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Welcome friends to Economic Update, a weekly program devoted to the economic dimensions of our lives. Jobs, debts, incomes, our own, our children's. I'm your host, Richard Wolff. I've been a professor of economics all my adult life and that's how I come to bring these economic updates to you each week. I want to turn to answering the question why? And I want to answer it in relationship to something of a mystery that has been unfolding and that has caused many of you to communicate it to me. And here's the way, or at least one way it could be put. We are now in a very deep, long lasting economic crisis. After all, as I like to remind folks, the official beginning of this downturn was December of 2007. That means we are nearing the midpoint of the 5th east year of this crisis. And because it has affected so many millions of people losing their jobs, so many millions losing their homes because it's lasting so long, because people are out an average number of weeks of unemployment, that is longer than any downturn we've had for decades. This crisis therefore has lent itself to comparison with the last major breakdown of capitalism as a system in this country. And I'm referring of course to the 1930s and what we now call the Great Depression, a collapse that began in October of 1929 and really didn't end until early of the year 1941. So we're talking about an 11 or 12 year old crisis lasted a very long time. We use that as a benchmark. We're not even halfway through what it may turn out to be this time as well. But what is very striking about a difference between the 1930s and the crisis today hinges on a very peculiar phenomena. When the crisis hit in the Great Depression, the new president, a man named Franklin Roosevelt elected in 1932, was considered a centrist, rather like President Obama is considered today. He talked about balanced budgets, he talked a kind of relatively conservative anti deficit reduce the budget debts of the country and so on. And yet shortly after he takes power in 1933 and 1934, the President Roosevelt undergoes a stunning change and his policies undergo a stunning change. We don't hear about austerity, we don't hear about balancing the budget. We don't hear anymore in the 1930s when Roosevelt changes about the need to cut government employment. The way we hear it today, we don't hear about the need to cut back services to people the way we hear it about it today. I want to look at that with you and I want to analyze it first. Let's be as clear as we can, with as much drama as I can muster. What did Roosevelt do in the depths of the depression of the 1930s that is so different from what is being done now? Well, let's see. First of all, the depression conditions were worse than they are today. For example, in 1933, the official unemployment rate was 25%. That's three times worse than what it officially is today. Wow. In those years, with such enormous unemployment, there was widespread poverty and real desperation. You can imagine the condition of city, state, and the federal budget with that many people out of work. They weren't paying taxes. That plunged the government into tremendous difficulty. They weren't bringing in the tax revenues to pay for all the things government normally did. Police department, fire department, public schools, maintaining the roads, the whole list. So you can imagine that there would have been calls, wow, if the government hasn't got this money, it's going to have to cut back. But you would have been wrong. Because what Roosevelt did in the midst of a depression, much worse than what we have so far in this one, what Roosevelt did was the opposite. I'm going to give you the three major examples of what Roosevelt did. First, he announced the establishment of an entirely new system called Social Security. We had never had that before in the United States. The president announced in the midst of a depression that the government was going to spend a ton of money. Doing what? Helping old people. Providing a pension to everybody 65 years of age or older who had spent a lifetime of work either in the home or on the job, or both, as a matter of their rights as citizens. Wow. And, of course, one of the reasons Roosevelt did this was. Was to help. In the Depression, it meant that old people were going to get some help. Not a handout of charity, not a welfare, but rather a recognition that a lifetime of labor given to this country got you in return a reasonable pension for your old age as a kind of thank you and appreciation for. For what you had done. But the interesting thing is, he created Social Security. What is being debated in Washington today is the exact opposite. Reducing Social Security payments, making you wait longer till you're 67, 8, or 9 to become eligible. So in the 30s, when the depression was worse and government had less money coming in, they created a program. Whereas today, when we're a much richer society and the depression we have is much less severe, we're not only not increasing a Social Security system, we're cutting it. But that's only the tip of the iceberg. Roosevelt in the 30s did a second thing also involving a huge expenditure of money at a time when the government supposedly didn't have it. He declared the establishment of an unemployment compensation system. We had never had that in the United States before either. This meant that every unemployed American who lost his or her job through no fault of their own, simply because the employer couldn't hire them anymore. Since the employer couldn't sell what they helped to produce because of the economic downturn, such workers would get 12 years weekly unemployment compensation payouts. And remember, you had a 25% unemployment. One out of four workers was eligible for these payments. And of course, here again, Roosevelt was helping the mass of people negatively impacted by the crisis. He helped them with a pension for their elderly, and now he was helping them with an unemployment check while they weren't working. But now the third thing that Roosevelt did, he announced the if the private sector, if private capitalism of the 1930s either could not or would not provide work for the tens of millions of unemployed workers who wanted jobs and, and were ready to work, then, said President Roosevelt, there's no alternative but for me as president to provide jobs. And between 1934 and 1941, Roosevelt created and filled 12 and a half million federal jobs. He put, in other words, a huge number of the unemployed back to work, having a job, earning a decent income, able to make their mortgage payments so they could keep their homes, etc. What are we doing today? Today there is no federal employment program. Not only has President Obama not created what Roosevelt did, he hasn't even proposed it. It's not that he tried and the Republicans rejected it. Neither Republicans nor Democrats are even discussing what the last President did in a similar economic downturn, even though he's from the same political party, the Democratic Party. So we are stuck with a remarkable dichotomy and a remarkable difference. The last time capitalism breaks down, the President comes roaring in with enormous outlays of money, whereas today, with a lesser depression, at least so far, none of our leading officials seems to be able to imagine, let alone propose a comparable or anything like a comparable program of helping the mass of people damaged by an economic crisis they did not cause. What's going on here? Well, the answer that I want to bring to your attention may surprise you a little bit. The answer is not that in the 1930s there was belief in the leadership of the country in the theory or the program of government intervention in an economy when capitalism was breaks down. That kind of theory that the government needs and can step in is associated with a very famous British economist named John Maynard Keynes, spelled K e Y N e S, who was the leading economist in Great Britain in the middle of the 1930s and who looked around him at the Great Depression and came up with the fairly obvious argument that capitalism wasn't working real well, and that if you leave capitalism to its own devices, it breaks down and sometimes in catastrophic ways. And that therefore we need to understand why that happens and we need to tell the government how to step in to either prevent such things or at least to make them go away quickly and not hurt too many people. And he developed a theory and a program of behavior that has since come to be called either Keynesian economics or Keynesianism for short. Some people want us to believe that the advisors around President Roosevelt in the 30s were somehow suddenly converts to Keynes theories or to Keynesian thinking. And that's why the President changed. And they like to believe that this is a superior way of understanding capitalism. It recognizes capitalism's weaknesses and flaw. And it has come up with this ducky, nice government intervention program to get us around capitalism's difficulties, to either prevent these crises from happening or to make them short and shallow rather than long and deep. I would respectfully like to disagree. I don't think President Roosevelt had a great theoretical breakthrough and I don't think his advisers did either. I think there's a very different explanation for what happened in the 1930s that has the nice advantage of also explaining why what Roosevelt did then is so different from what Bush and Obama have done so far. Now, here's the in the 1930s, when the economy fell off the wagon, when millions lost their jobs, millions lost their homes, poverty stared everybody in the face. Three things happened and they're all very similar. First, we had the most profound, far reaching labor union movement that the United States has ever seen. We never had such a thing before and we've never had it since. In a matter of months, months, millions of American workers in our major industries, auto, steel, chemicals, rubber and so on, joined unions for the first time. They were organized under something called the Congress of Industrial Organizations, the cio. That's the same thing as later merged to become the AFL cio, our modern union movement. But then it was powerful, it was dynamic, it was what was happening to working people across America. And as millions joined these unions, two other things were going on that were just as important. First, a number of socialist parties that had existed and existed in important ways in many parts of the United States got much stronger. Hundreds of thousands of Americans affected by the crisis able in a very practical concrete way in their own personal lives to see that this was an economic system that didn't work well, had decided to join the Socialist Party to make changes that would really do something to prevent these kinds of crises from having these kinds of devastating effects on, on people's lives. That does it. For the first part of our show, I want to remind you to follow us on Facebook, Twitter and Instagram, and remember to subscribe to our YouTube channel and visit our website, democracyatwork.info There you can see more of what we do and how you can get involved. And if you listen to this show as a podcast, you can download the new economic updates where you can find recent episodes and archived shows. As always, thanks to our Patreon community, your support makes all that we do possible and we enjoy bringing it to you on your mobile device. Please stay tuned. We'll be right back. Let me then turn to the other side. They joined the Socialist Party and they began to agitate in big cities, in little towns, in schools, in churches, in neighborhoods, in sports clubs, all across American society. They began to spread their arguments about the limits, the flaws, the shortcomings of capitalism and the advantages of a social transition to a better system for serving the major needs of the majority of people. And alongside the socialists, we also had the surge of a new and powerful communist party here in the United States, which was able to gain footholds in a number of industries, a number of parts of the United States, and to become quite influential. So we had a union movement, a socialist movement, a communist movement. Many of the people in each of these was also active in the others. That is, the CIO was the place where lots of socialists and communists did their work. And so you had an influence on the economy through the unions, on politics, by so many people talking about this and on our culture. Because socialists and communists were interested in affecting how people thought about society and thought about life in general. Together, the union drives. The socialists and the communists basically turned to the President of the United States and said, we are mobilizing millions upon millions of people. You must do something for us in this period of capitalism's breakdown, or else you're going to force us as well as invite us as well as encourage us to make our arguments that capitalism is the system of the past and socialism or communism that of the future. And we can show you by the millions of people, we can get into street demonstrations, that we can get to join unions, that we can get to create socialist clubs and communist clubs that produce newspapers and magazines and you name it, that we are a political force to be contended with. And I think in the marches they ran, in the demonstrations they held, they sent an unmistakable message to the President and to the business. You're going to have to do something, because if you don't, your whole system may not survive. Roosevelt was a smart politician. He understood what what was being said to him, and he was ready to make a deal. And so here's what he he went to the business community. And after all, let's remember, Roosevelt came from one of the richest, oldest, best families in Americahis relatives had been president before him, et cetera. He knew these people, and they knew him. And they all saw those demonstrations in the streets. He said to them, I need to take care of the American people, because if we don't, we're not going to stay in our positions as capitalists much longer. Our system is broken down. We have to do massive amounts of repair, and we have to take care of the mass of people while we do so. And the only way to pay for that is for you gentlemen. He said, you big businesses, you top executives, you're going to have to cough up the money. And he convinced enough of them. Not all of them, by the way, not by a long shot, but he convinced enough of them that he was right, that they faced a threat to capitalism as a system. If they didn't act that they went in on the deal, they would back Roosevelt. They would give him the money. Huge taxes on business, huge taxes on the rich, plus lots of loans, because they didn't want to just be taxed. They preferred loans to taxes, as those folks always do. But a combination of lending to the government and paying huge taxes would give Roosevelt the money to do what? Well, I've told you to create Social Security, to create the unemployment compensation program, and to hire 12 and a half million people to do all kinds of socially useful work. Wow. Roosevelt took the promise of the business community and he went to the unions and the socialists and the communists, and he said to them, I got a deal for you. I'm going to create an enormous apparatus of programs to help unemployed and working people on a scale you've never seen before. But in exchange, you've got to shut up about going beyond capitalism. All that stuff about socialism and communism, you can talk a little bit about it, but that's gotta be gone. You've gotta say that this program of Social Security, unemployment compensation, and public employment is wonderful, and you've gotta back me. That's the deal. I'll get that done, you've got to back me. And the unions and the socialists and the communists in the main, bought the deal, just like most of the business community, or at least a large chunk of it did. And that was the alliance, the quote unquote progressive wing of the business and rich community on the one hand, and the union socialists and communists on the other, with a few dissenters on both sides, by the way. That's why Roosevelt was reelected four times, something no other president had ever achieved before. He put together an incredibly powerful combination. It wasn't Keynesian economics or a new theory from England that changed the president. It was massive pressure from below. The turn to Keynesian economics was simply the form and beyond the form of doing this. It allowed the people in charge to flatter themselves that it was clever students at Harvard who read the book from the famous economist in England who came up with this plan. No, no, no, that's not quite right. That's the revisionist history that gets written later. The reality is it was pressure from below. And now isn't that interesting, because if you ask why, in today's economic crisis, with massive unemployment, massive home foreclosures, massive Americans feeling pinched at every turn economically, why is it we don't have an expansion of Social Security? On, on the contrary, we're cutting it. Why? We don't have a government employment program. We don't even talk about it. The answer is not that somehow Keynesian economics isn't strong. The answer is we don't have a mass movement from below, at least not yet. Occupy Wall street may be the first step in that process, but we don't have it yet. And that's why we don't have the kind of response from the government that people were able to get in the 1930s. It isn't about Mr. Obama or Mr. Roosevelt, and it certainly isn't about Keynesian economics versus some other kind of economics. What happens in the realm of politics, like what happens in the realms of. Of economic theory, is shaped by what is happening on the ground in the real world of the mass of people as they try to live their lives. Thank you very much for being with me today. This is Economic Update. I'm Richard Wolff. I look forward to being with you again next week. Sa. Sa.