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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 begin today with a small item that, when you look at it closely, isn't so small at all. Around the world, more and more cities are grappling with Airbnb, a remarkable service growing up over the last few years that allows people to essentially turn their apartments into mini, occasional hotels and sell living space to others seeking to avoid paying high hotel prices. I'm sure most of you know all about it, but I want you to understand perhaps an aspect of this that didn't occur to you in recent years. Wages have been very stagnant around the world. They haven't raised much. Working people, used to an increase of a few percentage points every year or two or three, are now having to go without that kind of an increase. Airbnb is successful for that reason. Why? Because it means that people who can't anymore get an increase in wages because they know their job better, because they have more experience at it, because they figured out how to make it more productive, they don't get rewarded for that. And so how do they increase their standard of living, or at least try to keep up? Answer is, they share their housing space, and that's what Airbnb allows them to do. But make no mistake, it means that what you used to get as an increase in your wages, you now pay for by losing access to your own home a certain amount of time per year. And it means that more and more people are sharing your living space. Of course, you're paying for this by lost living space. And the only benefit you get is. Is what? An increase in your income that used to be provided from your job but isn't provided anymore. The capitalists get more out of you, don't pay you extra, and you recoup the situation by selling your home. Think about it. The coronavirus gives me my second update for today. You've all heard about it. A virus starting in Wuhan, China, and spreading around the world, as viruses can easily do. And one aspect of it is an object lesson in economics, which is why I'm talking about it. It has to do with the masks. The masks that people wear to try to limit their exposure to that virus, the coronavirus, that's spreading. And in many parts of the world, the prices of these masks have gone through the roof. It might have cost a few dollars before. It now costs tens or even hundreds of dollars, depending on where you are. This is called price gouging. Or to be more honest, this is how markets work. When something becomes scarce, the people who want it outnumber the availability. That's what the word scarce means. And so the people who are more numerous than the object they want, in this case the mask, bid up the price. Or merchants who sell the masks, knowing exactly what this game is, do jack up the prices. Either way, the price goes crazy. And so the only people who can save themselves from the virus, insofar as they believe masks do that, will be those with the most money. That's how markets work. What is scarce is given to the people with the most money. Is it given to the people who deserve it most? No. Who need it most? No. Who might have waited the longest for it? No. Is it given, in this case to people whose respiratory system makes them vulnerable to a virus? Whose age does, whose work activity does, Whose need, in terms of other members of the family does? No. It's given to the people with the most money. There's really no moral defense of this, because it's outrageous. An authority, a governmental authority, particularly a democratic one, would distribute scarce things in a way that respected people's needs, that respected the democratic decision of who to get scarce materials. But that's not how markets work. They're not democratic, they're anti democratic. What's the defense that the lame economists who can't see any of this come up with? Here it is. It's okay that prices go up, my colleagues tell me, and I look at them and they say, here's why. When the price goes up, the profits go up. And that will make companies more interested in producing these masks because they're so high priced and the profit is so fat. So let the price go up and that will induce the suppliers to produce more. I look incredulously at my colleagues, at the naivete of this. So I say to them, the two 1. And what are we supposed to do while we wait for the suppliers to produce more? We're giving it to the people who are richest. So for as long as it takes, we're screwing everybody but the richest people, aren't we? What kind of a system does that? But here's the better suppliers know this. They've taken the same economics course you do. And they know that they can make more money holding back on the increase of supply than if they rush out there as if they were textbook robots. Producing more, why bother? Producing more is risky. The virus may disappear, the solution to it, or the cure might be found much smarter to grab the money quickly by letting the price go to the moon. And that's how it usually works. There is no defense for how markets allocate scarce goods. And when life and death is involved, as with the coronavirus, that lesson really needs to be learned. It's long overdue. My next update has to do with the federal budget of the United States. It was announced a couple of weeks ago that we just went over a 1 trillion. That's with a T, folks, a $1 trillion deficit. That's right. You didn't hear much about that at President Trump's State of the Union message, because that's nothing he wants you to know about. So let me underscore it one more time. A huge fat deficit. The government is spending way more than it takes in, in taxes, and there's no mystery as to why it. In December of 2017, the United States government under Trump cut taxes on corporations and the rich an enormous amount, thereby cutting back the revenue coming in to the United States government. Meanwhile, he was giving even more to the US Military than anyone had before. So here's a clue. If you take in less and you spend a lot more, you run a deficit, because that's all it means. And so here we have the conservative Republican wannabe running one of the hugest deficits in American history, without there being a crash to justify it, without there being a war, which is how we've justified these kinds of deficits in the past. But what's it all about? Why is Mr. Trump running the deficit contrary to the Republican Party he claims to lead? And the answer? It's good for his reelection. Pumping up the economy with a vast amount of government borrowing. That takes money that might have sat there because our economy is not in good shape and private enterprises are not going to produce more for an economy that can't afford what they now are able to sell. So corporations aren't going to lead the economy out. Neither are people, because they can't afford, with their low wages to buy much more and they're already up to here in debt. So you pump up the economy the two ways the government pump money in which the Federal Reserve has been doing to beat the ban for the last five months and run an enormous deficit. Soak up all that money that isn't going to be spent, take it in the hands of the government and spend it. It's good for the reelection. It postpones the economic downturn another few months so Mr. Trump can squeeze back into office. Yeah, you can listen to the justifications, but that's the bottom line. And that's what an economic update program owes you to make you aware of. Then there's the sad news of the last few weeks. The final chapter, maybe in the Brexit saga. The European Union said goodbye at their headquarters in Brussels and the British withdrew. What a sad end to the British Empire, which has been ending for a century or so. But this was another chapter. Now they are once again what they once a small offshore wet island away from the mainland of Europe. They're gonna go it alone. They have a leader who has even more imagination than Mr. Trump. Well, that's not much of an achievement, but there he is, a junior Trump they used to call Mr. Tony Blair America's poodle. Maybe this is going to be America's Chihuahua, who knows? But Mr. Johnson takes Britain out and now the British people have the morning after hangover. Having deluded themselves that the problem of the British people is Europe, they're now separated from what they pretended was the problem. And they're back face to face with what always was their problem. An economic system that makes a very few people quite wealthy and the mass of people not at all. British working class has really taken it on the chin, especially in the last decade, and even earlier than that as well. But particularly in the last decade, they got to deal with an economic system that treats them so unfairly because they are the majority. And when it's done with blaming immigrants and when it's done with blaming Europe and blaming foreigners and blaming, I don't know, the moon, they'll be forced to face their real economic difficulties. And then the theatrics of Mr. Johnson, including his inability to manage his own hair, will become the joke of the day. If you're not crying about the cost of this evasion of your real problems that the Brexit saga represented, my last update has to be very brief because we're running out of time. It's the disastrous condition of the pensions in the city of San Diego, California. They're in the billions. They can't afford it. The city can't do it. And so the mystery is not what people are proposing. The usual business interests, fearful that they will be taxed to cover the pensions of workers, are explaining that what we have to do with these high pensions is cut pension benefits. Let me be clear with you what that means. For decades, the city workers in San Diego, the cops, the firemen, the clerks, the people who clean the streets, all of those people that make life bearable in the society, have been putting money aside on the promise that it would be their pension when they get 65 and older. What you're suggesting is that all of those sacrifices they made, all the commitments they made, all the money they put in there is now going to be betrayed by because you're not going to give them the benefits you promised. Let me remind you that the reason politicians give pensions to workers is because they don't have the courage to tax corporations and the rich to pay workers higher wages. Promising a worker a pension later means you don't have to pay him or her a higher wage now. And that's what those politicians do, knowing that by the time you have to pay the pension years down the road, they, they won't be the political leaders of San Diego anymore. It'll be someone else's problem. And that's where we are now. Cutting the pensions is the betrayal of workers and shows you an economy that's so desperate that that's how it solves its problems. We don't have a great economy. We have an economy in terrible trouble. We've come to the end of the first half of this program. I want to remind you that we recently published a book, Understanding Socialism, that I would urge you to take a look at because it answers many of the questions that you've been sending me. I also want to remind you that our website democracyatwork.info has available on it a store with all kinds of interesting things having to do with economic update. And I urge you to explore what that store will offers. A special thanks. Go as always to our Patreon community for its support and its enthusiasm, both of which are very nurturing for what we do here. And finally, please do make use of our websites, the one I mentioned, democracyatwork.info and follow us on Facebook, Twitter and Instagram, as well as becoming a subscriber on our YouTube channel. Stay with us. We'll be right back. Welcome back, friends, to the second half of today's Economic Update. I want to focus in this second half on an issue that has bothered me for more years than I can remember, and it ought to bother you. And I want to make the case why it should. For the last 300 years, which is basically the time during which capitalism went from being this new system in England to becoming the basic system around the world that we see Today, for these 300 years, one issue has dominated the debate over this capitalist system. It's not that there weren't other issues that were discussed, but this is the big one. This is the dominant one. And it's been the same for 300 years. So the first thing I want you to think about is how stale that must be if it's the same fight people are having today that they had 50, 100, 200, 300 years ago. Here's the issue. Is modern capitalism a system that ought to have active daily intervention by the economy, by the government, rather, in the economy, or is it better not to have the government involved in the economy, or at least minimal, and let the economy be run by private enterprises and private interests? Government intervention versus government exclusion used to be called laissez faire. The old idea, laissez faire is French for let it be. The government should let it be. Let the private economy run everything. This is very stale. When I was a student learning economics, my professors were terribly excited about whether there should be more or less government intervention here, there, or anywhere in the economy. Imagine my surprise as a student when I read history and discovered that what was really exciting to my professors had been really exciting to their professors and had been exciting to their professors. Nobody told me that this is old. This is so old it makes your grandmother look young. I remember how she looked. What is going on? Why would the same issue be the big hot topic for a profession for 300 years? I want to answer that question, but before I do, let's review it a little bit. You can go back to Adam Smith and David Ricardo, the founders of modern economics, and they were engaged in that debate. But that might be reasonable because they had strong states in those days and they had a new capitalist economy working. It wasn't the stale old debate there. It was an exciting, interesting one. So let them have it. But it kept being debated, and even history couldn't shake this debate. Let me give you an example. Between 1850 and 1929, those roughly 80 years, we had a largely private capitalist system around the world, including in the United States. The government played an important role, but much less than happened after 1929, nor is there any mystery about it. In 1929, this mostly private capitalism crashed, and it produced a global catastrophe of the Great Depression, which had a lot to do with the Great World War II that came at the end of it, et cetera, et cetera. So people could be excused for tilting a little bit towards more government intervention. So Franklin Roosevelt, in the middle of a depression, created the Social Security system. That's government intervening to help every family cope with aging or the unemployment insurance. That's to help every family cope with the lack of jobs that the private capitalists couldn't or wouldn't provide or a minimum wage to counteract the private capitalism's payment of horrifically low wages, or with the government jobs, 15 million of them in the 1930s, because the private capitalists couldn't provide jobs or decent wages or fill in the blank. So things tilted towards more government intervention. But then the conservatives hated that, because when the government intervenes more, it has a tendency to raise taxes to pay for that, and the taxes often go on hitting the corporations and the rich, and they don't like it. That's what Mr. Roosevelt did and. And they didn't like him either. So once again, at the end of World War II, we have this weird remark. We can't have the government intervene. Really, we just did that and it saved the system. Who cares? We want to get it out. We want what is going on. And then we had the liberals, the Democrats hold on to the government intervention a bit, the Republicans undoing it a lot until 1970, 80. Then we have the Reagan revolution, and then we really dismantle the government, minimize its intervention. Now, partly, this debate, which is, by the way, renewing now because in the wake of the great crash of 2008, surprise, surprise, people are saying the government should come back in and do more. What's going on here? This debate is over and over again, all why? Here's the answer that makes sense to me. Debating the pros and cons of the government versus the private sector is a silly game until you realize that the purpose of it isn't what it is about. The purpose of it is to make sure we don't debate something else. You know, it's like what we did in the first half of today's program when we commented on Brexit. Getting British people to focus on Europe distracts them from the issue at home. The economic system that isn't working for most people. It focuses their upset somewhere else. It's what Mr. Trump did with immigrants from Central America. It's what Mr. Trump did with bashing China. It's what the Democrats second him in doing with. By joining in the bashing of China and thereby making it impossible to formulate a critique of Mr. Trump. It's the Democratic help to get him reelected that's going on in front of our eyes. What is this about, this deflection of your focus? That's what the debate about more and less government is all about. And that's what it's been about for a long time. By debating more or less government, we're not debating whether the system of employer versus employee is the way we ought to organize the production of the goods and services we just depend on. Why do we have a tiny number of people making all the powerful decisions in a business rather than the workers democratically deciding? Why do we have a system based on corporate hierarchical enterprises rather than democratically cooperative workplaces? Those are the big issues. Let me hammer at it in yet another way when we discuss slavery and why slavery's disappearance is something we welcomed as a human being, as a member of a species. We don't care whether the slave was the slave of a private plantation owner or the slave of a governmental agency. More or less government, who cares? The issue was slavery. Are we going to organize society so that a small number of people are masters and the rest of us are slaves? That was the real issue and that finally got decided, which is why we don't have slavery. Likewise, when we look at feudalism, lords, a very small number, serfs, a very large number, and we look at how they treated each other and the inequality and the oppression, we don't care whether the serf had a lord who was a private person or a governmental agency or a part of the government, or more or less. Government isn't what was important historically about feudalism. It was the relationship between the people who did the work, who ran the enterprises, whether they were rural plantations or urban workshops. Master slave, lord serf, that was the issue. And we got rid of master slave and we got rid of Lord Cerf, and now we're stuck with employer, employee. Are we debating that? Are we understanding whether that's an acceptable system or whether we can do better than capitalism? No, we debate whether there should be more government, less government. Some of us are so nutty. We imagine that more government is another system. You know, if someone had stood up in the United States and said, haven't the government have slaves means we're not going to have slavery anymore, the they would have been laughed out of the room. Someone who stood up and said, the lord is the king and therefore that's the government and that's not really feudal. What? And I'm here to tell you the same applies to capitalism. If the employer is a private business, you're still the employee. And if you lose your job and you go to work in the post office or somewhere else, you're still an employee, you still have an employer. But. But one of them has the title of a government official and the other one doesn't. What's interesting is not the uniform of the person who's telling you what to do. It doesn't matter whether it's a state or a private employer. The problem is it's an employer and you are an employee. The debate over more or less government is not about capitalism versus another system. It's the same system, either run by the private or by the government. It isn't socialism, if you mean by that a different system until the relationship among the people doing the work is different. And if it isn't different, then you're talking about socialism in a way that shows you don't understand the history of what's been going on for the last thousands of years, which is sort of embarrassing, don't you think? So let's get over the stale debate. Many of you that are watching, I would guess, have some criticisms of the Trump. That's the government doing what it is you don't like. You're still critical even though it's the government, which you would on another day think is the right entity to do something else in society, like help students get through college or help people with medical bills they can't afford, etc. The issue isn't whether the government does more or less. As long as that's a debate. The unspoken agreement of all the debaters is with capitalism. They don't have an argument with a few people making all the decisions. Call the employer. They don't have a quarrel with the undemocratic nature of that arrangement. They don't have a quarrel with the exclusion of an alternative like worker co ops in which workers collectively and democratically decide. You know what it's like. It's like having an argument about kings and monarchies in which the argument is, should it be this family that's the king, or should it be that family? The people who think that's the big argument all agree with monarchy. They're just fighting over who the monarch is. Arguing between government intervention more or less is no quarrel with capitalism. You're just quarreling over who the employing capitalist is. We don't care. Who do we really? Does it matter all that much? Most of the employees in the world today don't even know who the employer in the end is, who sits on the board of directors of the corporations you're working for. You really don't care who it is. You care how this is set up. Because whoever's in that position plays by the rules of the system. The system is the problem. And we evade that issue, which is central to our lives, when we allow ourselves to be deluded into the notion that an ancient stale debate which has wobbled one way or the other umpteen times, is where we ought to be paying attention. I hope you've understood the logic here. The point is to get beyond a debate that should not be occupying us now in favor of the focus on the system we live in, which is the issue shaping our lives most fundamentally. Thank you very much for your attention. We've come to the end of this economic update. It gives me a chance once again to remind you of our new book publishing operation. The latest book, Understanding Socialism, gives me a chance to thank again our Patreon community ask you please to subscribe to our YouTube channel and make use of our websites. We put them there for that purpose. Thank you and I look forward to speaking with you again next week.