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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Jobs, debts, incomes, our own, and those of our children. I'm your host, Richard Wolff. Today's program is dedicated to a fundamental economic inequality. I want to understand and explore with you why economic inequality is such a problem in our society, why it is so extreme, as I'll show you in a moment, and why the capitalist system, the dominant economic system for the last 300 years, has been systematically unable to overcome inequality throughout that history and shows no sign of doing it now. Okay, let's begin. We do want a change. Inequality. I'm going to end with that. And I'm going to begin with it, too. The overwhelming majority of Americans, poll after poll, indicate that they would like a society with less inequality, much less than what we now have. So this is not an issue in dispute. The mystery is why, with those views, has nothing, in fact, been done? So let's begin by explaining what income inequality, wealth inequality, what they mean and what numbers are basically there. I'm going to talk about it first at the level of the whole world, because we live in a capitalist world, and then focus on the United States first. The capitalist world. There's many ways to get at this. I'm going to give you a couple. The 68 richest people in the world, roughly 7 billion people on this planet. The 68 individuals who are the richest have more wealth than the bottom half of the population. You add up the wealth of those 68 and they together have more than the bottom half. That's three and a half billion people. The richest 10%, 10% of adults in the world own 86% of global household wealth. The bottom half. Collectively, the bottom half owns 1% of household wealth. Top 10% have 86% and the bottom half, 1%. You could not be more starkly unequal. And here's one more way. An average person in the top 10% owns nearly 3,000 times the wealth of. Of an average person in the bottom 10% of the world, 3,000 to 1 in terms of wealth. Let me turn then to the United States so that everybody's clear that it isn't all that different. The top 20% of Americans own 86% of the United States wealth. The bottom 80% of our people together own barely 1%. Excuse me, 14%. Sorry about the numbers. I don't want to get them wrong. If you look at financial wealth, you know, the way wealth is held in the form of stocks and bonds and money. Here are the numbers. The top 1% of Americans own 43% of the stocks and bonds. The next 19% of Americans own 50%. And the bottom 60% of Americans own 7% of the value of stocks and bonds. So we have extreme inequality in global capitalism and extreme inequality in American capitalism. So next question, why does such inequality persist? Because it has. If you look at England in the middle of the 19th century, when Charles Dickens is writing his famous novels, that's the kind of inequality you had. If you look much later in the United States, say at the novels of Jack London, it's the same inequality. John Steinbeck writing in the 1930s, the same inequality. And then you get to the present and I've just given you the same inequality. Have there been policies adopted by the government to deal with the inequality? Yes, there have been, over and over again. Remember Franklin Roosevelt's famous speech in the Great depression of the 1930s when he bemoaned the fact that that one third of Americans go to bed hungry, are cold, are not properly housed and clothed. He knew. People have known. It's been talked about. Politician after politician has promised to develop an anti poverty program, a less inequality program. You know, the Declaration of Independence, the Constitution, the documents of our society are full of all people are created equal. Yeah, maybe. But something goes terribly wrong if that's the beginning. Because we know how that story ends. With a level of inequality that has resisted change. Here's what we have occasionally done. There have occasionally been redistributions of wealth. Here's how they work. We go to poor people and we say, here, here's some money, here's some welfare payment, here's some food stamps, here's some. We all know about that. Or here's another way we've done. We've done taxes where we tax people at the higher end, the richer people, rather more, we say, than those we tax at the bottom of the wealth and income distribution. Those are ways we say we're going to redistribute wealth from the top to the middle and the bottom. We say it, we pass those policies, but yet the inequality persists in capitalism. It turns out, to be blunt, that capitalism as a system is able to produce remarkable wealth. No question. Unfortunately, it is equally capable to produce and reproduce remarkable poverty. Bottom line. It is a system that reproduces inequality. Well then why didn't those efforts at redistribution, progressive taxation, welfare systems of one kind or another, why didn't they work? And here's the answer. And it's very important. We have a system which positions the rich in such a way that they can quite easily and quite regularly evade, avoid, minimize, or altogether escape the redistribution, to negate it, to make sure it doesn't last, even if you get it, and to block it most of the time. I'll give you an example. There was an effort starting in the 1930s to have a minimum wage, to not allow wages to go below some level set by the government so that you wouldn't create poor people, which capitalists had been doing by paying very low wages. The logic here isn't complicated, but what happened was there were ways that businesses got around paying minimum wages. They hid and paid less. They used immigrants who could not defend themselves and paid them less because immigrants were often afraid to complain because their status as immigrants made them nervous. Or capitalists went to other countries, didn't they, where they could get away with paying below the minimum established here. Lots of strategies that the people who run the businesses could use to get around the efforts at redistribution. Bottom line, if you allow businesses to be run by a small number of people, you can't really be surprised that they, the ones who run it, you know, the owner, the board of directors, the major shareholders, those people, always a small minority of every capitalist business, because that's how capitalist businesses are organized. They, of course, to no one's surprise, benefit themselves. First and foremost, if the company is doing well, they give themselves the big dividends as shareholders, the big pay packages as top executives, the benefits that come to the owner of a business. And if the business doesn't do real well, well, then they fire all of us and close the business down. Yeah. You notice something. The costs of a failure are borne by all the rest of us. The bulk of the benefits of a success are taken by the people who own and run the business. So if you don't change that, then you're giving them as the leaders of the business, as the people who have the money in their hands, who grab the profits. You give them the wherewithal to escape and to undo whatever efforts at redistribution can be imposed on this system, usually by pressure from below. Businesses take a portion of their profits and rather than keeping them for themselves, they use them to buy the political system. Why? To make sure that the redistributions don't go very far. Using my same example, when the working class was able to get a minimum wage, the business community responded by not getting the politicians to raise the minimum wage along with rising prices. So as prices went up over the years, the value of the minimum wage went down. Unless the politicians lifted it, which they haven't Done. For example, the minimum wage today in the United States, $7.25 an hour. Federal minimum wage was last increased in 2009. That's when it went to seven and a quarter an hour. We've had inflation, rising prices every year since 2009. But the politicians controlled by the donations that come from the. Yep, rich people sitting at the top of capitalist businesses, they haven't raised the minimum wage. And so, in effect, they nullified what it's about. Over the last 10 years, the value of stocks on the NASDAQ, our largest and most important stock market, have gone up over four times. If you look at another index of shares over the last 10 years, the Standard and Poor 500 stock index, it's gone up over three times during the same 10 years that those things went up four times and three times. What did the real wage, the average real wage in the United States, or more accurately, the median real wage, 50% did better, 50% did worse. The median real wage, what you could buy with your wage, went up over the 10 years, 6%. Stock owners, it went up four times and three times. Wage earners, 6%. You haven't changed the system so long as you allow the people who run the corporation to gather into their hands the wealth and the power to undo any redistribution that you can achieve or to block it from happening in the first place. We've come to the end of the first part of today's show. Before we get to the second half, I want to remind you our new book, the Sickness Is the When Capitalism Fails to Save Us from Pandemics or Itself, is available@democracyatwork.info books. I also want to thank our Patreon community for their ongoing and invaluable support. If you haven't Already, go to patreon.com economicupdate to to learn more about how you can get involved. Please stay with us. We will be right back. And then we will be talking not only about what the inequality is and why it has persisted, but what needs to be done, finally, to really do something about economic inequality rather than bemoan and worry about the fact that it's been with us because capitalism reproduces it so steadily. We'll be right back. Welcome back, friends, to the second half of today's Economic Update. This program today is devoted to analyzing the question why capitalism reproduces over time, poverty, desperate economic circumstances, a pinched middle alongside extraordinary wealth. In other words, why capitalism reproduces serious deep inequality and what we can do about it. In the first half, we explored what that inequality is, and a good part of the story of why it has persisted, what the conditions are. Now I want to turn to what we're going to do about it, but before I do, I want to deal with the history of inequality. Some of you know, and you're quite right, that inequality doesn't begin with capitalism. It's older, it has existed before. Capitalism hasn't overcome it, as many of its enthusiasts promised it would, but it hasn't been the beginning of it either. And there's a lesson in that. Let's take a look at the two major economic systems before feudalism and slavery. There's something interesting that we can learn about those systems, and they were systems of enormous inequality. The pyramids in Egypt are a product of a society very, very unequal. The pyramid is a tomb for the richest, produced by a mass of the poorest citizens. The chateaux along the river Loire in France that are tourist attractions were the homes of the very richest feudal lords, and they were produced and staffed by the poorest serfs. Well, what is interesting about slavery and feudalism that we can learn from is something that they have in common with capitalism. In other words, a certain structure is true about slavery and feudalism that is also true about capitalism. And that, I believe, explains why all of them have this extreme inequality that they reproduce over centuries. Let's start with the slave. You divide the population of a slave economic system basically into two roles, master and slave. The master runs the show. The masters are a small minority of all the people. The vast majority are slaves in most slave systems. But that minority has extraordinary power. They decide what gets produced, how it gets produced, where it gets produced, and they get all the product. They give a portion of it back to the slaves so that they can keep working. But, wow, it is no surprise that the people who run that system make themselves the beneficiaries. They become wealthy and the mass of the slaves don't. Let's turn to feudalism. There we divide again into a minority that runs the show. They're called feudal lords in Europe, and a mass of people who do the work, they're called serfs. Now, it's a different system. The lords don't own the serfs the way the masters owned the slaves. Slavery is not there anymore. But in this relationship between lord and serf, here's what we have, a minority. The lords make all the decisions what to produce, how to produce, where to produce and what to do with the product. And the serfs do all the work. Now, the serfs keep part of it, they deliver only the extra, the surplus, the rent, as it was called to the lords. But it allows the lords to amass enormous wealth, which we can see because much of the wealth of feudalism is still around in the great castles and in the. The great cities, in the Versailles, outside of Paris and so forth. Now we come to capitalism. And here's the Capitalism also divides the people involved in production into two groups. A small minority that runs the show, and they have a name, employers, or if you like, capitalists, because their employers, who are trying to amass capital to make their wealth grow, which is what capitalism means. And then a vast majority of people who are employees, employer to employee replicates lord to serf and master to slave. And again, the employers, because they're in charge and they have the position of gathering the, the net product, the surplus, the profit into their own hands, take a big portion for themselves to become wealthy. And the mass of people live on their wages and do not become wealthy. In other words, here's the Whether it's slavery or feudalism or capitalism, the structure of each of those societies positions a minority in such a way as it can accumulate wealth and keep that from being shared among the mass of people. That's the clue. It's the structure of production, or if you like, the class structure, because employers are one class, employees are another two, just like lords are in one class and serfs in another, masters in one class, slaves in another. This system, this class division within capitalism explains why it is unfortunately as successful in reproducing inequality over time as both feudalism and slavery were over the many centuries, that they were the dominant economic system before capitalism came to replace them. And now let's draw the conclusion together if you really want to do something about inequality. And let me remind you, as I said at the beginning of today's program, the majority, big majority of Americans, and by the way, it's true in other countries as well, wants there to be support, steps to be taken to reduce the extreme inequality in the world today. One of the saddest realities going on in the world today is the information and the reporting that the vaccinations against the COVID disaster are much more happening in the richest part of the world and almost happening not at all in the poorest. Once again, you see not only the inequality being reproduced, but the awful, literally fatal consequences of that inequality and the injustice it always brings with it. Well, here's what you have to do. You have to change the organization of production. That's the only way you're going to end this inequality. You cannot expect it to stop if you continue to allow a small minority of the population to be in charge of the enterprises, the factories, the offices, the stores. Because they will use their position, as we have seen, to amass the wealth in their own hands and then to corrupt politics so that they can keep the wealth that this economic system allows them to accumulate in their own hands. You have to deal with that or else. You're not serious. It's because of that minority having that position that they can block efforts to overcome inequality or reverse them. When they happened, you know, they do occasionally happen. The mass of people sometimes rise up. It happened in the United states in the 1930s, in the Great Depression, when we really did for a while have a movement that stopped the inequality, made us much less unequal for a while because masses of people demanded it. And the Democratic administration of Franklin Roosevelt accommodated that demand. So for a while we had less inequality. But as soon as the war was over in 1945, the Republicans came back in and the conservatives came back in. And the resumption of capitalism allowed us to recapture the inequality that had only temporarily been overcome. That's the problem. You've left in place a minority of folks who are able either to block redistribution efforts or to make sure they're temporary. And if you don't change that, you will not go beyond the inequality we have. But we can change it. We know how. And I want to end today's program making that crystal clear. Suppose you change the organization of. Of production. No longer a small group in no masters, no lords, no employers. You say that in every production unit, every enterprise, whether it's a factory or an office or a store, it doesn't matter. In any collection, in any community of human beings producing a good or service, it has to be organized by democratically. Just think, what an idea. One person, one vote. Whether you're a supervisor or a machine operator or a service provider or a sweeper upper. At the end of the day, one person, one vote. You together, by majority vote, decide what this enterprise is going to produce, what technology it's going to use, where this is all going to happen. And here comes the big one where what's to be done with the output, with the profit, with the revenue, whatever you call it, I don't think in a minute if this were done democratically, you would ever see five people being given spectacular pay packages while everybody else can't put their kid through college without accumulating debts they can never repay. Some people have 15 yachts and other people. Are food insecure the modern euphemism for hunger? No. If it were democratically done, you'd have a fantastically different commitment to less inequality. You wouldn't see the inequality we have because you wouldn't anymore have a minority in a position to accumulate it, because they wouldn't be in the power position that they have been in slavery in feudalism and capitalism. The democratization of the enterprise, the democratization of the workplace. That's a structural break from the past. And only with that kind of a break do we have a chance to undo the inequality reproduced systematically by slavery, by feudalism, and in our era, by capitalism. Here's the bottom line and I tell it with a story. If you want to have social conflict, tension and difficulty, then you give some people a great deal and everybody else way less. It's a recipe for tension, conflict, difficulty and disorder. You want a society in which each of us can develop our talent, follow our passion, contribute to society and be taken care of. Then don't allow that kind of inequality. And the way you do that is not merely moral preaching, however useful that may be. You've got to take the structural steps and economically we know how to do that. Democratize the enterprise, make it a general discussion and a general democratic decision. Sure, some people will get paid more than others, but we will never have the kinds of centuries long gross inequality that I described to you at the beginning of today's program. Overcoming inequality is a systemic problem. Capitalism is the obstacle that we need to overcome to get to the kinds of levels of equality rather than inequality that most Americans have shown us over and over, like most people around the world, is what they would prefer. Thank you for spending your time with us. This is Richard Wolff for Democracy at Work thanking you and looking forward to speaking with you again next week.