Welcome, friends, to another edition of Economic
Update, a weekly program devoted to the economic
dimensions of our lives: jobs, incomes, debts,
our own, those of our children.
I’m your host, Richard Wolff.
I wanted to devote today’s program to exposing
and criticizing a number of myths, ideas about
how the economy here in the United States
is working that deserve to be put aside.
They are not real.
They misrepresent what is going on and therefore
they produce decisions, individuals, corporates,
governments that are not good for what we
need in this country at this time.
I want to start with the employment story,
the question of employment.
This has talked about a great deal these days,
because it’s one of the very few statistics
that Mr. Trump and the Republicans can point
to that has at least some positivity to it.
We have a low unemployment rate—that is
the percentage of people looking for work,
who don’t find it—is relatively small.
I don’t want to take away from that.
But to think that you’ve understood how
the economy is doing—let alone Mr. Trump’s
boast that it’s quote, unquote “great”—to
look at one statistic is an act of economic
incompetence.
It’s as if you went to a doctor and asked
for the doctor to assess your health, he took
your temperature, told you it was okay, and
therefore, you’re healthy.
You would know you need to go to another doctor.
You look at many things in order to assess
the health of an economy.
Just like you do with the health of a human
being.
For example, one of the reasons unemployment
rate is low, is not that we don’t have lots
of people looking for work.
It’s actually worse.
It’s we have a lot of people, who have given
up looking for work, because in our statistical
system in the United States, the government,
the Bureau of Labor Statistics, when it looks
at working people, says, “You can either
have a job, then you’re employed.
You can have no job and be looking, then you’re
unemployed.
Or you can give up looking, in which case
you’re not counted anymore.”
What we have today is a much lower than we
used to have labor force participation rate.
That’s the fancy term that counts what portion
of adults of working age are either working,
looking for work, or not anymore looking.
And that last one is the one that’s gotten
quite big and that helps account for the low
number of people unemployed, but looking,
who are the only ones that count.
You need to know that to understand what the
numbers mean or don’t mean.
Here’s another example.
Yeah, we might have lower unemployment, but
suppose, it means at the same time that huge
numbers of people went from good jobs, high
pay, good benefits job security to, instead,
have jobs at low pay, no benefits, and no
security.
Why do I bring that up?
Because that’s exactly what’s happened
over the last decade.
And that means the implication of our job
situation could be better captured in these
words.
What we have done is said to the American
people, “You’re not going to have good
jobs anymore.
So you got a choice: you can have no job at
all or you can take a job with low pay, no
benefits, and little security.”
And guess what?
Millions of Americans have seen the latter
option more attractive than even unemployment.
But that’s not a sign of economic health
and it sure doesn’t mean the economy is
great.
Let’s look a little further.
I decided to take a look at hourly pay—the
average pay per hour that most Americans,
who are on a wage system, get.
Back in 1973, is when I started—that’s
a long time ago, frankly almost half a century—the
average wage in this country was $4 dollars
and ¢3 cents an hour.
Okay.
So I did a little calculation that we economists
do.
And I said, “Let’s take a look at what
you could get for $4 dollars and ¢3 cents
an hour in 1973 and adjust it to 2018—the
last year that we have numbers for.”
And I adjusted.
how much money would you need per hour in
2018 to be able to buy the same bundle of
goods that you could buy for $4 dollars and
¢3 cents in 1973?
And I came up with the answer.
You’d need today an average—ready?—of
$23 dollars and ¢68 cents an hour.
That would be the average wage you’d need
for a worker to be able to buy, on average,
as much today as he or she could in 1973.
$23 dollars and ¢68 cents.
Well, what is the average wage of the United
States in 2018?
You needed $23.68 to be at the same place
you were 50 years ago.
You know what the average is today?
$22 dollars and ¢65 cents.
That’s right.
Average wage in America today in terms of
what it can buy is less than what it was 50
years ago.
So if you’re feeling pinched, if you’re
feeling your economic situation is difficult,
if you’ve had to adjust your family, because
living on one person’s wage simply will
not give you a decent lifestyle, so that your
wife or your elderly parents or your children
have got to go to work now too.
You’re right.
You are living what has happened.
But it’s even worse, because over the last
50 years that the real wage of what you could
buy with your income has gone nowhere.
Actually, gone down a bit.
Over that time, your productivity—that’s
what your labor adds per hour to what your
employer produces and sells—that’s gone
up somewhere in the neighborhood of 20% somewhere
between 25% and 35% percent.
So let’s be real clear.
Productivity, your output, what your brains
and muscles add to your employer’s materials
goods and services to sell, that’s gone
steadily up.
Productivity measures what you, the worker,
give to your employer by means of your work.
Wages are what the employer gives you for
your work.
So let’s review.
What the employer has been giving you for
the last 50 years has gone nowhere.
But what you give to the employer has zoomed
up by a third.
That’s why there’s a gap between rich
and poor in the United States.
Working people, their incomes have gone nowhere.
But the employer class—a small minority
in this country—has made out like the bandits
that capitalism makes them be.
I want to look now at the minimum wage.
You know that sad situation in which a capitalist
system pays people at the bottom so little
that after generations of struggle we passed,
in the depths of the depression, a law mandating
a minimum wage at the federal level.
It’s a law that says, “You can’t pay
people less than a certain amount.”
It’s just indecent.
It’s like forbidding capitalists to employ
children or forbidding capitalists to impose
themselves sexually on their workers etc.
The minimum wage.
Well, let’s look at it.
It’s a kind of measure of decency in a system.
The current minimum wage is $7 dollars and
¢25 cents an hour.
That’s what it’s been since 2009.
It hasn’t been raised.
Again, in over a decade it hasn’t been raised.
Over that time, prices went up every year:
1%, 2%, 3%—not a terrible inflation.
But you added up over 10 years a lot.
The prices have gone up, but the minimum wage
hasn’t gone up with them, which means in
terms of what the minimum wage can buy, the
last 10 years have seen a steady year-by-year
decline in what the minimum wage will do for
the people—the millions, who depend on it.
What kind of a society does that?
The society during which the rich got richer,
and the minimum wage was allowed to go down.
You know, when the minimum wage was the highest
in terms of what it could afford a person
earning it?
1968.
I did a calculation.
Using today’s prices, what would the minimum
wage have been, after I have been in 1968,
if it could buy what $7 dollars and ¢25 cents
can buy today, because that’s what the minimum
wage is?
It would have had to be $12 an hour, which
it wasn’t.
Wow.
We have really shafted the people at the bottom.
And that’s an achievement of the capitalist
system, even with a minimum wage when you
can see how the establishment—having been
forced by struggle to create a minimum wage—undermines,
eviscerates it in the years afterwards, taking
back what they once had been forced to give.
It’s so bad that a number of states, almost
half the states in the Union, have higher
minimum wages in their states than the federal,
because the people in those states have at
least understood what an abomination it is
to treat people that way.
In Washington state, on the West Coast, the
minimum wage at the state level is now—ready?—$14
dollars an hour, nearly double the federal
minimum.
In Washington, D.C., in California it’s
$13 dollars or more.
Yeah, the states have done what the federal
government hasn’t done.
And let’s be clear, the Republicans have
been working to keep that minimum wage down
and the Democrats—well, the best you can
say for them is—they haven’t been strong
enough to do anything other than watch the
process unfold.
Okay.
Let me turn next to the market.
This wonderful institution, we are told, our
leaders keep saying, “Let the market decide.
The market will get to the official or the
efficient outcome.”
Really?
Let’s take a look at what the markets have
done.
The market economy we live in today has a
number of ways of measuring its extraordinary
product.
I’m going to give you two.
The 2,000 odd billionaires in the world today
together have more wealth than the bottom
half of the population of this planet—three
and a half billion people.
That’s right.
2,000 of the richest have more together than
the bottom three and a half billion.
That’s a level of inequality that any system
should be deeply ashamed of.
Here, in the United States, we even have a
better statistic.
The three richest people have more wealth
than the bottom half of the American people.
Oh my goodness!
If you think inequality is a problem—and
that probably takes in most of you that are
awake.
Well, then it’s that capitalist market that
we’re supposed to celebrate that produce
that.
I’m going to come back in the second half
of today’s show with more about the market.
But we’ve come to the end of the first half.
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Welcome back, friends, to the second half
of today’s Economic Update.
In the first half, we were just concluding
with a criticism and an exposure of markets—of
what markets do and don’t do—that make
you want to understand, I hope, with me, that
this is a very flawed institution; does not
deserve the nearly religious kind of endorsement
of it that our leaders are eager to provide
over and over again.
It’s time to have a balanced look at the
market to evaluate it like every other institution
rather than bow down before it as if we weren’t
aware of its flaws.
So let me continue.
Many of you aware of a problem—and that’s
what it is—called gentrification.
It’s what happens city after city, neighborhood
after neighborhood as people with money decide
they want to live somewhere.
And so they move into that area, buying up
homes, paying high rentals so that it becomes
impossible for the people who used to live
there, who have less money to stay there.
No matter that they grew up there.
No matter that their children are going to
schools there.
No matter that their churches, their friends,
and their neighborhoods—none of it matters.
Why?
Because the market is the institution that
determines the neighborhood.
And if the rich want it, they get it.
And the middle and the poor get thrown out.
It is something you can see across this country
in city after city.
It is a sign that we produce not diverse neighborhoods—but
the opposite; not shared different kinds of
people and lives to enrich one another—but
the opposite.
Over and over again, interesting neighborhoods
that wealthy people want to live in, they
all come in, they drive out the little businesses,
they drive out many of the interesting people,
and they end up wondering why they paid so
much for a neighborhood that is so dead and
so anemic.
It’s the market that gentrifies.
If we didn’t allocate housing according
to how much money you have, we wouldn’t
have the problem of gentrification.
It is one of those things markets do that
ought to make us very critical.
And the market is a basic institution that’s
good for rich people.
You know what the market does when there isn’t
enough to go around?
Let’s for example imagine a park, a bunch
of parents with their children and the local
ice cream vendor runs out of ice cream, doesn’t
have enough.
There’s 25 children, but there’s only
six ice creams left.
You know what begins to happen in a market
economy?
The parents who have some money go to the
vendor and say, “You know, I know the ice
cream cost $3 dollars.
I’ll give you a $5.”
Other parents not wanting to be outdone offer
$7.
Then some other parents offer $9.
As this goes on, the parents, who can’t
afford $9 dollars for an ice-cream, drop out.
And when the process is done—because that’s
how markets work—whatever is scarce in an
economy goes to the people with the most money.
And I ask you, whatever your religion, your
spirituality, “Is it ethical?
Is it moral?
Do you really want to live in a system that
takes whatever is scarce and gives it to the
people with the most money?”
Rural America is dying.
You know why?
Because there’s enough money there, the
market says, “It’s not worth it for a
bank to locate a branch in a rural area.
It’s not worth it for a supermarket to go
into an area that isn’t rich enough.”
So they can’t get their banking done.
They can’t get supermarket prices.
They have to pay more at the quote, unquote
“convenience store” etc., etc.
Markets work that way.
Rural America is a victim of a market economy.
And then let’s talk about the things that
we want that markets don’t produce.
Let me start with the simplest one.
Did the market produce the United States?
No.
A government did that.
A government called Britain, which came here—there
were other governments too, but the British
are the ones, who won—and they killed large
numbers of Native Americans.
And they took their land.
And they did all this other thing long before
there was any market here.
So don’t think of United States as a product
of the market as some, who defend markets,
would like you to believe.
It’s precisely not.
And, you know, the middle class that Americans
used to be proud of—a vast part of the working
class earning enough money to live in a home,
to have a car, to go on vacation, to send
their kids to school, you know, the good old
days—was that created by the market?
No.
That middle class was created in the depths
of the Depression, when a revolt from below—the
CIO, the socialist, and communist parties—created
the mass movement that pressured Franklin
Roosevelt to do the things that created a
middle class, to give people federal jobs—millions
of them—to create Social Security, to pass
the first minimum wage, and to create unemployment
insurance.
These things created the middle class.
The market economy resisted it.
Capitalists resisted it.
It was overwhelming them that got us this.
The market was the problem, not the solution.
And then let me give you some other examples.
You know why American businesses closed in
the United States and moved to China in huge
numbers?
That’s the market, friends.
Nobody forced them.
Nobody held a gun to their heads.
No.
American corporations wanted to make more
profits, which is what they do in a market
economy.
And they could make more profits by going
to China, because the workers were lower wages
there, and because that’s a growing economy
and they wanted to sell their goods there.
General Motors sells more cars in China than
it does here.
That’s why it’s there.
The jobs disappeared here, that’s the product
of a market economy.
Think about it.
And you know what the Chinese did?
They said, “Look.
We’ll give you access to our lower wage
workers.
We’ll give you access to our growing market,
but in exchange we want to share the technology
that you have.
We have something you want.
You have something we want.”
The fact that Mr. Trump now wants to call
that “intellectual property theft” is
a game that’s like paying a bill and then
having paid a bill for something you got,
claiming that the money was stolen from you.
It deserves the same amount of credence and
respect.
And here’s the double irony.
What is Mr. Trump doing, now that the market
has moved production and jobs to China.
He’s imposing a non-market event.
He’s imposing government taxes and tariffs
to try to offset the effects of the market.
In his obtuse way, he recognizes that the
market is bad news.
You know, that’s happened before in American
history.
In the war, World War II, it was decided in
Washington, we can’t let the market allocate
the goods that are now scarce, because we
were producing to win the war.
Railway cars, gasoline, you name it, was being
used to support the war effort, which meant
much less of that could go to produce consumer
goods: our milk, our sugar, our meat, our
gasoline.
There wasn’t enough, because it was being
used for the war.
So we couldn’t let a market to handle that.
But you know what would have happened if we
had?
The rich people in America would have bought
all those things, because they could bid up
the price.
So he would have had a war, in which poor
people died on the front and rich people are
the only ones who can keep up their consumption
at home.
And the government of the United States recognized,
that would destroy the unity you need for
war.
So they got rid of the market and they substituted
a ration system.
Every American got a little ticket from the
government.
And to buy milk, or sugar, or gasoline, or
meat you needed a ration ticket.
Having money wouldn’t get it for you.
And you know how the government gave out the
ration tickets?
According to people’s needs.
If you had a big family, you got a lot of
tickets for milk.
A rich person couldn’t buy the milk for
the cat at the expense of milk for children.
Gee.
A market would have taken care of the cat.
But a non-market intervention was necessary
for the human beings.
Don’t venerate markets.
They don’t deserve it.
And for a really good book, if you’re interested
in pursuing this, on what’s wrong with markets,
the best one I know of is by Harvey Cox.
It’s called “The Market as God” published
by Harvard University Press in 2016.
The last myth to explode is the one about
the corporation.
The corporation is this institution of efficiency
that has made the country great.
Not at all.
There is a professor, over in England, French
by origin, a woman, she teaches at the Leeds
University School of Business.
Her name is Virginie, that’s Virginia in
French, Pérotin.
I’ll spell it for you—P-É-R-O-T-I-N—Virginie
Pérotin.
She’s one of the few people who’ve spent
much of her adult life comparing and studying
capitalist corporations—you know, the ones
with the board of directors, twelve or fifteen
people at the top will make all the decisions
what to produce, what technology to use, where
to carry out production, and what to do with
the profits—versus worker co-ops, democratically
run by the workers—one worker, one vote—making
those decisions.
She’s compared them.
And guess what her research shows?
You’ll have to guess, because you probably
don’t know, because this kind of research—even
when it comes out of an established, well-reputed
business school—has a peculiar way of not
showing up on the radar.
Her research shows that worker co-ops are
more efficient, grow faster, and are more
successful as businesses than corporations.
We don’t have corporations because they’re
efficient, we have corporations because they’ve
used their profit to make sure we don’t
know the kinds of research that professor
Pérotin has produced and that we don’t
act accordingly.
A rational society would long ago have created
a sector of the economy that is worker co-ops,
so that all of us as citizens would be able
to see how they work, would be able to look
for and have jobs in a democratically run
business, so we could decide where we would
prefer to work, where we would prefer to buy
the goods and services we need.
And on that basis, we could then have a debate
and a decision what kind of economy we want.
Do we want a 50/50 mix of corporations and
worker co-ops?
A 90/10 mix, one way or the other?
We would then have a rational way to discuss
it and to debate it.
I had intended, if time allowed, to read you
the list of American corporations that have
moved production over to China, one way or
another.
But the list is too long.
It numbers in the—ready?—thousands of
American corporations.
They decided, following the principles of
the market driven by profit, to move.
They didn’t care about the disaster for
American homes, cities, towns, jobs.
They were doing what a market capitalism has
them do—maximizing profits.
And that was what was good for the corporation,
not good for this country, not good for most
people, not as good a way of organizing work
as democratic worker co-ops could be and would
be.
You know in Emilia-Romagna part of Italy,
they have an economy that’s 40% worker co-ops.
It’s been like that for decades and they
fight to keep it.
Guess why?
Yeah, there are all over the world examples
of successful worker co-ops.
That’s what professor Pérotin studied when
she came up with why they are preferable to
corporations.
Corporations are with us, because they want
to be, because they make money.
And it’s at our expense.
I hope you found this interesting, a discussion
of economic myths that need to be exploded.
And I look forward to speaking with you again
next week.
