Welcome friends to another edition of
Economic Update a weekly program devoted
to the economic dimensions of our lives,
jobs, incomes, debts, all of those kinds of
dimensions of our lives that affect us,
our children, our futures.
I'm your host Richard Wolff, I've been a
professor of economics all my adult life,
and as always I hope that that has been
a good training to bring you this
analysis of the last week or so major
economic events. I want to begin today
with talking about two related things:
the release of regular government data
about the economy it is after all the
United States government that is the
major producer and distributor of data
about jobs incomes interest rates you
name it and then the media the major
media in this country who record and who
announce and who distribute what it is
the government says so in the last week
or so there's been a release as is
typical this time of the year in this
time of the month of data and the one
that got the most attention was an
announcement that wages and here the
numbers are important that wages had
gone up hourly wages between January
2017 and January 2018 by two point nine
percent so just under 3% this got the
media into a tizzy which the government
clearly wanted and fed why because wages
have been stagnant in the United States
for most of the last 35 years that's
right if you adjust the money we get as
wages to the prices we have to pay for
what we spend our wages on we're not
getting much more today than we did in
the late 1970s yes we have more money in
the pay envelope but
you pay the higher prices your about
able to buy the same amount of stuff
today that you could then for most
Americans if you're actually buying more
stuff it's not because your wages went
up more than the prices they didn't it's
because you're borrowing more money and
that carries its own dangers but let's
get back to this number almost three
percent increase in wages over the year
see a number of commentators said the
economy is improving well here we go
with a reality check first question how
did prices go up over the last year
while wages were going up 2.9 percent
the answer is between two and two point
one percent is the rise in prices in
other words when you adjust the two
point nine percent increase in money
wages for the two point one percent
increase in the prices we pay you're
left with a zero point eight percent
increase in the actual wage per hour we
get and then we have more problems in
January of this year the average length
of the work week shrank so that you have
less hours of work so of course you're
not getting paid as much and compared to
a year ago the percentage of our people
that are in the labor force either
working or looking for work is lower
than it was a year ago well when you put
these things together with the normal
uncertainty of these numbers here's the
inescapable conclusion wages are
stagnant in the United States they are
as stagnant over the last year as they
have been for most of the 30 years the
notion that it's different from that is
a mistake on being polite or a
deliberately misleading effort by the
politicians in power to look better than
they ought to and that is justified and
by the way the current leader in the
White House promised to drain the swamp
meaning to drain the behavior of people
who were not being honest with the
United States true enough this behavior
by the government and the subservient
behavior of the mainstream media is
nothing new but mr. Trump has changed
exactly nothing our next update has to
do with an initiative very important
being taken by three of the richest
corporate executives in the United
States Warren Buffett the leader of the
Berkshire Hathaway Empire Jeff Bezos the
head of Amazon and Jamie Dimon the head
of the Morgan Stanley Bank one of the
biggest banks in the world they got
together over the last couple of weeks
and announced something they're planning
a new health care company it's not 100%
clear whether it'll be health care and
health insurance or one and part of the
other but that's not really the key
thing the key thing is what they said
and what it means in announcing that
they were doing something none of them
has done before health care that's not
what mr. Buffett does that's not what
Mr. Bezos does and it's not what Mr.
Dimon does they are bankers distributors
and a conglomerate respectively
I'm going to quote their statement we
want to do health care because we want
it to be low-cost
and efficient and here comes the key
words quote free from profit-making
incentives and constraints end quote
you know what they're saying they're
saying they're sick and tired of paying
way too much money for the health care
of their employees who number in the
many tens of
thousands they don't want to pay what
all the rest of us pay and why do we pay
so much just a reminder the United
States spends more for its medical care
than any other country on the face of
the earth roughly 18% of our GDP pays
for health care the second most highly
paid health care system in the world is
roughly half of that we are way out of
line with everybody else why because the
doctors the hospitals the drug and
medical device makers the insurers all
of them hospitals they work a monopoly
together they get together help each
other and charge us enough money that
they're all laughing on their way to the
bank
well we suffer it but Mr. Buffett Mr.
Bezos and Mr. diamond they don't
want to they don't want to be extorted
by other capitalists they want a medical
system let me read it to you again
free from profit-making incentives and
constraints so they're gonna produce
their own healthcare and they're gonna
make their own employees use what they
produce because it's cheaper it's a
cheaper way to provide medical care for
their own employees I have been arguing
on this program that we are all the
victims of a medical industrial complex
hospitals doctors drug and device makers
and the insurers they work together and
have produced overpriced medical care
now I have allies of Mr. Buffett, Mr.
Bezos and Mr. Dimon because they to
recognize and they don't want to be
victimized now they're going to do it
for their employees let me ask you a
question why isn't that available to you
and to me why hasn't it always been why
are we still held hostage to a system
that is not quote free from
profit-making incentives and cons
rates the third economic update for
today has to do with the activities of
the new kind of industry called
Air BNB or home away these are services
I'm sure many of you are familiar with
that make it possible if you travel to
stay not in a hotel as you may have in
the past but in someone's home and it
makes it possible if you have an
apartment in the city somewhere or home
in the rural parts of the country to
make that available to travelers to make
a little extra money
well these services are having a lot of
trouble but mostly in other countries
they have been either banned or rigidly
controlled for example in Berlin,
Amsterdam, Paris, and Barcelona just to
take some major European destinations
and what's the argument being made there
well it's a very interesting economics
argument it goes like this all that's
happening with these services is that
there's an effort to switch the hotel
industry from what we've been used to
going to a hotel that's a business that
has built a building maintains a
building maintains the rooms cleans the
rooms you know the whole bit as a
commercial activity typically hiring
workers who are often in unions to do
the work what air BNB HomeAway and the
other services like that do is switch it
the business so that a good part of the
rooms are not in the hotel or anything
like one they're actually your apartment
and why because they can make the price
cheaper and still make a big profit but
not because the costs aren't there it's
because the people doing this the air
B&B and the other agencies they don't
have those costs they've shifted those
costs on to you and me if we make our
apartment available it's an apartment
we either built or rent
it's an apartment we decorate and heat
and provision and we do that and we
clean it before and after as we maintain
it since we live there a lot of the time
those costs are somehow not recouped
it's not a problem for Airbnb we do it
and most people who do this don't count
those costs the way a hotel would very
carefully to see whether it pays so we
absorb the extras that come with having
folks stay over we hope in the end it
makes us more cash but we don't really
do that and here's a next economic
effect while they're making money in
these services and many of us who make
apartments available or in fact
subsidizing this whole thing the
companies in question make a lot of
profits very successful but there's also
another phenomena apartments that were
once the homes of people are being
increasingly removed from the market by
people who buy lots of apartments or
rent lots of apartments and in effect
run little mini hotels in apartment
houses where they can escape many of the
costs and the taxes and so on
that a regular hotel business has to pay
once again there's no technical
innovation here there's no sharing
economy that's not what this is about
it's about making more money that's what
it's about
finding a way to push the costs on to
others so you can reap more of the
profit for yourself but as people
aggregate that's what they're called
aggregate apartments to run them like
the sort of Airbnb hotels they're
driving up the rents in the United
States because the apartments that are
left for people to live in are shrinking
so the demand for apartments is what it
always was but the supply available for
regular long-term tenants is being
reduced by these under the wire let's
call them hotels no one can
these kinds of course no one asks gee if
you're threatening the hotel business
losing people working in hotels their
jobs if you're raising the rents in a
community then maybe that ought to be
factored into whether it's profitable to
allow an Airbnb system and if you really
want to give that option to people who
have an apartment then you ought to take
into account the effects and deal with
it the market doesn't do that the market
doesn't allow us to do it the market
doesn't make sure those costs are
counted it raises the question that
gentrification has always raised why do
we allow the decision about something so
important as housing to be handled by
buying and selling so that the best
housing goes to those with the most
money so that profit drives the rents
and everything else housing has been in
many countries it still is in many
countries a public service precisely to
make sure that everybody has a home and
that the distribution of people in a
neighborhood is diverse
rather than being governed by money and
prices and rents and for those of you
that are skeptical that the government
could manage something as important as
housing I often find that a bizarre
hesitation why because of most of the
same people really enjoy going to the
public parks in American cities almost
every city has one more ten of them here
in New York City we have Central Park
and Prospect Park and many wonderful
parks you know what they're maintained
by the city by public authorities of one
kind or another who keep them well
planted who keep them clean who keep
them safe we want the parks we've given
that to the government in most parts of
the country and it does a fine job why
don't we do that with housing also maybe
it would escape some of the kinds of
problems that are bedeviled the housing
industry the rental industry and so on.
Before I get to my next update, I want to
remind you we maintain two websites as a
project alongside this program: rdwolff
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that's all one word,
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television program. ok some of you have
noticed in my next update a remarkable
thing that happened in the country of
Saudi Arabia over the last several
months and since it's now come to an end
or nearly so it's time for us to take a
measure of what happened and to learn
the lesson a whole group of Saudi
Arabian billionaires and millionaires
were caught up by the current leader in
what he called an anti-corruption drive
this was really interesting lots of them
something on the order of three hundred
and eighty one billionaires and
millionaires most of whom were herded
into the Ritz-Carlton hotel in the
capital of Riyadh
okay it's unusual for millionaires and
billionaires to be rounded up to say the
least it's doubly unusual for them to be
rounded up in an anti-corruption Drive
and it is really extraordinary
that instead of being taken to jail they
were taken to the ritziest Hotel in the
country what's going on
Saudi Arabia is in trouble as a country
it is totally dependent on the price of
oil and gas and when the price went down
over the last couple of years the
economy of that country like other
countries that depend on oil and gas
Nigeria Venezuela and so on got itself
into deep trouble the new leader
relatively new decided that he needed a
large sum of money from these wealthy
beyond words people literally the 381
richest or nearly the 381 richest people
in his entire country he could very
quickly take a portion of their money he
decided and make it available to the
government to see themselves through the
very hard times if he asked them for it
he'd probably get a giggle and a sneer
so he decided maybe even tried that he
decided to do it more directly he
rounded them up told them they were
targets of an anti-corruption Drive
stuck him in a fancy hotel and said I
won't let you out until you give me a
whole bunch of money and he got it
turns out they didn't want to be stuck
in a fancy hotel they wanted to ride
around in their expensive cars and do
their usual billionaire thing but he got
a hundred and six billion dollars and he
plans he said to use 13 billion to
compensate the Saudi people for the
rising cost of living he's gonna solve
that problem that way notice it isn't
that difficult to see a country through
difficulty notice
these 381 richest people in Saudi Arabia
even after they had to fork over one
hundred and six billion dollars there's
still the three hundred and sixty three
hundred eighty-one richest people the
problem of getting the resources to
solve a country's problems depends
entirely on whether you go after it
directly or not in Saudi Arabia they
felt they had to they did it and we
learn a lesson here in the United States
the richest people likewise have more
than enough money to enable the
government to solve the problems and
still leave them the richest people but
they're strong enough so far not to have
to do that my next update has to do with
an event that happened on Thursday
January 18th in London an annual
fundraiser for charities took place at
the Dorchester Hotel 360 of the United
Kingdom's business elite except for one
thing
they were only men they gathered
together for the president's club event
it's called two undercover women
reporters for the Financial Times took
the jobs that were offered to you love
this a hundred and thirty hired
hostesses to work for the 360 business
elite men yes you guessed it groping
sexual misbehaviors of one kind or
another but this time it got caught this
time it got exposed and in the most
important financial newspaper in the
country the Financial Times so no one
questioned the veracity of it all what
is it another example that if you
organized business with a few people at
the top those people will be tempted and
by virtue of their power will be enabled
to abuse those below them whether
it's men abusing women or men and women
at the top abusing those whose jobs
depend on what those few at the top
decide a hierarchical structure of
business is an open invitation for this
kind of behavior which is why it is so
old and so well known all that happened
were the British were caught out the
president's club became a scandal but
the lesson to be learned is don't allow
a few people to run everything because
then you're a slave to whatever abusive
instincts or desires they may have a
horizontally organised business a
democratic business where everybody
participates in a decision would at
least allow those who don't want to see
this kind of behavior to have some power
to change it it shouldn't take
undercover reporters after 33 years of
this charity to break the story open the
last update we'll have time for today
has to do again with housing becoming a
very important subject in America to say
the least
first rents in the United States today
are higher than they have ever been in
the history of the United States even
more remarkable as this statistic for
every homeless person in the United
States today there are two vacant
investor-owned homes in the United
States today let me repeat that people
are holding homes off the market hoping
to make a killing by getting a
high-paying tenant sometime in the
future the homes are empty they're in
the hands of investors who have no
desire to use them they just want to
make money off of them side by side
with many many thousands of homeless
people when I say sometimes to you that
we can do better than capitalism this is
a perfect example we have a system that
encourages people to become investors in
households in homes side by side with a
system that pays so few wages or gives
so few jobs that we have hundreds of
thousands of people in this country
without a home and as I pondered this
sort of situation why we don't make
housing a human right
why again we don't make housing like our
public parks something that we give to
ourselves as a people everybody has to
have a park to have a picnic in to play
with your dog to play with your children
to get a moment of green escape from
your daily life it's very important to
have parks which is why almost every
city in town and village has one or more
than one but housing is also very
important to your mental and physical
health why don't we do it that way that
we have a shared housing stock for
everybody
we don't have homeless people but we
don't do that but other countries do so
I thought I'd close today by telling you
what is being proposed in Great Britain
by the Labour Party Jeremy Corbyn the
new leader of the Labour Party and by
the way in Britain they had a homeless
problem is much smaller than the
homeless problem here in the United
States in absolute numbers and per
capita in terms of the relationship to
the size of the population but they
don't call it homelessness they have a
wonderful name which I hadn't
encountered before
here's what it's called in England in in
Great Britain rough sleeping that's
right rough sleeping which kind of tells
you pretty closely what we're talking
about homelessness rough sleeping
here's what Corbin has said in response
to what he honestly admits is his horror
at contemplating the suffering of
homeless people in the United Kingdom
number one the government plans to buy
empty houses and make them available
none of this vacant homes next to
homeless people and also to empower
local authorities to cease deliberately
vacant housing that's what's called
housing held by investors to make money
in order to solve problems
he's very critical of a society that
builds luxury apartment houses that sit
half-empty while not taking care of the
basic housing needs of the fellow
citizens I had this final thought the
British don't make such a big thing
about their family values the way the
United States does but it is remarkable
that a country committed to family
values is so much of a failure when it
comes to providing housing for vast
numbers of people what kind of a family
value is that thank you very much we've
come to the end of the first half of
economic update please stay with us
after a short interlude we will be right
back
