Welcome, friends, to another
edition of Economic Update, a weekly program devoted to the economic
dimensions of our lives: jobs, debts, incomes — ours and those of our children, coming
down the pike. I'm your host, Richard Wolff.
Before jumping into today's economic updates,
I want to make clear that this program was produced before the results of the election were
completely known. Please do keep that in mind.
Okay, I'm going to begin with a story
about the Dunkin’ Donuts company. Well, I should correct myself at the beginning. It's now
called the “Dunkin’ ” company. It got rid of the “Donuts” when they decided to produce other things
besides those fantastic contributions to modern, uh, food intake. Formerly Dunkin’ Donuts, then,
now Dunkin’, is being purchased by the Inspire Brands corporation, for the hefty sum of $11.3
billion. I want to talk to you briefly about this interesting merger, happening right in the
middle of an economic crash and the pandemic.
First, Dunkin’ already owns Baskin Robbins
ice cream, so that's part of this. Inspire already owns 11,000 Arby's restaurants
around the world, also the Buffalo Wild Wings business, Sonic, Jimmy John's, and
others. So the first thing about this merger, this purchase, is that it is an
example of how large capitalist corporations use a pandemic and a crash to become much larger.
Dunkin’ Donuts had a rough time. People were not going out and getting them in the last quarter,
so its income was down, its price was down. Great. A big corporation was able to swallow an
also-big corporation, but not quite as big.
It's interesting that the way this crash is
working, and the way this pandemic is working, you may have 225,000 dead Americans (not to speak of
over a million globally), but it is an opportunity not being wasted by the capitalist class in this
society. Yeah. Big businesses are getting bigger, and small and medium businesses are
being wiped out in record numbers.
Does it have to be this way? Of course
not. Government policies stepping in to deal with both the pandemic and the economic
crash (we have two crises at once) could have favored small and medium businesses to offset
what is happening. The Trump administration — and, to be honest, the Democrats too — didn't take
that opportunity. Didn't do it. So we have an economic system that is becoming more tilted in
the favor of big business over medium and small business than it needed to. These are some of the
long-term damages that this crisis is imposing on the United States that we will be living with
— unless they are reversed — for a long time.
My second point wants to drive home something
I've mentioned before and a number of you have commented to me about, so I want to get very
clear. The United States private capitalist system — often referred to as the private
sector, or the dominant part of our economy, which is not the government, but is private
capitalist enterprises — that system is now on life support. Think of
private capitalism as a three-quarters dead enterprise. It can't live anymore. It's
run out of gas. It's run out of energy.
What do I mean? The Federal Reserve, the central
bank of the United States, is now sustaining our capitalist system with an endless flood of
money creation that they produce electronically, on a bank account. And they make that money
that they're creating, literally out of nothing, they make it available at interest rates
barely above zero. In short, the Federal Reserve is making free money available because
the capitalist system can't work without that anymore. That's what I mean; it's life support.
Let me explain. This year the Federal Reserve began lending directly to corporations. Not
going through indirection — they did that in the past — no, right here. Here's some. You need
money? You're a corporation in trouble? You made a bad decision about what to produce? You chose
a poor technology? You're being out-competed by the Chinese? Whatever your problem, here's the
quickest, easiest way to solve it. Come get the free money. It's as childish as that. And so the
Federal Reserve produces money and lends it to the corporations. That's called “monetary policy.”
But then let's look at the other way the government is life-supporting capitalism. It's
called “fiscal policy.” That's when the government cuts taxes, so people have more to spend, and
companies have more to spend. And at the same time the government spends more itself, pumping
all of that purchasing power into the economy. When government cuts taxes, as Trump/GOP
did, and spends more money, as Trump/GOP did, guess what. It runs deficits.
That's right. In order for the government to spend more while it brings in less in taxes,
it's got to borrow the difference. And here's how it works, friends. Here comes High Finance
204. You ready? Good. The federal government borrows money. Trillions, right now. It gives
treasury securities, a little printed document, to every bank, to every insurance company,
to every corporation, to every rich person that lends to the United States government.
So here's how it works. The government can run a deficit by issuing treasury securities to the
public that buys them. And then here's what the public does: Within minutes of buying a treasury
security from the US Treasury to fund the deficit, the bank or the insurance company turns around
and resells that treasury security — you guessed it — to the Federal Reserve, which uses fresh,
new money to buy the treasury security.
The end of this game, this kind of Three-Card
Monte? Well, the federal government can spend more than it takes in in taxes, supporting a dead
economy, and the Federal Reserve is sitting on a mountain of treasury securities it has bought.
So in the end, the Federal Reserve is sustaining US capitalism — directly by loaning
to corporations, and indirectly by loaning to the federal government — to run
a huge deficit, excess of trillion dollars.
Here's what the meaning of all this is.
First of all, our private capitalist system is defunct. It can't work. It's busted. You know
what the hottest new term in high-tech economics is? Here we go — the “zombie corporation.”
I've talked about this before. That's a company whose profits are not enough to cover the interest
it owes on its debts. So the only way the company can survive, since the profits are not enough
to cover the debts, is to borrow more, so it can pay off the debts of its earlier borrowings and
thereby becomes more zombified than it was before. Am I describing a fantasy? No, I'm
describing the reality of US capitalism.
And nobody says a word. All of those libertarians
— this must be their worst nightmare. The federal government is not an
intrusion; the federal government is the only thing that keeps private capitalism
from a complete bust. And that's the reality, folks. And the Republicans go along with it, and
the Democrats go along with it, because nobody wants to say that the emperor has no clothes,
that the system is busted, that it doesn't work.
And here's another dimension of all
of this I don't want anyone to miss: The only way that the Federal Reserve can do
all of this is if the government says it's okay. The only way that the government can keep going
is if it taxes large numbers of people, as well as borrows money in the end from the Federal
Reserve. So everybody's in on this game.
And what do we know about this way that the
Federal Reserve is keeping capitalism going? It's funding the most extreme inequality in a century
of American history. The 50 richest billionaires in America have made out like bandits over the
last six or seven months. Covid is good news for them. The crash of our economy is a source
of immense wealth for them. You may be having difficulty, and I may be, but the inequality
is growing like a mushroom after the rain. And we, with our taxes, are funding the government
that is making all that possible. So I want you to take a moment to feel good that the taxes you pay
— when you buy a beer, when you fill your car with gas, when you pay your income tax — that money is
helping to sustain monetary and fiscal policies that make the United States even more unequal
than it was before these twin crises hit.
Unequal: big business versus small and medium.
Unequal: rich and poor. Whatever else is going on — this capitalism may be on life support, but
the rich are making money all the same. Never let a good crisis, or a good pandemic, go to waste.
That's the real slogan of US private capitalism.
My last update that we'll have time for has to do
with the eviction tsunami that's coming. Before I even talk about it, I want to recommend
a book. There's an extraordinary fellow; his name is Matthew Desmond. He's a professor at
Princeton of social sciences. And in 2016 he wrote a book that is more important now than it was four
years ago when he wrote it. It's called Evicted: Poverty and Profit in the American City. It
won a Pulitzer Prize, and rightly so. If you're interested in any of the things I'm about to tell
you, get Mr. Desmond's book. Matthew Desmond, Evicted: Poverty and Profit in the American City.
The Centers for Disease Control set a moratorium in March, and they renewed it again last
summer. It says that folks don't have to pay their rent, and can still not be evicted,
until the last day of this year. So we're talking less than two months from now. Many
millions of Americans have accumulated rent, because the moratorium delays the rent you have
to pay, in effect, but it doesn't erase it. You owe your landlord that money. It is being very
inconsistently enforced across the United States, so for some of you this may be news, because you
may be haunted by the lawyers for your landlord who is trying to get around this. Landlords
have ways of evading it. They can evict you for some other reason, other than not paying rent,
if they can make a case. The rents accumulate, so that millions of families are going to be
owing many months of rent on the 31st of December, and there's no prospect that they will
earn the money enabling them to pay.
This is the worst crisis of the renter — millions
in America — since the 1940s. That's almost a century ago. And during the Great Depression of
the ‘30s and ‘40s, there were also moratoria, but there were also direct actions by renters
who did not pay, and who had fights — sometimes violent — with landlords around this issue. More
can be done today by simply doing what was done back then. There have been 3.7 million evictions
in an average year in recent years — many times more than in any European country. Seven
evictions every minute of the last few years. Poor people pay more than 50 percent of their
income in rent. It is a catastrophe. An economic system that doesn't pay people enough to buy
their own housing is a system that isn't working.
We've come to the end of today's show,
the first part. And before we move on, I want to remind you that we've now published
a third book of mine with Democracy at Work. It's called The Sickness Is the System: When
Capitalism Fails to Save Us From Pandemics or Itself. It's a compilation of essays that aims
to explain how and why capitalism, not covid, is the sickness we have most to worry about. Get
your copy today at democracyatwork.info/books. I want also to thank our Patreon community
for their ongoing and invaluable support. Please continue, if you like this show, to
go to patreon.com/economicupdate to sign up and get access to all kinds of extras that we
provide. Stay with us; we'll be right back.
Welcome back, friends, to the second half of
today's Economic Update.The second half today is devoted to a single theme. And the theme
is, no matter who wins — Mr. Trump or Mr. Biden — some things are not going to change.
And those are as important, if not more so, than whatever the outcome of this election
turns out finally to be. So let me begin.
No matter who wins, what will not change
is the capitalist organization of the US economy. The overwhelming majority of businesses
will continue to be run by a very small group of people at the top — the owner, the board
of directors, the major shareholders — who make all the key decisions that the vast
majority of us employees have to live with. We have no control over those decisions. Those
are the people who decide what gets produced, how it gets produced, where it gets produced, and
what is done with the profits that come from the work we all contribute in each enterprise where
we work — in each factory, office, or store.
That's not going to change. You know why?
Because both of those parties, and both of those candidates, are committed to that way of
organizing business. They never say a word about being interested in an alternative, let alone
giving the American people some real choice about the alternative, which means that we're going
to allow that small group at the top to take the bulk of the money for themselves, which they've
always done, and to use part of it to control the political system, that we live with, so that their
power is not only economic, but also political.
You get the picture? No matter who wins. You see,
the fight in the politics is only about who is in charge. We both know, they both know, that what
they do in the way of supporting capitalism is indistinguishable between the two of them. That's
their top priority. They disagree on the ways, but not on the goal. One way to see that was the
remarkable theater around the nomination of Amy Coney Barrett to the Supreme Court. There we
had it: a person whose last judicial decision was a key ruling blocking many gig workers
from suing in court when tech companies cheat them out of overtime pay. That's from an
editorial by Len Goodman, a Chicago attorney, in the Chicago Reader newspaper of October 27th.
Attorney Goodman makes a wonderful point, that the opposition of the Democrats was
pro-forma. They didn't expend any political capital to try to block it, because in the end,
Amy Coney Barrett is just another justice for whom capitalism is the beginning and the end —
can't see beyond it, can't see outside of it, stuck in that point of view. But that's what
both parties want. So the Republicans push them, and the Democrats go through some pro-forma
opposition. The Democrats will in turn pick another person. It's the same game, the same
people, the same establishment that is being reinforced. But maybe they understand that
capitalism is heading into tough times and they need to shore up those who can't see beyond it on
the highest levels of American political life.
No matter who wins, the private sector and
the government will continue their shared failure to overcome capitalism's socially
destructive instability. What do I mean? Wherever capitalism has existed over the 350
years that it's become the dominant system in the world — starting in the 17th century in England
and spreading to become the global economic system it is today — in all that time, and in every
country where capitalism settles, it has a crash every four to seven years. That's the average.
Every four to seven years, millions of people lose their job. Tens of thousands of businesses
go belly-up. Cities and towns and governments are desperate because they're not getting the tax
revenue they were used to because all those people are unemployed. So just when we need more public
services, we can't afford to provide them.
The chaos of all of this you know, if you
follow the economic history of capitalism. We knew we were due for one because the last one
was in 2008. And if you add the four-to-seven to 2008, we were already overdue this year for a
crash. If it hadn't been the COVID-19 it would have been something else. We have 20 years of
this new century we're living in, the 21st. Twenty years. We've had one crisis in the spring of 2000,
the so-called “dot-com crisis.” We had another one in 2008, the so-called “subprime crisis.” And
now we have one called the “COVID-19 crisis.” Twenty years, three crises, right on
time, four-to-seven-year average.
Any serious politics would
have to have a political party that took responsibility for failing to prepare
us. We weren't just unprepared for a virus. We were unprepared for a business downturn we knew
was coming because we've had it every four to seven years for three centuries-plus. There's
no excuse, but both parties act like whoa, what a surprise, an economic downturn. We
have so many words: “recession,” “depression,” “boom-bust,” “collapse,” “crash.” Why? Because
it's an ever-present reality. It's a failure of the two parties not to have prepared us. It's a
failure to not be prepared for a virus, which we also know has been coming, from time immemorial.
But we don't have any real fight about it, do we? Nobody points a finger, because we all are
pro-capitalist in this country, and so we have to pretend that the unspeakable instability
of capitalism is not an issue we should ever bring up. And so neither candidate did, and doesn't.
Let me say to you again, as I have in the past: If you lived with a roommate as unstable as
capitalism, you would have moved out long ago.
No matter who wins, here's something that will
continue: the undoing of the New Deal. You know, back in the 1930s we had another depression —
surprise, surprise. It lasted from 1929 to 1941. Twenty-five percent unemployment, staggering blow
to the American economy, lasting over a decade. Wow. But the people in America rose
up, in a way they didn't this time. And they formed labor unions on a scale we've
never seen before. And they joined socialist and communist parties. And the socialists and
the communists and the unions worked together.
And they got stuff in the 1930s, didn't they? Social Security — we never had that before.
Everybody who's over 65 gets a check every month for the rest of their lives so
they're not a burden on their family. Transformed life in this country. Unemployment
insurance — for a year or two you get a check if you lose your job through no fault of your
own. We never had that before. A minimum wage, so the employer can't really screw you while
you're working 40 hours a week. We never had that before either. And then a public jobs program
that hired 15 million Americans, who didn't have to lose their homes and who didn't have to
lose their self-esteem. We really did things.
And when the war was over in 1945, and the
leader of the time, Mr. Roosevelt, was dead, they went to work — the business community and
the rich — to destroy and to undo the New Deal. You know why? Were they against Social Security?
No, it wasn't really that they were against them; they just didn't want to pay for them. And
they had been made to pay a big part of it. Taxes had been raised on the rich and on
corporations, and they had had to lend money to the government to help pay for all of
this. That's what they hated, as they always do, so they went to work to undo the New Deal.
We don't have a public jobs program. Here we have unemployment as bad as it was in the Great
Depression, and neither of the two candidates has said a word about a public jobs program of the
sort we did successfully in the 1930s. Wow. That's cooperation of our two parties — not even to
think or talk about what was done in the past to help people. And all they can think of is cutting
Social Security. Well, uh, it’s not affordable. And they haven't raised the minimum wage even
to keep pace with the rate of inflation.
I mean, it's disgusting what these two parties
will do. Yeah, the Republicans do it more, and they do it more quickly, and it's harsher.
And the Democrats say, we won't do it; we're not Republicans. That's right; you're
Republicans Light. You're Diet Republicans. But that's all. You don't question any of it.
You just roll back the New Deal more slowly. And pretty soon there'll be no New
Deal left to roll back any further.
And finally, no matter who
wins, there will continue to be no real political choice in the United States.
I really want to drive this point home. Americans used to — maybe many of you still do —
refer to something as quintessentially American when it involves freedom of choice.
We're supposed to have freedom of choice. But what it really means in practice is the desire
to be able to go into your neighborhood drug store and choose freely among 27 different kinds of
toothpaste, or 36 kinds of dish detergent, or 27 kinds of automobile branding. That's the choice
you seem to care about. Because when it comes to politics, two is the magic number in our society.
Only two. You don't need three? or six? or nine? Every European country has three or six or nine.
We don't. We don't want choice, apparently — not in the unimportant thing like politics.
So what have we got? We’ve got two parties that are very hard to tell apart — particularly when
it comes to capitalism, when it's impossible to tell them apart. Republicans and Democrats — the
establishments that run those parties — they are cheerleaders for capitalism. They don't question
it. They don't challenge it. They don't advocate for anything else. You want to have the political
choice to go somewhere else? You don't have it. Those parties are persecuted. Their ability
to run is made extraordinarily difficult. The system is monopolized by those two parties.
We don't allow two companies to monopolize an industry without raising a question, but
we allow the two parties to manipulate and monopolize from here to tomorrow. You don't
have any choice. And these two political parties work very well together to keep it that way. And
that's not going to change — not with Mr. Trump and not with Mr. Biden. Or maybe I should amend
that. With Mr. Trump, perhaps he's interested in getting it down from two to one. But that's not
the direction I would guess most of you support.
So, yeah, big election coming up. But no
matter who wins, the New Deal gets eviscerated, the instability of our economy continues
to function without any opposition at all to a system that is so unstable, or a
system that produces such inequality, or a system that just failed to be prepared for
the next crash, or to be prepared for the virus. It's extraordinary. The most profound
reality for me as a critic of capitalism, for me as a professor of economics, the
most extraordinary reality of the American political system and the current political season
is that the system we have — which is performing so badly for such a vast majority of the people —
gets a hundred percent pass. There's no critique of capitalism in the airing of the political-party
debates, no question, no challenge, no rejection — nothing. That's called denial, folks, and
it is something you really want to worry about the next time you talk to a therapist.
This is Richard Wolff for Democracy at Work, thanking you for your attention, and
I will speak with you again next week.
