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. In today's program we're going to be talking about the banking crisis
that has enveloped the United States yet again, we're going to talk about plant closings, what
they mean, child labor in the United States, the bizarre budget proposal of President Biden
and then some new research on homelessness in the United States and with an important book.
And then we'll turn to an interview with our guest Robert Ovetz, who will have something
to tell us about the U.S Constitution. Let's jump right in. I don't want to rehash what
most of you already know about the collapse of the Silicon Valley Bank and the bank runs and crises
that have been proliferating above and beyond the surface of events ever since. I want to stress,
however, something you may not have thought about. We now live in an economic system that
cannot protect us - not you, not me. We've had two dramatic lessons, even though
there are lessons like this every day, we've had two dramatic ones: horrible catastrophe
of a derailment in East Palestine, Ohio and now catastrophic collapse of a bank in
San Jose, California. It's extraordinary. The system doesn't work, the banks can't
do what they're supposed to or are driven by profit to cut safety, to cut care, to cut
their responsibility. The railroad companies can't do it, the banks can't seem to do it, the
institutions, governmental commissions and so on that are supposedly regulating and supervising,
they can't save us and protect us either. Let me go over the timeline that
leads to the banking crisis. We have a pandemic and an economic crash in
2020 that was not prepared for, that was not managed very well. We really took it on the chin.
That, in turn, was handled in so bad a way that it was followed by an inflation when we could
barely recover from the pandemic and the crash. The inflation led to herky-jerky governmental
policies, which included raising the interest rate which hurt the same poor and middle-income
people that had already been hurt by the crash and the pandemic and the inflation. And now
we're told we're going to have a recession. Well, with rising interest rates
the value of bonds go down. No one seems to have said to themselves in the
halls of power 'banks invest a huge amount of their deposits in government bonds, they've
been doing that for, let's see, two centuries.' So it's not as though it's a secret. And if the
bonds go down in value when interest rates go up, which they do, and which they have
been doing for six to eight months now, the logic would say 'uh-oh, if something goes
wrong the banks are going to have a lot less wealth in the value of those.' But no one thought
it through, no one took the appropriate steps. The banks took bigger and bigger risks, probably
hid half of what they were doing from the... It's the same old story. If you leave
private enterprise in place it will undo, it will subvert any regulations put in. After
2008 and 9's catastrophe we had some reforms; the Dodd-Frank Act and others. What did the
banks immediately do? Go to work lobbying with their money to reduce those regulations.
President Trump went real far in reducing them, just like in a few years before the
collapse of 2008 and 9 the repeal of the Glass-Steagall Act - a reform after
the Great Depression of the 30s - opened us up for the 2008/9 catastrophe. That
this is going on should surprise no one. That the people of this country tolerate a
system that works like this, that's the issue. Let me turn next to a town you may never
have heard of: Canton, North Carolina. There they have a big factory that employs a
very significant part of the population. It's called the Pactiv Evergreen paper mill, which is
important in that area. They recently announced a restructuring aimed to make the company more
profitable. And they also announced that they would be firing 1,100 workers in the factory in
Canton, North Carolina. Now, I want to stress two things: a tiny board of directors, numbering less
than 20 people, made a decision that's profitable for that company and that involved firing 1,100
people. Those people fired had no say at any step in this process. They were told that they
will have to get a new job by June of this year. The fact that they may have made a commitment
to buy a house for the next 20 years is of no concern to the company. The disorientation
of their children, of their families with the anxiety and the loss of income that is looming
upon them at a time when the economy as a whole is in not good shape either could count for
nothing. This is the opposite of democracy, the people affected by a decision are
excluded from participating in it. But even worse, let me explain
to you as an economist: let's suppose a decision by the company is correct
and they make 50 million more dollars of profit over the next few years than they would have if
they hadn't done that, let's give them that. By the way, there's no certainty that that's true,
but let's let's assume it. But then we would have to ask what are the losses to the 1,100 people
who have no job anymore for the next few years, the households of that many people.
We're talking five thousand people. They're not going to have wherewithal, many of
them are unable/going to be unable to make their mortgage payments. They're going to have to try to
sell their house at a time when no one is moving in because their jobs are being cut. The local
town, the state of North Carolina will have less revenue because 1,100 people aren't going to be
able to pay taxes because they don't have a job. I could show you quickly if we add up all the
costs, direct and indirect, from this decision it could easily be 500 million dollars, in other
words, to a society as a whole, to all of us. This is a stupid decision because the costs
are much greater than the gains. But we have a system that allows a tiny number of people
to go after those gains, even when and if the social losses dwarf those gains. That's not
only undemocratic, that is irrational. That's a system that is making bad decisions because of
the way it's organized. And we do that every day. There's a new report out by the Department of
Labor, Health and Human Services. It's a new report - 2023. Here's the statistic I want you
to think about. Since 2018 there's been a 69% increase in illegal child labor employment in
the United States. The U.S Department of Labor reports it has 600 investigations of employers now
underway where they have a legitimate complaint of child employment. You thought we had that
problem beat. You thought we had outlawed child employment in this country. Well, yes we did.
But the corporate profit-drive will and always has gotten around the laws, the regulations when
there's money in it. And there is, because you can get away with paying children, especially
the children of immigrants, very little money. I turn next to the budget proposed by President
Biden. It's very hard to maintain politeness when you're talking about such fakery. Before I tell
you about the budget let me tell you that this is pretty similar to what he proposed before when
the Democratic party controlled both Houses of Congress and they didn't get it then. Therefore
to propose it now when the Republicans control one House it's more certain than ever that they're
not going to get this. So proposing these things is a bit of public fakery. It's theater,
it's political theater - 'this is what we want.' Because everybody who counts
knows it's not going to happen. But here we go. Number one: increase the
income tax for people earning over four hundred thousand dollars to 39 percent. Gee, now
it was 37%. What a dramatic change that isn't. Number two: increase the capital gains tax
on shareholders, so you pay on the difference between what you bought the stock for and
what you sell it for - the capital gain. And they're raising it, he proposes, from 21
percent to 28 percent. That's pretty boring, too. It'll hurt the people who have that money but
won't hurt them very much, will it? And finally a minimum tax on billionaires. Well, in this country
we have 320 million people and we have less than five or six thousand billionaires. So that's
not going to affect very many people either. So there it is: bold, brazen
and absolutely pointless, just for theater. And guess what? The
Republicans will give us their theater. They will trot out the dead old arguments against
this dead-on-arrival proposal, as if it mattered. And we'll hear things like 'gee, you're stifling
innovation or investment, you're taking money away from people.' Oh goodness, I just told
you about that poor town in North Carolina, look what's being done to those people, shaking
their lives to the foundation. But we're supposed to empathize with the billionaires who'll have
a little less in the way of a billion than they might otherwise have had if this had a chance,
which it doesn't. What a weird country to live in, with the problems we have. And political
theater is what our leaders give us. Final update that we have time for today: there's
a new book, and when a book comes out like this it makes an important point. I want to begin
to mention it to you. The authors are Gregg Colburn and Clayton Aldern and the title of
the book is Homelessness is a Housing Problem; was published in 2022, so it's a new book by
the University of California Press, a very prestigious university press. Here's what their
book shows us in great detail: that the problem of the homeless in America, and we have now huge
numbers that are growing every day... The problem of homelessness in one of the richest countries
in the world (the U.S) is not mostly about drugs, poverty, crime and all the rest of the things
that have been said - mental health, you name it. Here's what the answer is: it's a problem
of a shortage of housing and high rents. Whoa! It's an economic problem, mostly. In
other words, our economy produces too few homes, even while the rental to live in them is too
high. In order for our system to be adequate to house the people who live in it you have to
either give them the income needed to pay the rents or bring the rents down to what the income
is they can afford to spend on them. We don't do that in this country and that's why we mostly
have homelessness. The stuff about the drugs and so forth is meant simply to focus attention
away from the economy that doesn't provide homes to people and to put it on the people
themselves. In other words, blame the victim. We've come to the end of the first half of today's
show. Please stay with us, we will be right back. Before we move on I want to remind everyone that
Economic Update is produced by Democracy at Work, a small donor-funded non-profit media organization
celebrating 10 years of producing critical system analysis and visions of a more equitable and
democratic world through a variety of media. Like the long-form lecture series I host called Global
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explain the impact and effects capitalism creates across the globe to others. Global Capitalism is
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we produce, sign up for our mailing list, follow us on social media and support the work we
do. Please stay with us, we will be right back. RW: Welcome back friends to the second
half of today's Economic Update. I am very pleased to bring an old friend of mine
to the microphones and the screens - someone who's done the kind of work that I try to do on this
show as well. His name is Robert Ovetz, he teaches at San Jose State University in California
and also at the University of California at Berkeley. His published work in books and articles
focuses on labor history and class struggles. His most recent book is called We the Elites: Why
the U.S Constitution Serves the Few, a class analysis of the U.S Constitution. So first of all,
welcome Robert Ovetz and thank you for your time. RO: Thanks for having me. RW: I want to jump right in. And, as I'm
sure most of our listeners and watchers well know, whether you're looking at
the Supreme Court conservative majority or countless conservatives in various parts
of our federal, state and local government, they like very much to support, to justify,
to rationalize what they do and what they say by stating that they are with the founders
of our country, with the people who wrote the Constitution and with the Constitution itself.
And that therefore their interpretation is legitimate and everybody who doesn't behave the
way they wish is therefore illegitimate. Well, I thought it would be particularly interesting to
our audience here if someone who has studied the Constitution, written about the Constitution
could come before us and weigh in and tell us what you think. Starting this way: what you
think about the way the Constitution has been used to support, basically, the right-wing
in American politics for quite a while. RO: Well, Rick, as any of your listeners
have heard you talk about numerous times is that it seems that our system of
government fails the economic majority, or another term that I use for the
working class over and over again. And while it seems like there's the possibility of
reforms around the environment or workers rights or a woman's right to choose her own reproductive
methods, we lose over and over again. And what motivated me to write this book was to try
to get out what is going on with our system of government. Why is it that our system seems to
block what the majority wants over and over again? And what I found in my several years of research
of reading who I called the framers - their letters and pamphlets and the transcripts from the
debates of the Constitutional Convention and the state ratifying conventions - is that this is not
an accident, this is not a symptom of partisanship or big money. This is caused by the design of the
Constitution itself. In order for us to understand why the economic majority cannot get what it wants
we have to understand how the Constitution was designed by the economic elites of the late 18th
Century to do what I call constrained political democracy and prevent economic democracy. And,
as your listeners have heard you talk about for many years, is that we need economic democracy in
order to transform the way we govern ourselves. But unfortunately our constitutional system
was designed with numerous what I call minority checks in order to provide the opportunity
for the economic elite, the ruling class, to be able to block any change that it
opposes. So to get back to your question, when Republicans and conservatives
talk about their interpretation of the Constitution essentially they're saying
'well, the Constitution was designed to protect the capitalist economic minority.
And those changes that you want, sorry, but it's opposed by those who fund us and
those who back us and so you can't have it.' RW: And so your argument, and correct
me if I've misunderstood your argument, is that they're basically right in the sense that
the Constitution they keep pointing to is a useful document for them. In other words it rationalizes
and justifies an undemocratic way of organizing your economic system. Okay, take us through it.
In other words, give me the core of your argument, if I've gotten it right. Give us, if you would, either an overview or some examples of how
the Constitution does what you just described. RO: Yes, absolutely. So we learned from the
earliest age, as early as elementary school if you grew up in the United States, that our
system was designed to set up a democracy to extend rights to people and to allow the majority
to rule. And these are what I call the three founding myths. Our system does the complete
opposite. In fact it was designed and still operates essentially virtually unchanged - only 27
amendments in over 230 years - to do the opposite. It opposes the majority's will by allowing those
who are opposed to change to be able to block that change anywhere in the system. And as an effect
it allows the economic minority to actually rule. So this is how it works. One of the key principles
in understanding the Constitution is that famous saying of 'checks and balances.' And essentially
what that means is that each of the branches have a certain number of enumerated and implied
powers in the Constitution. And one branch can activate and act on its own without one or
the other branches also acting. And the similar kind of checks and balance exists between
the Federal Government and the states. And ultimately that the Federal Government has the
final say under article 6, the supremacy clause. So essentially the way that it works is that
anywhere through the system exists what I call minority checks. In order for the majority to be
able to get what it wants at the end of the line of the political process it essentially has
to overcome the possibilities that its bill, for example, will be blocked anywhere
in Congress. A bill has to pass both Houses of Congress and it has to pass each
committee that it's assigned to in addition to being signed by the President. Or if the
President vetoes the bill the Congress has to override that veto with the super-majority
of two-thirds vote without changing the bill. These are just some of the best known kinds of
checks in the system that essentially give the upper hand to those who are opposed. Because
if you block the bill anywhere in a committee, for example, even if the bill passes the other
house with 100 percent of the members voting yes, that bill is dead. It can't go to the President,
it can't become law. Now there are numerous other checks as well. For example, even if the
President signs the bill the new law can be gutted in the regulatory process. And
you've talked about numerous examples of this happening. It can also be challenged in
the courts and thrown out as unconstitutional. So throughout the system [there] exists
numerous checks that essentially give the advantage to those who don't want change
and put those who want change in the position of having to make concessions
and compromises that ultimately water down and destroy the original
intention of the legislation. RW: Why have generations of American majorities accepted a system that works the way you
just described it? Give us your insights, because you've studied it. Why do we, as a
people, accept and perpetuate this arrangement? RO: That's an excellent question Rick.
And I have to say as somebody who's been involved in numerous movements, in
labor organizing for almost three decades we are constantly dealing with hope and
disappointment; our hope that ultimately the system will respond to the overwhelming demands
of the majority and that it can be changed and over and over again we're disappointed. And our
system is designed in such a way that it builds up a new sense of hope every two, four and six
years when elections occur. People get excited, they back candidates who they believe
will make change and, lo and behold, they either don't get elected or they get elected
and then suddenly they disappoint. And we become disenchanted and alienated from the process and
we turn away for a while until things get bad and even worse. And then we look back at the
system and the process starts all over again. And so I think part of the reason why
we can't get the change that we need, except every few generations when there's
an immense uprising and outpouring - a mass movement that can't be ignored - is that we get
locked into the political cycle and we forget about the history of every other attempt
at bringing about change and how it ends up getting swallowed up and compromised as
a result of these numerous minority checks. Now there have been periods in American
history where immense changes come about. And you've talked about numerous examples of
that. For example, reconstruction after the Civil War. But it takes massive disruption. It
takes civil wars and economic depressions and mass strikes and mass protests to force
those inside the halls of government to respond to those demands. But even then we
get small incremental changes and reforms that ultimately over the years become rewritten and
killed by what I call death by a thousand cuts. And so that's an excellent question
and it's something that anyone who's involved in political change has
to confront, that our system was designed to constrain political democracy
and prevent economic democracy. And until we confront that problem in our system of
governance we're not going to be able to make the big changes we need to solve the
huge global crises that we face right now. RW: Okay, in the time we have left you have a very
provocative sentence in your book that caught my eye in which you, I think, position yourself as
an advocate that we as the people of the United States "go beyond the Constitution." Tell us
in the remaining time we have what do you mean? RO: Well, I conclude the book in the last few
chapters looking at what we can do about this problem. What do we do about a system that was
designed by 55 white wealthy men who didn't believe in democracy? Who actually looked down on
the common people having their hands on political power because they thought it would threaten
property? And I think we have three options. First we can pursue necessary constitutional
amendments. That seems like a dead end because the framers were prepared for that. And they
wrote into Article 5 a process for amending the Constitution that creates super-majorities that
are incredibly difficult to overcome. While we do have 27 Amendments - this is 27 out of over
10,000 that have been officially introduced. And that's a tiny, tiny success rate of a quarter
of one percent. So that seems almost impossible. Another possibility is to call a
constitutional convention. Again we have to go through the amendment
process that is set up in Article 5, also incredibly difficult. And also right now
there's a process being funded by the remaining surviving Koch brother to call a constitutional
convention. And that could be a complete disaster for those of us on the left if that was to
succeed. We're just not prepared for that. So those two options don't seem to be very
promising. What I argue in the book is that we need to go a different direction. We
need to follow the strategy of the framers, actually, who were not allowed to create a
new constitution but amend the Articles of Confederation. And during the next mass uprising
to be able to recreate a direct democratic governance system from below by taking over
and running the economic system democratically. RW: Thank you very much Robert. You're a good
teacher and you're a good disciplinarian of yourself, which many of our guests can't
quite manage. So thank you very, very much, you've done it in record time. I think people have
a lot to think about. And to my audience I hope you found this as useful as I did. And as always I
look forward to speaking with you again next week.
