Economic Update: Best Years of US Lie in its Past

[S11 E28] New

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On this week's show, Prof. Wolff talks about Chipotle Mexican Grill blaming its price increases on its workers, economist Arthur Laffer's claims that many poor, minority workers are "not worth $15/hour" and false claims that lower taxes help economic growth while higher taxes hurt it. On the second half of the program, Wolff interviews August H. Nimtz, Jr. on today's crisis of a declining US capitalism, its impacts and implications.


Transcript has been edited for clarity

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.

I want to begin today's updates talking to you briefly about a corporation whose name you probably know: the Chipotle Mexican Grill — a restaurant chain, a fast-food chain, in the United States and beyond. And I want to talk about it in relation to something else in the news these days: inflation, the process of rising prices, because there are some lessons to be learned. First of all, Chipotle, I want to assure you, is doing its patriotic good part by making sure it contributes to inflation here in the United States. That is, Chipotle is raising prices. Or to be more accurate, it's raising prices repeatedly.

Back in February of this year, it raised delivery prices 13 percent, all at once. And then more recently it decided to raise all of its prices another four percent. Now these are hefty changes, coming suddenly, and they will certainly add to the rising cost of everything that's going on here in the United States. But what's interesting to me is the ploy being used by the Chipotle Mexican Grill, because it blames — particularly this four-percent, across-the-board increase — on rising workers’ wages. Yep, the company, you know, only reacts. It never takes any step on its own; it just reacts to raising wages. Let's take a look at that.

First, Chipotle has promised to raise the average wage to $15 an hour by the end of June 2021. But please remember, an average is not the same as a minimum. Around the average, some wages are above it, and some wages are below it — could be a lot of wages are below it. They haven't committed to what other companies have committed. A minimum, below which nobody will fall, of $15 an hour is low enough, but they haven't even done that. So they're not in the forefront of wages, raising wages — not even close.

Number two: This is a pure hustle. The only way to know whether they're raising prices in response to raising wages, even a little, is if you were part of the board of directors of that company, you knew what all their different costs were. Because, you know, they're all going up and down. The cost of the taco that you could get there, or the burrito that you could get there, or anything else you can get there, goes up and goes down. So does the cost of building the restaurants, the cost of the electricity to run them. You get the picture? They have lots of costs. And we're being asked to take their word that the only reason they're raising prices is because they have to pay higher wages.

And in case you're wondering whether it's reasonable to trust the executives of Chipotle Grill — well, not that long ago their restaurants were being closed around the country because large numbers of people were getting sick. And they didn't handle that too well, and it took them years to climb out from underneath their failure to guarantee the safety of people who ate in their restaurants.

Here's the reality: Corporations raise prices for lots of reasons. The biggest one? To make more money. To get more profits. And to deliver those profits to the shareholders and the top executives. That's what Chipotle is about, and let me assure you they've been doing a good job of that. The CEO of Chipotle Mexican Grill is named Brian Niccol. His 2020 take home? Thirty-eight million dollars. That's what your Chipotle is paying for. You have to raise prices and profits a big check to get that kind of payout to an executive. Blaming the workers, those at the bottom of the economic pyramid, is a cheap ploy. You can never verify it unless you know what's going on inside. And it's a way to distract you from what all corporations are doing all the time: maximizing their profits, with or without raising wages — mostly by not raising them.

My next update has to do with a right-wing economist named Arthur Laffer. Some of you may know about him. He worked in the Reagan administration, and he was awarded the Medal of Freedom by Donald Trump. He recently outdid his right-wing past by telling us that it was technology that made it, sadly, the case, he said, that large numbers of our people, particularly minorities and poor people, just weren't worth $15 an hour. I kid you not. I couldn't make this stuff up. So Arthur Laffer, professor of economics, etc., etc. — that's his argument.

So we just have to face it. They're not worth it, and they're going to be unemployed, and they're going to be an underclass — these are words he used — and they're going to be angry. And if you listen to him, he's giving you the reasons that will later be used by the police in this country to repress these people who are basically being thrown under the economic bus. So let's take a look at it.

Is it fair to say that these people are not worth $15 an hour? What does that even mean? Fifteen dollars an hour is what an employer doesn't want to pay them. That I get. But that's very different from what they're worth. Fifteen dollars is what the market decides they're not worth. The employer decides it's not worth it because he can't make money hiring them. But that's a very different matter. Let me explain.

If you don't pay these people $15 an hour, and give them a job at that pay, you know what they're going to be? Upset, angry, unemployed, without income, poor, bitter, hurt. Mental and physical problems will come their way. And you know something? Their families are going to suffer — not just those who can't get the job, but those who depend on them. And there will be health costs, and social-work costs — all kinds of costs. It'll turn out to cost much more than $15 an hour. The society would have been better off giving them a job for $15 because it's gonna cost you a lot more not to give them a job. Think about it.

Now let's turn religious for a moment. Nowhere in the Bible (I believe — I'm no expert on the Bible) but nowhere in the Bible do I understand it is written that the worth of a human being is to be determined by the market, is to be determined by how much an employer will pay for somebody's labor. We're all equal in the eyes of God, I thought. The human worth is based on many things other than what the employers in the community will pay. You know, the employers never paid to maintain the environment, and we're now paying the price of what wasn't worth it for them. And employers didn't spend money to hire people to overcome the racism that tears this country apart. That wasn't worth it to them either. Are we really going to do what's worth it to the employer, rather than asking the obvious question, what's it worth to us as human beings? Or let me put it another way: What's the worth of the employer? Why aren't we asking that question? Really? Brian Niccol, Chipotle Mexican Grill, is that what he's worth — $38 million? So that he can decide to deprive hundreds of thousands of people of $15 an hour? Really?

The market doesn't determine things accurately, or appropriately, or even humanly. We are not to be shaped by the market. The market is a human institution that has to serve us. And if it comes up with a “worth” of people that contradicts common sense and understanding, then we should go with our common sense and understanding, and not be slavish in the face of the institution we've created. Otherwise, the market is a little bit like Frankenstein. Remember that story? Human beings create a monster who then comes back and overwhelms them? We've created the market. Let's not let it become a monster that overwhelms us.

Last update that we will have time for. In December of 2017, then-President Donald Trump arranged for the Congress, which he then controlled, to give corporations and the rich a record-breaking tax cut. It lowered the corporate rate of taxation — how much of their profits corporations have to pay to Washington — from 35 percent to 21 percent. Wow. Enormous. And it gave a kind of a blip to the economy in 2018 and ‘19. But what was promised was decades of prosperity. Cut the taxes, and the unchaining of our corporate leaders will give us economic growth from here to tomorrow, lasting . . . . It didn't. Early in 2020, barely two years after these tax cuts took effect, capitalism here in the United States crashed. February of 2020 — before covid hit — this economy went down, and has stayed down for the last year and a half. Big time. The big tax cut didn't do the job. The promises of the big tax cut didn't materialize.

Why am I telling you this? Because over the last few weeks the Biden administration has made a very modest proposal that around the world countries agree that corporations have to pay a minimum 15 percent — that's less than most of us pay — a minimum 15 percent on their profits. And the idea is, that way companies will not run away from, like, the United States to go to someplace else where they don't have to pay hardly anything, because we've all agreed 15 percent is the minimum everywhere. This is being opposed by the Republican Party, the GOP, and by conservative Democrats, like the senator from West Virginia, and the other one from Colora — uh, Arizona, if I remember correctly.

Here's the important point: Cutting taxes doesn't give you what the people who push it claim. And raising taxes doesn't cause the disasters that those same people claim. They don't want you to levy taxes on corporations because that's who they are slavish to. That's where their donations come from, that's where their loyalty lies, that's where their support comes from, that's whom they serve. They just can't say that. They can't announce, hello, I'm the senator who's a slave to these corporations. They've got to come up with BS. And this BS these days is to celebrate over and over again that cutting taxes is the magic that will give us economic prosperity, and imposing taxes is always therefore bad. This is stupid. This is not verified by the historical record, this is pure ideological protection for the corporate sector of this economy.

All right. We've come to the end of the first part of today's show. Before we move on, I want to thank all of you who have, and continue to, support the work that we do to make this show possible each week, and to especially thank our Patreon community. If you haven't already, please go to the patreon.com/economicupdate website to learn more about how you can get involved in supporting this show. Please be sure to also follow us on Facebook, Twitter, and Instagram. Now, please stay with us; we'll be right back with today's special guest, author and professor August Nimtz Jr.

WOLFF: Welcome back, friends, to the second half of today's Economic Update. It is a special pleasure for me to welcome to our microphones and our cameras a man, a professor like me, from whom I have learned for many, many years, whose work I looked forward to, read, and each time understood. This was a colleague, a comrade, and someone that I was really grateful was in the university world that I was in, which was sometimes a lonely place.

He is professor August H. Nimtz Jr. He's a professor of political science and African American and African studies, and also a Distinguished Teaching Professor at the University of Minnesota, Minneapolis-Saint Paul. His most recent book, which I urge you to get a copy of and read, is called Marxism Versus Liberalism: Comparative Real-Time Political Analysis. His most recent article, likewise something I recommend, is called “The Chauvin Verdict: A Historic Victory That Points the Way Forward.” It is really an honor, August, to welcome you to this program.

NIMTZ: Thanks, Rick, for inviting me. So glad we’ve finally been able to do this, man.

WOLFF: Yeah, it's long overdue, and maybe we can do it a lot. Let's hope so. All right, so let me begin by what is in some ways the question I ask those of my guests who I think can really answer it. How and why do you think that Marxism and the Marxist tradition — that you have worked with, that you have contributed to — why is it important for basic social change in the United States today? Why, in short, are you engaged with that tradition?

NIMTZ: Well, as a Marxist, I think — as you know as well as I do — you’ve got to begin with the real world, what's happening all around us. And the crisis of capitalism takes many, many forms — not just the economic, but also the political repercussions of it. And I claim that you can't make sense of the Trump moment without understanding the crisis of capitalism.

WOLFF: All right. How about, then, another way to get at it. How do you react to the sentence that American, US, capitalism is in some sense in decline, that something has changed relative to the earlier history? And you have often written about American history. So that somehow we need to take into account a fundamental change in the situation of US capitalism.

NIMTZ: Well, you think about just us, our generation — we enjoyed a lot. We had opportunities that, sadly, the working-class, working people will not have. I tell my students oftentimes that the best that capitalism has to offer the working class, that's behind us. That's a very sobering reality. And if you look at the Biden administration's new budget, the forecast, it's based upon a set of assumptions of economic growth of around about two percent, 2.1 percent. That's anemic. It's what what's-his-name calls “secular stagflation.” This is the reality. This is what is ahead of the working class. And it has all kinds of repercussions, not just in this country, but in other countries around the world. Looking at the recent World Bank estimates on growth, and looking at the gap between what's happening in the advanced capitalist world and what's going on here in the United States — this, I think, is very sobering evidence that indeed the best that capitalism has to offer working people — that's behind us.

WOLFF: How do you think that plays out? In other words, what are the implications (I guess is what I mean) of that sobering reality? Where does that lead? Where do you think that leads this country?

NIMTZ: Well, I think it goes a long way in explaining the phenomenon of quote-unquote “polarization,” tribalism in US politics, and so on. It's a shrinking economic pie. And once the pie is shrinking, there's a tendency on the part of people to think about, how can I get the best of what's left, the declining amount, for my group, for my tribe, my people, my nation, my workplace, my factory, and so on.

And so yes, I think this phenomenon that political scientists have difficulty in explaining — the polarization, the deep polarization within US politics — can be traced to the crisis of capitalism. And Trump was a product of that. Trump was a product of that. And because of that crisis, Trump is not going away. Trumpism is not going away.

WOLFF: You use this concept of the working class. For most of my time in the American university system — and I've been a professor all my adult life — the few times I tried to use that very phrase, “the working class,” I could sense, viscerally, the discomfort of my colleagues. Not my students — they didn't have any problem with it — but with my colleagues. So talk to me a little bit about how you, as a political scientist, find that concept valuable, useful, something that you're going to work with. Tell me a little bit about that.

NIMTZ: No, I hear you. I found it much easier with my students after 2008, as the crisis deepened and people began to realize the opportunities were beginning to shrink. And, yes, with my, with our colleagues, yes it's a different world. We are privileged. We're very privileged members of the working class. We don't see ourselves — our parents wanted us to get our PhDs to get out of the working class. So that's what it was all about. But it's not that case with young people. And it's young people who are focused on — even within the academic world, between students, I find undergraduates much more open to this than graduate students. Graduate students are on a different kind of a trajectory and have different hopes — at least up until the pandemic. As you know, the crisis now since the pandemic, in terms of the job situation.

So as I explain to my students, I've said, anybody who has to sell his or her labor to survive, welcome to the working class. Anybody who has to sell his or her labor to survive, welcome to the working class.

WOLFF: And I'm sure you share my experience. I tried, both in the labor union — because my faculty at the University of Massachusetts was even unionized — but to have a conversation with my fellow professors in which I made the point you just did, that we are, of course, part of the working class, elicited from them such trouble, such difficulty, such resistance, that most of the time I just gave up.

All right. I want to pick up on your reference to covid. What blows me away beyond all words — and I want your view on this — is that the United States has four percent of the world's people and just suffered 20 percent of the world's deaths from covid. That's one of those statistics which, you know, is more profound than most books. It just screams — well, that's the question. What does it scream? Is that a symptom of a system in decline? For me, it is. But I was wondering, how do you make sense of this experience we've just gone through, the last year and a half? Because everybody in this country is struggling to make sense of what that all means and where it leads.

NIMTZ: About a month and a half into the covid pandemic, I wrote something, and I noted — at least the main claim I was making is — that an economic system based upon private ownership of the means of production, along with the values that go along with that, would be incapable of dealing with a collective problem, a pandemic, a COVID-19. In that sense, we really shouldn't be very surprised about what happened, given the background, given all the cutbacks on public health care and so on. That was a problem waiting to be made.

And so, yeah, my feeling is that we really shouldn't be very surprised at this, because of what had happened before. It's a little bit like disasters like Katrina. I'm from New Orleans originally, and I saw the Katrina disaster and what happened with Katrina. And what Katrina revealed was all of the kinds of decisions that had been made prior to the disaster itself. All of that was the chickens coming home to roost. And that's what I think this pandemic revealed. And I can't emphasize enough the values of, the dog-eat-dog values of, capitalism — the private property and all of that associated with it.

WOLFF: Which, if I understand you, undermines the kind of collective behavior that a problem like a pandemic basically confronts a society with.

NIMTZ: Exactly, exactly, exactly. And this is a problem that is on a global scale, and it's interesting to compare and contrast it with some societies versus other societies. So yes, dealing with a collective problem is antithetical to the interests of the capitalist mode of production.

WOLFF: That's right. It would be very dangerous for capitalism if people became used to the notion of collective decision-making, collective response.

How do you — you know, it's an obvious question, but it's one I want your opinion on too. What do you make of the resurgence of white supremacy that went along with the Trump administration, or at least became very overt in a way that had been less overt before? Is that, too, a part of this decline? Is that what you were referring to before, with social divisions, and tribalism, and all of that? Your sense of it.

NIMTZ: Yes. Well, what I've been on a campaign about, Rick, is to try to get people, especially young people, to not freak out about the Trump administration, and what happened in Charlottesville, Virginia, in 2017. You and I are old enough to remember what white supremacy was really like. We’ve got to remember that. We have to tell young people, no, no, no, let me tell you about white supremacy. I grew up in a world in New Orleans. I grew up in Jim Crow. The first time I tried to register to vote, they wouldn't allow me to vote. And so that was white supremacy, man.

And so what we had is just a reaction to the crisis. Yes, the tribalism, the so-called tribalism that was promoted by the ruling class — Trump was simply representative of that. But what's so different is we have opportunities today that we didn't have before. And I keep telling people, look at the George Floyd protests. In the 1960s when there were anti-police-brutality protests, there were exclusively African Americans in the streets, exclusively. Look at what's just happened. This has been a multiracial development. That has never happened before. If white supremacy was triumphant, you wouldn’t have that. You wouldn’t have these kinds of multiracial demonstrations. And so it means that we have opportunities to do things that your, and our, generation did not have, in terms of cutting through all of the divisions that the ruling class promotes to divide us on the basis of skin color.

WOLFF: August, we've come to the end of the time that we have. But I would like to get you on the record to tell me if you'd be willing for us to reschedule a continuation of this conversation.

NIMTZ: Of course, anytime. We were just getting warmed up, man.

WOLFF: That's right. Okay, I want to thank you, I want to commend you for the work you've done, and I want to tell my audience that I hope you find this kind of thinking, and speaking, and analyzing as valuable as I do. I hope to bring you more of it in the future. And, as I always close our programs, I look forward to speaking with you again next week.

Transcript by Marilou Baughman
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About our guest: August Nimtz is a professor of Political Science and African American and African Studies, and Distinguished Teaching Professor, University of Minnesota. Most recent book, Marxism versus Liberalism: Comparative Real-Time Political Analysis.  Most recent periodical publication: The Chauvin Verdict: A Historic Victory that Points the Way Forward (Monthly Review Online).  Current political work: co-coordinator of the Minnesota Cuba Committee--solidarity work in defense of the Cuban Revolution.

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Most recent book Marxism versus Liberalism: Comparative Real-Time Political Analysis

Amazon author's page https://www.amazon.com/-/e/B001HD0RRA

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  1. Chipotle Mexican Grill 
  2. Arthur Laffer's claims
  3. Lower taxes help economic growth

Showing 1 comment

  • Sonny Wiehe
    commented 2021-08-08 11:58:42 -0400
    While the Professor claims that Chipotle is only promising to raise their “average wage” rather than set a floor level “minimum wage”, he fails to provide the math that would make this pledge, mostly likely, more disadvantagous for Chipolte’s CEO. The Professor reports Chipolte’s CEO, Brian Nichol, o have made a $38M salary in 2020. Even if Mr. Nichol worked 60 hrs a week for all 52 weeks of the year (which is a generous estimate) than that means his corresponding hourly wage would be roughly $12,200.00/hr. Even with Chipolte’s estimated 91k employees that CEO salary (with a number of pricey executives to go along with that) it has got to bump that average up tremendously. My guess is that an average under f $15/hr would nearly impossible— unless many of those employees are currently working for free. What these workers should be doing (and the Professor fails to mention) is hold the CEO to that seemingly generous pledge with demands of executive pay transparency. However the Professor prefers preaching dead end red herring ridicule over facts and accountability. Sad.

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