Economic Update: Capitalism's Flaws Fester

[S12 E21] New

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In this week's show, Prof. Wolff discusses today's US child care workers' crisis; how sanctions on Russia profit fossil fuel companies and worsen pollution; systemic causes of the US infant formula shortage; how food corp executives helped write Trump's 2020 order keeping Covid-plagued meatpacking plants operating; meat price inflation vs. general US inflation; and how cryptocurrencies (including "stablecoins") are as unstable as money has historically been.

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. I'm your host, Richard Wolff. In today's show, we're going to be talking about the child care industry, the shortage of infant formula, the food inflation that is really taking off, and then the instability of crypto coins, especially the one called “stable coin,” because of the irony of it all.

So let's jump right in. There is a crisis in this country today, yes another one. But, you know, the system, when it begins to disintegrate, has one crisis after another. This time, the crisis we want to talk to you about is the childcare crisis. What is it? Well, let's see, before the pandemic hit, we had roughly 1 million, fifty-thousand childcare workers in the United States - significant business. Today, we have nine hundred thirty-eight thousand. Way less, to be precise, 11% less in the way of childcare workers than we had in 2019. And yet, ironically, the inflation is forcing more and more families to send both adults, or indeed, if there are more than two, all adults out to work to be able to afford a basic, a decent life. And that means more need for child care so that the adults can leave than before, not less. And so the crisis is: everyone needs this more than ever, and we have less than we have had before. And why would this be? Well, there are no doubt several contributing factors, but here's the one that grabbed my attention: the median childcare wage in the US today, 2022, is $13.22 an hour. Median means half of childcare workers get less than $13.22 an hour. Wow, that puts you right up there, if you get just that median, right at the poverty level of this country, if you were so lucky as to have forty hours a week for fifty-two weeks a year, which most childcare workers don't. Needless to say, if the Supreme Court makes abortion more difficult, which the signs suggest it will, there are going to be more children who need childcare at a time when we are cutting it back. This is a failure of the system to provide something. Something fundamental. It's a failure of a system to say, especially if they force women to take pregnancies to term, “we're not going to help you take care of that child, we're not going to provide child care workers.” Thirteen dollars and twenty-two cents an hour – of course people are not flocking to that business. We pay more, in general, to people who mind cars in parking lots than we do to the people to whom we entrust the formative years of young children. This is a problem, that is a crisis. And that partly explains why, on May 8th and 9th of this year, a huge number of strikes were coordinated across the country by child care workers. Of course.

My next update has to do with one of those effects that perhaps one thought too well about, about the sanctions against Russia around Ukraine. By blocking Russia's exports of oil and gas, at least partly, fossil fuel companies around the world are rushing into new projects outside, of course, of Russia to come up with the fuel they can then sell, they hope. Because Russia cannot export its oil and gas. And this is going to produce what have come to be called carbon bombs, because it's worsening our production of extra oil. It's worsening our pollution problem. That was not supposed to be part of the story, but it is. And fossil fuel companies are making a fortune, and they will be committed to these projects for a long time. It is an extraordinary situation.

Then there is the crisis of baby formula - wow! Let's talk about that, because if ever there was a demonstration of the failure of a capitalist system to meet a basic need, here it is. There's a shortage in some states up to 40% shortage of the basic formula to feed babies, either as substitutes or supplements of breast milk. And crucial, of course, again for babies health. Here are some of the reasons, and notice what they all have in common. A capitalist firm, Abbott, is a major producer of the infant formula in this country. They were found to have allowed dangerous bacteria into their formula months ago. Babies died from it, and so they've had to recall a lot of their product. They didn't take the care they could have. They should have, would have cost them some money that would have eaten into profits, and they didn't do it. Here's the second reason: Covid, it turns out, led to shortages of workers who make this stuff, on the one hand, and occasional hoarding by people fearful of not having enough formula for their babies who bought extra. Okay, this is not rocket science. This always happens, particularly in times of major social upheaval. You know, like a pandemic and a crash of the sort, and an honest, decent industry knows how to deal with it. You provide backup - that is called inventory - you produce extra. You store it so that you can provide a regular flow, no matter what happens. The same issue as with supply chain disruptions, they always have happened. Everyone knows, either you spend money to take care of that problem, or you don't. And if you don't, it's on you, the capitalist who chose not to do it.

Then there's the trade policy of the United States, pushed by the same companies that make formula. Tariffs apply. You can't get European formula, which by the way exceeds FDA requirements, but can't come into the United States because the tariff that’s hitting it makes the price of this higher than the domestic, which is what the domestic wanted, because that could allow them to jack up the price. So, we're taking care of corporate profits, we're just not taking care of our babies. And then there's the last one - I love this excuse given by the companies: our birth rate is shrinking. That's part of the crisis of U.S. capitalism, and so it's a little dicey for these companies. How big will the market grow? You see, they're not in the business of feeding babies, which you and I might think. They're in the business of making profit, and if the number of babies coming into the world in this part of the country, in this part of the world, isn't going up, they don't see much profit. And they're not going to spend extra to have stockpiles to deal with the pandemic and all the effects. And so we got a shortage. Thank you, to a system that works in this bizarre way.

Alright, my next update has to do with something so ugly that I thought I'd leave it to the end of the first half of today's program. This has to do with two of the largest meat processing corporations in the United States, Tyson Foods and Smithfield Foods. It turns out that a research report was prepared by the House of Representatives in Washington. They have something called a “Select Committee on the Covid Crisis,” and they issued a report a few weeks ago. And the report, I'm going to quote now from the report, analyzes the - here we go, “shameful conduct by corporate executives pursuing profit at any cost.” Couldn't have said it better myself. What are they talking about? Well, it turns out that the executives of those two companies helped write the executive order issued by President Donald Trump in 2020. It was an order to keep open meat packing plants across the United States, and particularly in the midwest where most of them are. The workers in those meat packing plants work very close to one another in conditions that are unfortunately perfect for the spread of a virus like Covid-19. As a result, the Select Committee on the Covid Crisis says, fifty-nine thousand meat packers got Covid, and two hundred and sixty-nine of them died. What was the statement made by the meatpacking industry at the time that the President issued the order, partly written by the executives of the company? Talk about regulatory capture. You've captured the president pretty good. Here was the argument made by the meat packers: we must keep the meat packers working, they said, because if not, there will be a shortage of meat on the table of Americans. According to the House of Representatives Select Committee on the Covid Crisis, this was a false claim. They found evidence of an enormous stockpile - that's right, a stockpile of frozen pork - throughout this period, and a remarkable increase in the exports of meat. There was no meat shortage, this was just a convenient excuse to justify keeping those meat packing plants going so they would generate profit for the company. Of course the meat packers, in response, upset by being caught out like this, have denied everything.

And I want to drive home the issue that this represents: under a private capitalist, private enterprise system, the only way to know what the truth is about any industry, meat packing or anything else, or any firm, is to have access to their books, to understand what is the inventory if they have any. What is the profit they're already making? Are they genuinely in need of help? Is their survival at stake? Will we be meatless if we don't do what they ask? The only way to know for sure is to see the books. If they don't have to show us the books, which under capitalism they do not have to do, because they're private enterprises, then we are required to take their word for it. And with generations of evidence that relying on their word is a big mistake, like the House Select Committee just showed us, what in the world are we doing? One of the rationales for public enterprise has always been that then the books are accessible and we can see what's going on and make our own judgments.

We've come to the end of the first part of today's show, and as we continue to celebrate the 10th anniversary of Democracy at Work, I want to invite and encourage all of you to explore the variety of other shows, podcasts and books that we produce. For example, Capitalism Hits Home, a podcast that explores the intersection of psychology and economics, hosted by Dr. Harriet Fraud. Her show and others can be found at our website: And, of course, we couldn't do all of this without your support and encouragement, which is greatly needed and much appreciated. Please stay with us, we'll be right back for more Economic Updates.

Welcome back friends to the second half of today's Economic Update. I want to pick up with another story about Tyson Foods. We were just talking about them before the break. And this time, I want to talk about Tyson Foods as a corporation in the meat business. In this country, one of the largest producers of meat in the United States. Because even though we can't see the books, the private secrets they keep from us, and asking us as always to believe whatever they tell us about what those books contain, and what the numbers mean, they are required to publish some numbers by the United States government. We don't - the government doesn't - get access to their books, but they have to report something. So I'm now relying on what Tyson itself reports about its business in what I'm about to tell you.

Okay, first of all, Tyson as a corporation produces meat under a vast variety of labels. I'm now going to read them off to you, because I suspect most of you have encountered Tyson Foods, even if you're not aware of it. Besides using their own name, which they do sometimes, they are also the producers of: Jimmy Dean products, Hillshire Farm products, Ballpark products, Wright products, Aidell’s Sausage products, IBP (which I believe was once Iowa Beef Processors), and State Fair. All of those brands are Tyson Foods. And they have had to report on the increase in prices they charge for meats of various kinds over the last year. And by last year, I mean the second quarter of 2021 to where we are now, the second quarter of 2022. A one-year period. And I know all of you have in your mind, or at least I hope you do, the recent government report that we are running an inflation in this country. The government tells us in the neighborhood of 8.3% a year increase in prices. Now let me tell you what has happened to the meat that I'm assuming many of you eat. Beef prices over the year from Tyson up 23.8%. Prepared meat products up 15.9%. Chicken products up 14.4%. Pork up 10.8%. In other words, meat products have an inflation way above as much as three times the rate that inflation we are told is generally happening. And food is not something people can do without. So they have to buy food. Now, no doubt, prices like these mean that the shift is underway in America. The shift that you could describe as “leaving hamburger, and joining hamburger helper.” Hamburger helper, for those of you who don't know, is mostly grain. And that's what poor people eat around the world, grain with a maybe smattering of fish or meat to give the grain a flavor.

But of course in this country, we won't call it what it is. We'll call it vegetarian, or vegan, or healthy, or anything other than facing that one of its causes, whatever your genuine health and beliefs are, one of its causes is trade-out economics, which is what we talk about here and what needs to be understood. And let me drive home one more thing about Tyson's meat prices. How did Tyson do over the last year? In other words, was it profitable to raise those prices? Or were they merely raising prices, as folks like them enjoy telling us, because their costs went up? You know, what they pay their workers, or what they buy in the way of feed for animals or whatever else their expenses are. Well, on behalf of Tyson, let me be happy to inform you that over the last year, when all those prices were raised that I described to you, Tyson's profits rose from an annual 476 million dollars in the year before this last one, and then 829 [million dollars] in this last year from the second quarter of 2021 to the second quarter of 2022. That's an increase of profits of 74%. You know what that means: they didn't raise their prices that way because their costs went up. Had that happened, their profits wouldn't have gone up. Their profit zoomed up 74% in one year because they were jacking up their prices to make their profits bigger. The rest is the kind of bs they can get away with, because as private enterprises they don't have to show us. And yet the few numbers they are required to report like these give away the bottom line. And the bottom line is: don't believe the folks who want you to believe that rising prices is something imposed on the business, even if there were some truth to it. It's something imposed by one employer on another because they're the ones who set all the prices anyway.

And final footnote on this: the government has also given us what the rate of increase of wages is in the first three months of this year, January, February, and March. And if you assume that it'll continue at that over the rest of the year, we're talking about a wage increase of 4%. While the cost of your beef is going up 24%. It's not only that they're not close, it's that the American people are being trained to leave the standard of living they once had, a standard of living full of meat. And I'm not arguing for or against meat as your diet, but whatever you had before, you're shifting to cheaper food now. And that's going to have all kinds of effects that these producers are not responsible for and do not care about.

The last, in a way, update for today is something many of you have asked me to talk about. So, because of the recent history, I’ve decided to do it today. Cryptocurrency, the development in recent years of a kind of money, or let's call it a substitute for money, that is not controlled or produced by a government. Most monies in the world, you know, the euro, the US dollar, the Japanese yen, the Chinese yuan, the British pound. These are money systems, currencies controlled by the government, which literally prints them, and which literally controls the injection of them into the economy, and pulling them out of the economy as and when it sees fit. The cryptocurrency is not a government event. It's developed on the basis of something called blockchain ways of organizing information and information flows. And it is, therefore, controlled through algorithms and so on in the computer world. Let me leave it at that.

And it has been touted by all kinds of people as a new thing, as if private money never existed before, which as i'll explain to you in a moment it of course did. And, therefore, being free of government, it will somehow not be as manipulated as it now is by governments. Most of this is all wrong, and I need to explain that. In the beginning, well, money systems over millennia, money was produced privately. A private banker, private gold handler, would issue pieces of paper representing whatever it is that he would be willing to compensate a person who brought him that piece of paper. And that functioned as money in the early history of the United States. Money was produced by banks. When you traveled from New England to the South, you had to exchange the New England money issued by a bank there for the money issued by another bank in Georgia or in Maryland or wherever you went. There was so much instability in these private monies. So much corruption in these private monies, and in the banks, who abused their ability to literally create money, that in the end there was such a public clamor that the right to produce money was taken away from the private enterprise, which was not a reliable place to put it, and given to the government in the hope and the plan that the government would be less corrupt, less manipulative, and less hanky-panky with the money.

This turned out to be very naive for two reasons: governments are there, always at the beck and call of all kinds of interests who want them to do things. And number two, the private banking sector captured - that's the word they use - captured the Federal Reserve and other central banks to make them do things that those banks wanted. If the banks were going to lose the right to make money, they wanted to control whoever did get the right to make money. And that was the government, which is why high finance and government have such a cozy relationship everywhere you look across capitalism. Anyway, along came a few years ago a bunch of folks who said “we're creating private money again, we call it cryptocurrency.” The most famous, you've probably heard of, Bitcoin. But the problem was and remains that the manipulation, the corruption, the crime - all of that can be done to a private money as it originally was just as much as it can be done to public money.

As if to prove that, they developed a special crypto currency called Stablecoin, I kid you not. And Stablecoin was to be so managed by the computers that it wouldn't have its value go up and down the way regular bitcoin and other cryptocurrencies did. Here are some of the people who have publicly celebrated cryptocurrencies as if they were a great social breakthrough: Tom Brady, the football player and his wife, the model Gisele Bundchen. Matt Damon. Lebron James. Larry David. They have all done paid ads for this thing. You know, there's an old saying in the stock market, “if a deal offered to you is too good to be true, it probably isn't true.” Cryptocurrency is not stable. It's not free of all the problems that have besieged the capitalist system's money supply from day one. That's how capitalism works. It creates the incentive for anyone who can to manipulate whatever the money is, public or private, blockchain based or not. And here's the numbers. Since October 28th of 2021, that's about six months ago, ready? Bitcoin has lost 52% of its value. If you bought a dollar worth, you'd now have 48 cents, right? Since the Super Bowl, 30% drop, and the drop of Stablecoin was the same. Look friends, we do know better.

Thank all of you for joining me today. I appreciate it. I hope you find these updates as interesting to listen to as I do in producing them. And as always, I look forward to speaking with you again next week.

Transcript by Lauren Shiel

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