Economic Update: Extremes of Rich & Poor in U.S. Capitalism

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This week on Economic Update, Prof. Wolff discusses the new US program for monthly child benefits; why Covid strengthens some and divides other nations; the myth of "labor shortage;" the real cost of ultra-luxury cruises; Uber and sexual assaults; and lastly, the outsized US costs of healthcare.

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.

On July 15th of this year, the United States government began a program of providing monthly child benefits here in the United States. And it was announced with a great deal of enthusiasm by the Biden administration, which boasted that it was a major improvement in the lives of masses of our people, particularly families. And indeed there were announcements that it was going to cut child poverty in the United States in half, and words and phrases to that effect.

Of course, this program endorses — finally, finally — coming to the aid of America's beleaguered families with some support. So of course we're in favor. But it is important to understand what this program means and doesn't mean so we are not bamboozled by the hype. Because that's indeed what is going on here. Let me explain.

The benefits run between $300 and $350-60 a month. It depends on your income a little bit. It depends, obviously, on how many children you have. You get that amount for each child if you qualify for this. Okay, let's see what that means.

First, let me be clear: We're living through what's called an inflation. Prices are going up. And that is going to reduce what a family can afford on its income. So this support to families with children is going to be offset by the inflation's impact on making everything the family buys more expensive than it was, and so they can afford fewer items. Let me show you how important this is. The current rate of inflation in general is over five percent. In the case of food, a bit more. There are some things that are going out of this world. Used cars, for example — which an enormous number of working-class people depend on — have risen, from last year to now, 31 percent on average.

Okay, let's factor in just the five percent inflation. Well, if you're a $50,000-a-year household and you have a child, you're going to get an extra $4,000, roughly, for that child from this new program. But $2,500 of the $4,000 — that's more than half — will be lost because your prices that you're paying are going up. So the real benefit to the family is severely reduced once you take into account an inflation. And I'm using the lowest of the possible numbers I could have used.

This program of helping children is part of the American Rescue Plan that was signed into law in March of this year. Again, it depends on your income how much you will get. I want to underscore the remarkable reality that that was done. I want to compare it to the tax cut under Mr. Trump of December 2017. Huge amounts of money — more than is involved in this program to help children, much more — huge amounts of money were given to corporations in tax cuts. But there was no eligibility attached to it. There was no question, do you need it. If you're a company whose profit has been off the charts for the last 10 years, maybe you don't need a tax cut. Just like maybe if you're a family with high income, you don't need help from the government for your children. An eligibility requirement, applied to social programs for children, is not applied to huge corporations for tax cuts. Why are you doing that, Mr. Biden? 

And let's be honest. This kind of help to families? This is not going to help a lot of American families. We have 130 million households in the United States. How many will get child support of this sort? Thirty-nine million. Out of 130 million. So the majority of households are not going to see any money from this program. And the United States doing this? This catches up with what the United Kingdom, Canada, and many countries have been doing for decades. We are really late to support families, this country of family values.

I might mention Ireland, which has not only been giving these kinds of supports to families with children, but the Irish program has no eligibility limits. You get it whether your income is high or low. They treat the money to be given to children the way the United States treats the money to be given to corporations for tax cuts. In other words, the United States is doing less than most other countries in the world that have these programs. We're richer than they are, but we do less for our children. You think about that, because that's the reality behind the hype.

Some of you will remember that I made a point a while back that the Black Death, the bubonic plague, had a lot to do with the collapse of the feudal economic system in Europe in the Middle Ages. And I wondered out loud whether we'll be looking back at the covid viral pandemic as ringing the bell on the capitalist economic system fading out the way feudalism did. So my attention was caught by an essay, actually a series of writings, that comes out of a professor at Cambridge University in England. His name is John Rapley, and he makes an interesting point which I want to bring to your attention.

He points out, using many historical examples, that whether a disease marks the end of a system depends on how vulnerable the system is. You can show (and he does that) diseases that have made systems stronger. They've come to the system, they've hurt the system, but they made it stronger. And so he wants us to think not that covid might not be the end, but if it is the end of capitalism, it's because capitalism was itself vulnerable. So let me comment on that because I think it's a good point.

After the 1970s we had something here in the United States called “neoliberalism,” a move to get the government out of the economy. Because the government had come in in a big way in the 1930s and our Great Depression, and had really changed the economy — taxed corporations and the rich, given programs to the mass of people: Social Security, unemployment compensation, a federal jobs program, and so on. And the business community and the rich were angry that they paid the taxes to fund that program.

So starting in the ‘70s, with Margaret Thatcher in England, and Ronald Reagan here in the United States, there was a pushback. Get the government out of the economy. Denounce the government. That's what they did. The private is successful; the private is efficient. The government is a burden; the government is dangerous; the government is inefficient; the government is where all the fat is. You get the picture? You all know it because we've all grown up in it. You know what you did when you attacked the government? You made people suspicious and hostile towards the government. You worked at that for decades. 

And that produces a vulnerability. When a disease hits, you cannot use the government, together with the private sector, to together mobilize and coordinate to defeat that disease. You can't do it because you've set these two as opposites. You've trained the mass of businessmen and -women to hate the government, to see it as a burden, to see it as a threat. Yeah, to get benefits from it when you can, but basically it's hostile and evil. Every president ran for office in this country for years as putting an end to the inefficient government, cutting the government down, making it smaller, on and on and on. 

So yeah, when the disease hit, when covid came, our government couldn't get it together with our business community. And they didn't want to lock anything down because that would hurt the private business community, so they didn't. And we had the delay. And we had the failure to accumulate the tests, and the masks, and all the rest.

But now let me drive the point home, the powerful point. There were societies — and I'm going to pick one: the People's Republic of China — which went in a very different way since the 1970s. They didn't demonize the state. The state became the coordinator — if anything, the dominant social force, together with the communist party — to mobilize, to organize, to integrate both a public sector (government-run enterprises) and a private, capitalist sector (partly Chinese, partly non-Chinese). And these were mobilized to get together to grow China, to make it catch up to the West, to give it social objectives, rather than make it an enemy, private against the state. 

So when covid arrived, they could, and they did, mobilize their system’s strength — the coordinated government and private sector — to lock down Wuhan and to really clamp down on this disease. With the result that they've done much, much better in limiting the number of people who have the disease, and the number of deaths — way below what we have here in the United States, even though their population is four times that of the United States. Covid has taught the Chinese that the way they set up their economy has benefits beyond the economic growth they've achieved. That's what the disease showed them; it made them stronger. Here in the United States, as the struggle over vaccines continues, the disease has driven us further apart, deepened our divisions, deepened our political conflicts and disagreements. It's a testimony to Professor John Rapley's argument that the vulnerability of a society will have a lot to do with how the impact of a disease works itself out.

The last economic update for this first half of the program has to do with a Burger King in Lincoln, Nebraska. Turns out Lincoln, Nebraska, has a Burger King, but a very famous one that got into all the mass media a few weeks ago. Here's what happened at the Lincoln, Nebraska, Burger King. It has six workers and a manager. The manager: Rachel Flores. Rachel, together with the six workers, all quit on the same day. And on the marquee where you went to the parking lot of that Burger King was written, “Sorry, folks, we all quit.” It was remarkable. Why? She explained to the press the shifts that they were assigned were staffed by too few people. They had cut back after the pandemic, and they wanted fewer people to do the same amount of work that they used to hire more people for. And in the stifling heat, the air conditioning didn't work. Which means if you're over a hot stove in a Burger King and you have no air conditioning — well, you don't need me to tell you.

So guess what. The workers said, we're not tolerating this. We're being made to work harder, we're not being paid any more, and we don't even have air conditioning. And you and I both know what the issue is here. Burger King, or whoever owns that particular one, doesn't want to spend the money necessary to hire enough people to work the shifts, or necessary to have a functioning air-conditioning system in the heat of the summer. And so the workers won't come to work. That's the truth of it.

But here's how the business community spun all of this: worker shortage! labor shortage! We've been hearing about it for months. There's no shortage of labor if you provide the conditions that give people a reason to come back. Corporations don't want to do it to make more money. End of story.

We've come to the end of the first part of today's show,  which means it's time to thank all of you whose support makes this show possible each week. In particular, we'd like to thank our Patreon community and other regular monthly supporters. If you haven't already, please go to patreon.com/economicupdate or to democracyatwork.info to learn more about how you can get involved in supporting this show. As always, please remember to follow us on Facebook, Twitter, and Instagram. And if you're watching this on YouTube, be sure to hit the SUBSCRIBE button below. Stay with us; we'll be right back.

Welcome back, friends, to the second half of today's Economic Update. Well, many of us spent some time weeks ago paying attention (hard to avoid it) to the contest between Jeffrey Bezos and Mr. Branson of Virgin Airways because they were in competition, and we were supposed to be excited by the race. They were determining who between them would be the first and the best to fly into space on a rocket ship. They're both billionaires, and they had spent their billions, or at least a good portion of them, paying for these rockets, paying for the publicity about themselves. And we were all treated to a country in which half of the people had to file for unemployment, half the labor force over the last 18 months, had dipped into their savings, were facing an inflation of five percent. But no, no, no, this was of no concern, none of this was, to the media that celebrated the race of the billionaires.

And because that seemed to be popular (believe it or not), I wanted to bring to your attention something similar, and then see if we can draw some lessons from it. I want to tell you about the rebound in luxury cruise travel. I'm going to focus on a particular company, Seven Seas Mariner. They have organized a cruise to take place in the year 2024 — so not immediately, but soon. It's a wonderful cruise, as they describe it. It will last 132 days. Just so you all understand, that's more than four months on a cruise ship. It will make 66 ports of call; it will stop in 66 different ports around the world. They opened the ticket sales at 8:30 a.m. on Thursday, July 15th. By 11 a.m. all tickets were sold — 11a.m. the same day. Are you all with me? Two and a half hours.

Now for the good part. What did the tickets cost per person? You ready? Get ready, folks. The lowest price per guest — if you buy a ticket, you're called a “guest.” I guess that's part of what you pay for. The lowest-priced ticket for this cruise: $73,500. The highest price for this cruise: a flat $200,000. Pay now, wait four years, and go on your cruise, for four months.

 

All right. On one level, this is the kind of inequality — like the Bezos/Branson rocket-ship contest — that has been produced by 40 years of neoliberal capitalism and 18 months of a pandemic, plus the worst crash of capitalism in a century. I could stop there, but I want to draw the biggest lesson, besides the one obviously about inequality getting to a level that really deserves the adjective “obscene.”

I want you to think with me about the enormous amount of resources. Machines. Creative people, with good brains, spending a lot of their time designing, building, testing. The ships. The rocket ships. The water ships for the cruise. Tens of thousands of people are involved. Huge amounts of resources to produce this level of luxury. And all I want you to do is to think with me what those smart people, and what those huge resources, could have done for this country. Could have done for the housing our homeless don't have, for the educational support our students need, for the infrastructure we talk about all the time, to do something about the climate that threatens us. 

No, no, no, no, no. All those resources were used instead for a rocket-ship competition and for a cruise in four years that costs you between $73,500 and $200,000 a ticket. What kind of economic system is this? And how can you possibly justify it?

My next update. I have a debt to CNN, the news network. They exposed sexual assaults that took place in the Uber car industry, the Uber cars that you're all familiar with. Turns out there were roughly 6,000 — according to CNN — 6,000 of these sexual assaults in Uber cars in the years 2017 and 2018. Of those 6,000 assaults, 500 were rapes. Many of them were covered by NDAs — non-disclosure agreements. (You know, that's like the agreement signed by Stormy Daniels not to disclose what happened between her and Donald Trump. Paid by Donald Trump; received money by Stormy Daniels. And in exchange, she signed an NDA.)

For all of this, for basically keeping this a secret from the public, the California Public Utilities Commission fined Uber initially $59 million. But it was recently reduced, this fine, from $59 million to $150,000. The next time you face a fine, please ask for the same percentage reduction. Good luck to you. 

What's going on here? Well, in the name of privacy, Uber doesn't speak about this. But you and I should know better. They respect privacy? Yeah, about as much as they respect safety for their people. If you keep private that these things happen, you enhance the risk that more people will take Uber because they don't know what's going on, subjecting them to the risk. Who are you protecting? How stupid do you think the people of this country are? And as they often say in the movies, don't answer that question.

But I want to talk about another dimension here. What's going on is, as usual, profiteering. They don't want to spend the money vetting the drivers, making sure: Who are these people? Exactly what is their history? To whom are you, in effect, trusting the safety of the passenger? That costs money. You’ve got to be careful there. You’ve got to follow up. You’ve got to hire people to do the research. And you also have to be able to control the situation, have backup, have support — if you really mean to demonstrate that you care at all about this. Uber doesn't want to pay to do all this work. So they save a lot of money. That's where their profits come from. 

But now Uber, Lyft, and others have been successful in convincing people: Well, let's give folks who need a little extra money a chance to drive a little bit in their own car, make a little extra money. It's hard times out there. Put aside the ugliness of playing on that reality, because they're quite right about people needing it. But they don't care about the drivers either, because if they did, they would know that by not dealing with this problem, they are in the long run undercutting the market for Uber and Lyft. 

The best protection for the drivers who are good people, and need the money, and want the work, is to make it safe.To make people comfortable using these facilities, not hiding, not having a barrier of an NDA so you don't show people in a transparent way what the reality is. That's why people haven't demanded more — the way they once had to do with the taxi business, which does this kind of work. And it costs the taxi companies money — money which the Uber, Lyft folks can save and pocket as their profits.

So if you really want to help the people who have the jobs with Uber and Lyft, then for them make it a safe kind of work to have. Make those companies pay the costs of providing a safe service, and not hiding behind notions of respecting people's privacy.

The last economic update we'll have time for has to do with something that was brought to my attention when I read a story about a couple who had a child six and a half years ago and are still paying off the costs of that child, having that birth here in the United States. What I found out is really arresting, and I wanted to share it with you.

In the United States, the list price (if you like) for a birth can run as high as $70,000. I won't go into all the details; it's a broad average. It includes regular birth, cesarean births, and so on. If you have insurance, it usually covers about 80 percent, give or take, of that expense. And that leaves you with $14,000 out of $70,000 that you have to pay for. Here in the United States, if you have employer insurance, maybe you can do better. Maybe you can find a way to do this for even less because the employer covers this some — works it out with the hospitals or the medical insurance, and you end up with a few thousand dollars. Unless you have complications, in which case it zooms back up.

But let's remember, there are tens of millions of Americans who don't have insurance — any. There are tens of millions of Americans who have insurance that doesn't cover these percentages I just gave you. And they are the families who are paying for their children years into their children's lives.

And what's the difference? The National Health Service in England, which covers everybody in England, takes care of births for free. That is, if you have a birth in a hospital in England: You. Pay. Nothing. It doesn't matter whether you have a job or don't, whether your employer covers you or not. It's the National Health Service. It doesn't want to make children an expense.

Here's another example that flew across TikTok and became a viral sensation. A young woman in Australia needs medication for her attention deficit/hyperactivity disorder, ADHD. She gets a medicine called Vyvanse, and she pays $29 per month. I checked here in the US. Without insurance, it's $350 to $420 per month. And her shock went viral across TikTok. The richest country in the world (or at least one of them) cannot provide what other countries do as a matter of course.

And the politicians explain this by saying it costs too much. Hello? What are all those other countries able to do? It doesn't cost them too much. They don't even have what we have as a society. There is no excuse for this other than the BS pumped out by the medical-industrial complex and repeated by the politicians in that complex's pocket. 

Thank you all for your attention. I really do appreciate your interest and support for Economic Update. And, as always, I will close saying that I look forward, as I really do, to speaking with you again next week.

Transcript by Marilou Baughman
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SOURCES FOR SHOW SEGMENTS

  1. US program for monthly child benefits: https://www.bbc.com/news/business-55986366
  2. Covid strengthens some and divides other nations: https://aeon.co/essays/empires-pandemics-and-the-economic-future-of-the-west
  3. Myth of "labor shortage: https://www.nbcnews.com/news/us-news/we-all-quit-burger-king-staff-leaves-note-management-store-n1273869
  4. Luxury cruise travel: https://www.npr.org/2021/07/16/1016801922/world-cruise-ship-132-nights-sold-out
  5. Sexual assaults in Uber cars: https://www.cnn.com/2021/07/16/tech/uber-cpuc-sexual-assault-data-fine/index.html
  6. Outsized US costs of healthcare:  

 


Showing 2 comments

  • Ben Leet
    commented 2021-09-02 00:31:42 -0400
    The Child Benefit is a great step forward, and the professor’s concerns about inflation eating away the benefit are not accurate. Over the past 12 months prices are 5.4% higher, but there is not much evidence they will continue to increase by 5.4%, end of story. The Bureau of Labor Statistics shows inflation for years 2016 to 2020 averaged at 2.0%, and then dropped to 0.1% in May 2020. Only in 2021 April, May, June and July did price inflation exceed the normal growth, and that is not likely to continue for another year. Look at the BLS web page, you’ll see that the 12 month average inflation has been 2.0% per year. - https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm - Therefore, the child benefit of $4,000/child/year will be worth about $4,000, and income will drop by 2%, from $50,000 to $49,000, adjusting for inflation. So the $4,000 bonus will become something more like $3,920, a 2% decline. The problem is very low wages, not the paltry child credit, not inflation. Very low wages are the problem, wages were higher in 1966 than in 2020, that’ 54 years of low wages while the entire economy, GDP, grew by about 180% per capita. See the BLS web page - average weekly earnings of production and non-supervisory workers – states the Bureau of Labor Statistics : https://data.bls.gov/timeseries/CES0500000031 -

    But I want to contribute to the professor’s explanation. Inequality is really bad. The following is a longish explanation - really bad is the conclusion, if you can read the entire thing.
    The Center for Budget and Policy Priorities published a summary to a study by the U.S. Census, survey called the Household Pulse survey for July, 2020, and to quote CBPP: “Some 63 million adults — 27 percent of all adults in the country — reported it was somewhat or very difficult for their household to cover usual expenses in the past seven days, according to data collected June 23–July 5.” (see Tracking the Covid-19 Recovery) There are also about 130 million households, and if these 63 million adults surveyed were from separate and distinct households, then about 48% of U.S. households would be reporting hardship. -
    - It’s a lot to take in — almost half of all Americans is 48% - The United Way published an update of their ALICE study of hardship in December, 2020, “On Uneven Ground” and stated that when the data for all of 2020 arrives it’s probable that their ALICE hardship threshold will reach half of U.S. households (page 19). In 2019 they reported 42% of U.S. households were unable to afford all seven expenses: food, housing, utilities, healthcare, phone, transportation, childcare. They predict a jump from 42% to 50%.
    The total national income for 2020 was projected to be $16.679 trillion, which is an average of $128,000 per household, states the Joint Committee on Taxation, Overview, page 42. There is abundant income and super-abundant wealth in the nation. Total household net worth is reported by the Federal Reserve’s Flow of Funds report, page 2, and as of June, 2020 it is over $136 trillion (about 128% higher than it was in January 2009 when it was $60 trillion, adjusting for inflation). This averages to over $1 million in private savings per household. We have the resources, but political will is lacking. -
    -

    Did you get it? Average household income of $128,000 for 130 million households.
    Average savings or wealth, $1,053,000 per household.
    Extreme inequality. I write a blog.
    My blog: Economics Without Greed, Part Two — http://benL88.blogspot.com
  • pasqual digesu
    commented 2021-08-31 23:34:04 -0400
    Compliments on this lecture, From the professor’s original lectures on economic logic years ago to social injustice under immoral government or under a complete lack of government, these presentations have come a long way. There should be no shame in the fact that these lectures have grown to be more passionate and even angry, for this anger felt by all who understand is justified.
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