[S12 E06] New
On this week's show, Prof. Wolff talks about the US' 2021 trade deficit and its implications, the FED's inflation policy dilemma, and the political economy of the Baltimore and Bronx fires. In the second half of the show, Wolff uses the actual history of fascism in Italy, Germany and Spain to analyze the positions and prospects of fascism in the US today.
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, incomes, debts — our own, and those of our children. I’m your host, Richard Wolff.
I want to begin today with telling everybody, in case you hadn't noticed, that the numbers are now in for 2021, and the United States has run a bigger trade deficit with the rest of the world than at any time in the country's history. That is, we are importing more relative to what we're exporting, with the result that we're running what’s called a “trade deficit." This has been going on for a long time. President Obama promised he would change all this. So did Mr. Bush. So did Mr. Clinton. So did Mr. Trump, and so did Mr. Biden. And they all have more than a little in common, but one of the things they have in common is that these promises never bore fruit.
What is going on is really not so difficult to understand. The position of the United States in the world economy keeps shrinking, deteriorating, falling. I could use other words, but let's leave it at that. And here's what that means: More dollars are going out of the country to pay for all the stuff coming in, then foreigners have need of, because we're not exporting. They don't want that much stuff from us. That's what a “deficit” means. So then there's a question, “What do they do with all of those dollars that are going over there, that they don’t need, or want, to use to buy stuff here?” They’re accumulating dollars, because that's what a deficit is and does, and now we know the answer. They use those dollars to lend them to the United States government. That’s part of what funds the government's ability to spend more money than it takes in, in taxes. So it allows the government to tax us a little less, because it can borrow from all those foreigners who are selling us more than they want to buy from us.
Now let's look at what that means. Number one, it means the United States keeps accumulating debts to the rest of the world, and for those of you who do not know it, the United States is the number one debtor country in the world. Nobody comes close. If you owe trillions, because that's what we owe as a nation, then of course you have to pay interest on that debt, like any other debt. Here’s what that means, and I want you to think about it with me: The two largest holders of debt, the two largest countries that have sent to us much more stuff than they want to buy back from us, are China and Japan. Those are the two. Sometimes China's number one, and Japan is number two. Other times it varies, from year to year, it's the other way around, but they are the two big ones.
Okay, here's what that means: Since the United States government owes hundreds of billions of dollars to each of these countries, it has to pay them interest, which means that every year during the same week that President Trump, or President Biden, is telling us all how “we're going to control the Chinese, and we're going to …,” we are sending them money. Lots of money. Tens of billions of dollars are sent every year by the U.S. government to the governments of Japan and China. Keep it in mind. It will help you understand the difference between the theater of political discourse in this country, and the underlying realities.
By the way, the inflation we're having in America today is going to make all that worse, because the rising prices of American goods will lead people around the world to substitute other countries products, because other countries are not having an inflation like we are. It also means Americans will be increasingly buying fewer American goods whose prices are going up, and shifting to imports, whose prices haven't gone up. In other words, making the trade deficit worse. What’s happening as a result of this? Nothing. That’s why it continues.
I want to turn next to the Federal Reserve, because the Federal Reserve has reached a critical moment, and we're going to be hearing about it, and I want everyone to understand the kind of dead end that we've come to as an economic system, which is expressed in the dilemma of the Federal Reserve. Here's how it begins. We have an inflation, running seven, eight percent, with no end in sight. That’s a very serious problem. I’ve already mentioned one of the results is: It hurts our exports. People don't want to buy rising price goods, and it worsens our imports. And that means fewer jobs in America to produce what we used to export. And we're substituting imports, which is jobs produced in those countries from which the imports come, and so there's a problem.
There’s also a problem in that an inflation helps debtors, and hurts creditors. I lent you money that was worth a certain amount, but as prices go up, that money isn't worth what it was, but you can pay me back with that old money and I’m kind of losing in the process. So it changes the relationship between creditors and debtors.
And then there's another remarkable thing: It changes the relationship between employers and employees, probably the most important thing. Wages are going up in this country between four and five percent, the statistics tell us. Prices are going up seven to eight percent. That's not even close. That means that while your wages may be going up four to five percent, it’s not going to help you, because the goods you have to buy to live are rising even faster, which means we're falling behind. Inflations help employers, typically, and hurt employees. And that's a problem in this country, because we've just come through one of the harshest, difficult periods for the American working class, decimated by the crash, decimated by this disease, and all the consequences of it. To slap the American working class, after two years of COVID and a crash, with an inflation, is pushing how far you can push, and the Fed knows it. We know that from their conversations, because records are kept of those, so they're going to come in there, and do something about the inflation.
Well, what is it they’re going to do? They're going to stop pumping money into the economy, they said, and they are going to raise interest rates. Here comes the dilemma: If you stop pumping money in, guess what? The flow of money into the stock market that has been bidding up the prices of stocks, is going to slow down or stop. That’s not good for shareholders. They are only ten percent, basically, who own most of the shares in this country, but they're the powerful rich ten percent. And what are they going to do in the face of this possibility? We don’t know. Interest rates will be raised, that's what they're promising to do, three maybe four times this year. Wow. There we know what that's going to do. That is going to shake this economy to its foundations. Why? Because we're a more indebted country than we have ever been. Corporate debt in this country, business debt, bigger than it's ever been. Government debt, bigger than it's ever been. Household debt, bigger than it's ever been. Mortgage debt, car payment debt, credit card debt, and school payment debt — wow. You raise interest rates, the cost of that debt for all those people and institutions will be overwhelming. Many will go out of business. What is the Federal Reserve going to do? It can't allow the inflation to continue. There’s too much at stake, but it can’t really solve the problem with its money and interest rate maneuvers, because that'll condition a whole new set of problems. That's called a dead end. What are you going to do? No one knows. The idea that the Federal Reserve will be able to just do enough money reduction and interest rate raises to control the inflation, without those other problems — is that possible? Yeah. Are you likely and possibly going to win the lotto? Yeah, but the chances are really poor. And that's a problem that we're going to return to in the weeks and months ahead.
My third economic update for today is about tragedy. Tragedy in Baltimore, and tragedy in the Bronx borough of New York City. In January there were three fires, two in the Bronx, and one in Baltimore. People were killed, including a lot of children. Buildings were destroyed. Apartments were lost. What's going on? Firemen and women were injured trying to cope with this situation, as were tenants. There are two kinds of problem here. Number one, vacant buildings. Buildings that sit there for years, that become uninhabitable over time because they’re not taken care of, that don't pay taxes thereby hurting the community in all those ways, sometimes becoming home for criminal activities, or people in all kinds of personal, mental health, problems, and so on. Because they're not taken care of, and for all these reasons, they can easily catch fire and burn down. At that point, everybody around that building is in danger. The fire could spread, the fire department is called in, and the men and women who work in fire departments are being asked to risk their lives, and this happens over and over. Baltimore (I checked) has 15,000 vacant buildings in that one city. New York City has a problem that way, too.
This is outrageous. We have homelessness in this country. That is, people who don't have a home, and we have all these buildings sitting there vacant, full of homes. We also have, and this was the condition in Bronx, people who are paying who are renters, but who live in buildings controlled by private landlords who want to make money off the building, so they want to save on the heat. So the people in the apartment get a space heater, to compensate for the inadequate heat in the building, and the space heater is knocked over by a child, or a kitten, and we have what we have. And we have it over and over again.
And I want to point out what the issue here is: In many, many cities around the world, housing is considered a human right, and is therefore maintained by the government, the same way they maintain public parks, because people have a right to go and sit down on a lawn somewhere, and look at nature, and all the rest. Vienna is the example I use a lot, because half of all the apartments in that city (and it's a city overwhelmingly of renters) half of the apartments in that city are either owned and operated by the government of Vienna, or subsidized and regulated by the government. The rents are lower, the buildings are not vacant, they are full of people who are not homeless, whose rent is kept down, because if a city runs the homes, it doesn't have to make a profit. It just has to provide decent homes. Just like you don't have to make a profit on your local park, because that’s a service, paid for and provided to people. We don't want to tax wealthy people in this country, or corporations, and we don't want to have competition for private landlords, because if we had a public housing system, it would be a good quality. It would be decent rents, and that would make private landlords have a much harder time getting away with what they have gotten away with, but it would save our homeless, it would save our renters from the danger, and it would save our firefighters from their danger. And which is more important? That’s the question, over and over again.
We’ve come to the end of the first part of today's show and, as always, I want to thank all of you whose support makes this show, and others that we produce, possible. To learn more about the different ways you can support Democracy At Work and this program, Economic Update, please go to Patreon.com, slash, Economic Update. Or visit our website, Democracy At Work, dot, info. I also want to remind you of our recently released hardcover edition of “Understanding Marxism.” It is available now, along with several other books we’ve published at Democracy At Work, dot, info, slash, books. Please stay with us. We'll be right back.
Welcome back, friends, to the second half of today's Economic Update. I want to talk in this second half about Fascism. I want to talk about it, because you've asked me to. I want to talk about it because it's on the agenda historically around the world, and I also want to remind everyone of history. We are the year 2022. One hundred years ago, 1922, is when Fascism really begins in Europe.1922 is the year of something called “The March on Rome.” It was October of 1922 when Mussolini led the March on Rome, and took over in what was basically a coup d’etat, taking over the Italian government, and he then instituted a Fascist regime. It lasted from 1922 until around 1944. At that point, it came to an end, and Mr. Mussolini was hung upside down in the street and killed by the people that he had led — which tells you something about Fascism. Hopefully, you will remember.
The next case of Fascism happens 11 years later. It's January, 1933, and in Germany the government there turns itself over. It didn't require quite the coup d’etat, but it took not that different a form. It turned the government over to the leader of a Fascist political party like Mussolini in Italy, only his name was Adolf Hitler, and he was head of the Nazi Party. And a few years later, in 1936, a democratically elected government in Spain was overthrown by an illegal military revolt of General Franco, who waged a civil war, displaced that government, and established Spanish Fascism, which lasted several decades. And then he died, and Spain reverted back to a non-Fascist arrangement.
Those are the three major Fascisms we know about, and what I'm about to tell you is what we know from what they actually did. Before each of them, Capitalism, the dominant economic system in each of those three countries, was content with, and satisfied with, what we are familiar with as parliamentary, democratic government. You know, elections every year, people elected to a one or two house legislature, like our Congress, and going about the normal business of running a Capitalist society. Everybody gets to vote, we pay a lot of attention, but the people with the money — the capitalists, the wealthy, the big CEOs — they run the show, because they donate to the parties, they donate to the candidates, their lobbyists help write the laws — we’re all familiar with that, because we're used to that here, too.
The problem is, in each of those countries, the Capitalism that was normally perfectly happy with conventional representative electoral democracy, was falling apart. The Capitalism was producing such suffering, such anger, such bitterness among the mass of people that there was developing Anti-Capitalist movement, and this scared the Capitalist class, the owners of the enterprises, the big CEOs. They could see the handwriting on the wall. In Italy, just before Fascism, you had the greatest general strike in the history of the country in Torino, led by a then-obscure Communist named Antonio Gramsci, who becomes one of the great Communist theoreticians of the 20th century. He terrified people. In 1917, a few years before an Anti-Capitalist revolution in Russia succeeded, terrified Capitalists everywhere in the world. Here in the U.S. too.
So there was this sense, “it’s falling apart, our system.” And when that happens, there's a strong push — it doesn't always succeed — but a strong push, to push aside representative democracy, all of that, and have “the iron heel, the iron fist” change the government from that game, to one where its job is to control the society, repress every critic of Capitalism you can find, do it all in the name of the race, or the nation, or patriotism, to give it all a better sounding name than saying “we’re gonna save Capitalism by crushing everybody who disagrees with it, everybody who has turned against it.” So it is done in the name of the nation, nationalism. It's a good way of covering it over. “Everything we're doing is not about preserving Capitalism” (that’s the real agenda) it's about “preserving the nature, or preserving white America, if you bring it over into us, or preserving “the Italian soul,” or preserving “genuine Spain.” Whatever it was, it was always the same.
And here's what it involved: You crush the labor unions. You either kill them (that happened often) jail them, exile them, so no more labor unions unless the Fascist Party owns and operates the unions. You go after the Socialists. You go after the Communists. Antonio Gramsci, the leader of the Communist Party in Italy, the leader of that great strike, was imprisoned by Mussolini, and spent the last 20 years of his life in jail. That’s why his most famous writings are called “The Prison Notebooks,” because it’s Gramsci writing in Mussolini's jail. Hitler killed people, so that was easier, and in the Spanish Civil War vast numbers of people were killed as well. All of the so-called Republicans, as they were known as in Spain, were destroyed by the Fascists.
So that's what it is; it's Capitalism enforced. You still have employers and employees, like Capitalism before. The leaders of the Capitalist industries remained there, unless they were deemed to be “not part of the nation.” The Germans had that worked out, because they made Jews “not part of the nation.” Therefore they could take their property, distribute it among the rest, and therefore become even more popular, because Capitalists got richer by taking over what had been destroyed among the Jews, etcetera. And in order to glorify all of this as “saving the nation,” well, what did Hitler do? He got rid of homosexuals, he got rid of gypsies, he got rid of anybody and everyone he could think of in this national celebration. But don't be fooled. Underneath the veneer of the government coming in, is the ultimate purpose: protect Capitalism.
That’s why it's there. That’s why this is done. It’s the extreme of Capitalism having produced its own negation, its own opposition, its own self-destruction that calls forth the fascist alternative to come in there, and ‘deal with things,’ in that harshness that has nothing to do with the old convention.
So don't be surprised if you hear the American version of all of this. Here’s how it works: Mr. Trump, and the people around him, are saying, “Well, we have to exalt the nation.” Mussolini promised to “make Italy great again.” Hitler promised to “make Germany great again.” Franco promised to “make Spain great again.” Hint: Mr Trump promises to “make it great again,” and he declares who's not really quite part of the nation. That's people who aren't white. You don't have to be too subtle to get the parallels here, but now let's look at the opposition to Mr. Trump, because there's a lesson there, too.
When the folks around Mr. Biden tell us that they are “protecting democracy” by focusing, for example, on the January 6th activities of the Trump people around the Capital in Washington, yeah yeah. I know what they mean. They want the elections to go on, but if you look at it historically, what you’re really getting is a demand for how things were before. It’s a demand of people who don't want to see, or face, that Capitalism is in deep trouble. And if something isn't done about that, the turn towards Fascism will only accumulate more steam, more support, more momentum.
Against Mussolini there were Italians who wanted to protect parliamentary democracy in Italy. They lost. Against Hitler there were all kinds of liberal Germans who wanted to protect their parliamentary democracy. They lost. The same thing, the government in Spain wanted to continue to be a representative elector, and they were destroyed. This is a problem. The problem is the debate about “protecting democracy” versus “protecting the nation,“ the racial soul, the Aryan whatever it be. These are disguises for two alternative ways of protecting Capitalism, but because they can't say that, and because they can't really face it, they can't deal with it either, so the problem keeps getting worse. That’s why Americans rightly have the sense that the underlying difficulties keep getting worse. Our job situation, our income situation, the fact that the shelves in our supermarkets can't be maintained — these are all signs of a system that isn’t working, and Americans know it. Trump promised everything, delivered very little. The gap between rich and poor got much worse under Trump. It is getting worse under Biden. They're not dealing with the underlying problems, and those are at root of what is shaking this system to the foundation. Glorifying the nation, and using that to come down: will that happen in the United States? It certainly may. It certainly may. That is the historical pattern. We are not exempt from that. All those other societies thought they were. In Germany, for example, they had one of the most powerful labor movements, socialist movements, Communist movements in the world. That's where Marx comes from — Germany. That's where the Socialist Party got bigger and stronger. In the years before Hitler took power, Socialist and Communist Parties together got half the vote in every election in Germany. That’s why they scared the Capitalists. They scared them, and so they went and chose what, for them, was the only way they could be sure they would survive. The democratic system that they had supported, wasn't any more the guarantors it had been, so they opted for the Fascist solution. Why would you imagine that American Capitalists, also confronted by a system that is not only breaking down, but is generating a greater degree of questioning and opposition to Capitalism than we've seen in this country since when? Since the1930’s. And what was that period? Gee, that was the breakdown of Capitalism, that likewise generated a powerful anti-Capitalist thrust in American society.
So yeah, we are at a crossroads in our society. Fascism is one solution that the Capitalists may opt for, and the real political question is whether an opposition to that solution is possible. Saying “we want to protect democracy,” “go back to the way things were,” I frankly don't think that's an available option. And that means, maybe, the time has come when the Left has to be able to say, “We really do want, not to save Capitalism, but to go to a new, different, and better system,” because saving Capitalism has had this hundred year history, from the March on Rome Fascist solution, to the present moment, when we face something so very similar.
Thank you for your attention. I hope this kind of analysis is of use to you and, as always, I look forward to speaking with you again next week.
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Showing 8 comments
Psychology / psychiatry is an “ever shifting” black hole for most us when it comes to its reasonable understanding, the only medical science that can produce vast income throughout its bad history without having to cure the patient. But not to dodge your assessment, it’s true that the persons you name were mentally disturbed the question is to what degree. Most you mention murdered large numbers of people and actually committed genocide. Mussolini was responsible for many deaths as were the great admired leaders of his time through the same war, the causes being another story not favoring us. But his system of government was praised and also adopted by FDR in instituting the new deal. As for murder and persecution, there were no ethnic concentration camps on his soil like the ones for over 100 thousand Japanese Americans who were placed in work camps and stripped of an estimated billion in property, or the genocide of 1.2 million Philippine men as young as 10 years of age during the Spanish American war 40 years earlier, American Indians, KKK etc. He also stopped the extradition of 40,000 people of the French Jewish community by the Vichy French to the Nazis and probably saved same number in Croatia and Greece and other eastern block refugees. This information can be researched from your home to the library of congress, and to which most of us are unaware of. There are also the atrocities in the east starting with the Bolshevik’s, which should not by our historians be presented as stain on the economic philosophy of socialism. So how do you measure all men? In the words of Festinger “social practices of the period when history is written largely determine that history’s perspective on the past”
Mussolini sought an economic policy that was “productivist” instead of “distributionist” to fulfill Karl Marx’s prophecy that a nation needed “full maturation of capitalism as the precondition for socialist realization.” Marx argued that only an advanced industrial system could provide the productive capacity for the proletariat to bring about their historical worker-state destiny. In other words, to progress to a fully socialized worker state, Italy required a high level of industrialization, which, during Mussolini’s time, was stuck in a mostly rural, poor and underdeveloped condition.
Mussolini were simply imitating Lenin, who had earlier closed down all independent labor associations, factory committees and worker cooperatives, banned strikes, walkouts, and lockouts. Lenin even forced workers to work a slavish 80-hour week. After the Bolsheviks banned all labor unions, one unionist “described the unions as ‘living corpses.’” Any Russian worker who participated in general strikes was arrested, imprisoned or shot. Under Lenin’s regime, workers had no real representation or bargaining rights and were treated like industrial serfs who were chained to their factories. Although Hitler and Mussolini followed Lenin’s nationalizing craze, their treatment of workers did not mimic their Russian counterparts. (L.K Samuels – California Policy Center)
(In other words, Mussolini was what I call a “Fascist-Marxist.” Not until around 1921 did he begin to pull away from Marxism, mostly due to Lenin’s unpopularity over the economic collapse of Soviet Russia’s economy that had caused massive unemployment.)
If only to understood MMT. The interest rate we pay on Treasury securities is close to zero. If we didn’t pay interest, what would China do with its excess dollars?
Eventually China will de-dollarize its international trade. However, that won’t happen quickly unless we threaten them with economic sanctions. You didn’t mention that before I gave up watching this episode in disgust.