Economic Update: Injustice, Race and Class

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[S9 E33]

This week on Economic Update, Professor Wolff delivers updates on the 3 deadly failures of capitalism, the investigation of hi-tech monopolies by the U.S. DOJ, the franchising of worker co-ops and the social inequalities that income inequality breeds.

In the second half of this week’s show, Professor Wolff interviews Bob Hennelly, an investigative reporter whose recent work includes revelations into the Eric Garner, Epstein and Kushner cases.

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Prof. Wolff's latest book "Understanding Marxism"

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Bob Hennelly is an award winning print and broadcast investigative  journalist. He  is a staff reporter with the New York City based Chief-Leader newspaper which has been covering public unions and the civil service since 1897. He is a regular contributor to Salon where he writes on the economy and labor. He has been published in the Guardian, the New York Times, CBS-MoneyWatch and dozens of other websites and publications. His broadcast credits include CBS’s 60 Minutes, the PBS NewsHour, NPR, C-Span and the BBC. 

Bob's twitter handle: @stucknation



This transcript has been edited for clarity.


RICHARD WOLFF:Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives – those of our children, those looming ahead of all of us. I'm your host, Richard Wolff.

I want to start today by telling you three little short stories about corporate capitalism. They're stories about the failures of capitalism, and I've chosen them because they are very different. One is out of the United States, and two are inside. And they cover completely different industries, because the point is, something is in common in all of these stories. Here they are, very quickly.

The Boeing Corporation, one of the biggest airline producers in the world, produced a very, very unsafe airplane – the 737 Max. You know about it; it's been in the headlines. Two major crashes, killing hundreds of people, happened over the last year or so. Why? It's now clear from the reporting, that these airplanes were unsafe. The software that guided them, the safety arrangements made for them, were inadequate. Partly the reasons are clear. Boeing was saving on costs – using cheap software engineers, for example, saving on safety tests that could have and should have been done. And the bottom line was that the government supervision, which is supposed to catch that kind of behavior, was compromised because the government was in cahoots with Boeing, in terms of who the supervisors were, who paid them, and who they reported to. Bottom line: A capitalist corporation, to make more money, to save on costs – that's why you do that, to boost your profits – compromised the government and killed a significant number of people.

My second example, out of the United States: the Audi automobile corporation. Audi is a subdivision of VW, Volkswagen. And you know, because we've reported it, and there have been many stories about it, that VW was caught several years ago having systematically and knowingly cheated on its emissions-control activities and its emissions-control devices that were supposed to be installed in cars. Effectively, they had fooled the controller by putting in a failed device so that they could get away with selling to the public millions of automobiles that were polluting the air more than they were supposed to and that were legally allowed . Even as VW was exposed, and the press was on it, and the world knew, the subdivision of VW called Audi, the maker of high-end cars, continued, we now know, to do the same thing, hoping to get away with it. Those extra emissions – that were produced, by the way, not just by VW and Audi but by virtually all the major car companies who have been caught over recent years doing it – that pollution caused emphysema, caused asthma, and caused people to die in significant numbers, from compromised lungs, etc. Capitalism kills.

Third example: Cigarettes were banned in the United States from advertising publicly, particularly for children, and the cigarette companies fined heavily, because of the addiction qualities of nicotine – addiction that was exaggerated, intentionally, by the cigarette companies. What do we have today? Is the lesson learned? Not at all. A new company, Juul, J-U-U-L, has been producing "vapes," they're called – vaporizer substitutes for cigarettes. And guess what? They've now been caught systematically exposing children to advertising to get them to start smoking these things with claims that they're less dangerous than cigarettes. My goodness, that's what the cigarette companies tried. Remember filtered cigarettes? You were supposed to shift to them because they were safer, until we got rid of the whole thing. Now we get this company, once again making money by addicting children to another form of nicotine taking.

Wow, capitalism. What's the point here? Capitalism is about profit. To use their language: Profit is our bottom line. In simple English: Profit is the goal. Profit is the priority. Safety isn't. And when we fly in something, or when we drive something, or when we take something into our bodies, the number-one priority shouldn't be the profit of the producer; it should be the safety of the consumer. The profiteers are few; the consumers are many. It's not democratic. It's not human. It's inappropriate, and they ought to be called out. What's common to Boeing, to Audi, and to Juul is that they are profit-driven, capitalist enterprises, and therein lies the common problem.

My next update has to do with the decision of the Department of Justice in Washington to begin an inquiry, an antitrust investigation, into large high-tech corporations like Google, Facebook, Twitter, Amazon, and so on. The name of the game here is – ready? – shock and awe that these companies may be operating a monopoly. What's a monopoly mean? It means that instead of having many competitors, many companies competing with one another, instead
what you have is simply only one – that's literally a monopoly – or a very small number. And the reason that's bad is if it's one or a very small number, they can manipulate the market. They can jack up the prices higher than what they would otherwise be because you've got nowhere else to go but that one or the few because there aren't many. This is not rocket science, friends.

What's the problem here? Here's the irony: Capitalism always proceeds to monopoly. Here's the logic: When you have many competitors, each one trying to beat the other one, some win and some lose. That's what competition means. And guess what happens. The winners get bigger and the losers go out of business. And when the losers go out of business, they lay off workers, they sell off their equipment. You know who hires those workers? And you know who buys that equipment? The winners. And slowly over time, what competition does is reduce the many to the few. So if you don't like monopoly, you've got a problem: You don't like capitalism, because that's what it is. It's the competition that produces the monopoly. And why is monopoly attractive? Because then businesses can get two kinds of profit. One, what they get off their workers, whom they pay less than what those workers produce for the company. But now they have a second way to gain: They can jack the price up way beyond what it would otherwise be because the buying public – whoever they are – have no options. That's why companies want to become monopolies, because they make more money. It's built into the system.

So an investigation to see whether it's happening for the umpteenth time is an investigation into the likelihood that tomorrow the sun will rise. We do not really need an investigation. And here's an even more rich irony. No sooner do monopolies take over in an enterprise – in an industry, like cigarettes, or cars, or machinery, or whatever you name – than pretty soon they're making so much money that there's an incentive for other companies to come in with a new product to substitute, because it's so profitable. So ironically, monopoly generates competition again as others want in on the enormous profits that monopolists make. In other words, capitalism displays, as it always has, the transition from competition to monopoly, and the transition back.

The only thing that makes this even more ludicrous is when the government investigates. That means your Department of Justice is going to hire and use a vast array of lawyers, accountants, economists like me, to come in and push about why is this happening, and it shouldn't happen. And the companies will have their irony excess of lawyers and accountants to argue why they should, and they might not, and it should take some time, and they have to adjust. And you know who pays for the lawyers on both sides? You and me. The taxes we pay pay for the government lawyers. And the companies that are defending themselves? They'll jack up the price – which they're monopolists, and they can do – to cover the cost of their lawyers. We get to pay the lawyers on both sides. And you know what ends up happening? One possibility: nothing, and just keep going. Second possibility: We break up the company into many small companies to resume competition, which we do and that produces then again monopoly. This is crazy what we're doing. Our problem isn't monopoly or competition. Our problem is a system that displays the transition from one to the other, during which we are overcharged for the monopolized goods, overcharged for the legal shenanigans in which they argue with each other for the umpteenth time. How many times do you need to get ripped off before you recognize a ripoff?

I want to call out a remarkable development. Cooperatives have been formed, worker cooperatives across America, but there's a new thing happening. It's called Brightly. It's a system that franchises worker co-ops. You know, like you franchise a fast-food joint, or you franchise – you create a model that lots of people can easily get into that business. That's now being done for worker co-ops. One of the supporters of it is the Center for Family Life. If you're interested, go look up Brightly, go look up the Center for Family Life, look up this phenomenon of franchising of worker co-ops as they spread. Another good example of this is the Arizmendi association of cooperatives in the Bay Area of California that is also helping to spread this model so it develops in America even faster in the future than it has been in the recent past.

The last thing I want to talk about today – that we'll have time for, or perhaps we'll have time for two, we'll see – is the problem of inequality in the United States. I wanted to make sure that people understand the history of all of this. If you pay some people systematically more than other people, certain things follow. Those who are better paid can afford better housing, better schooling, better transport – all of that – and as a result, you get two different kinds of neighborhoods, two different kinds of childhoods, two different kinds of schools. And if you don't deal with that inequality, it becomes baked into the society. The people who live in the nicer neighborhood want some distance between themselves and those who are not. Those with children in the better schools don't want them to be reduced in quality by having to deal with kids that bring more problems. Why? Because their parents earn less money and can't live in the nice – you get the picture? Because we all know what this is about. And then it becomes self-reproducing over time. That's the real terrible part of all of this.

So I was struck when I recently learned that two school districts in Long Island, New York, exemplify this. And I wanted to simply tell you about it. In Hempstead, the Hempstead Union Free School District and the Garden City Union Free School District are a very few miles apart. Enrollment in Hempstead schools is two percent white, while immediately to the north, the school district in Garden City is 87 percent white. Get the picture? White people paid more than non-white people, and now these arrangements have happened. Now, what's at stake here? Well, you can get many implications of it. I'm just going to give you one. Ready? In Hempstead city schools, they get almost $5,000 more per student per year. Other wealthy districts get even more, maybe $7,000 more per student per year. In other words, the whole quality of what's happening to the children reproduces the inequality that exists in the society. You can't blame people for this inequality; you're blaming conditions that determine what happens to those people. That's why you've got to deal with the inequality at the base, at the unequal access to the resources that shape community, housing, schools, transportation, and all the rest,

We've come to the end of the first half of our program. For those of you that follow us on YouTube, please become a YouTube supporter. It's very important to us. Make use, please, of our websites: rdwolff (with two F's).com and democracyatwork.info, where you can communicate to us. And of course, as always, thank-you to our Patreon audience for the support and encouragement you constantly provide and we depend on. Stay with us; we'll be right back.

WOLFF: Welcome back, friends, to the second half of Economic Update. It is my pleasure to welcome back to our microphones and to the camera a journalist whom I admire, who is a kind of reminder of what really good, investigative, research-based reporting can do in illuminating what's going on and what it means in the lives we are all trying to lead. So let me introduce again my friend, Bob Hennelly. Welcome so much to the program.

HENNELLY: Thanks for having me. It's a pleasure.

WOLFF: Bob – just to remind everyone – is a well-known and awarded research, investigative journalist, to put all the words together. He works regularly for The Chief-Leader, and there he covers . . .

HENNELLY: Well, we had been doing public and civil service since 1897. In the last couple of months we're taking on the entire American labor movement, including the private sector.

WOLFF: So here's a newspaper with a reporter that's really going to cover labor. Something to pay attention to. Bob has a line of credits longer that I can copy all of here. He writes regularly for Salon, where you can find his work, but he has been on 60 Minutes, he's written for The New York Times – a long, long list of really the premier outlets for good, quality journalism, and it is a privilege for us to be able to talk with him today.

HENNELLY: Thanks for having me.

WOLFF: All right, Bob, let's start with that remarkable Eric Garner case, the case where police used choke holds and effectively killed an African American who was selling individual cigarettes, basically to support his family. And your article, which caught my mind, caught my attention, was about how this should be seen not only in the racial terms – which is how it was mostly covered and which it clearly has as an important component – but also as an economic or class issue. Tell us about why you felt that way and what was it about that story that you felt required you to focus on the race and class dimensions.

HENNELLY: Well because first of all, at that, on that particular day, Eric Garner told the police he wasn't selling loosies, but he had been arrested in the past. And he was, why this occurred to me, was that at its core, the decision by the City of New York to enforce this draconian measure – I mean, cigarettes are going for $14 a pack – and so he had found a niche historically, and other people that hung in that spot, where they could come up with this subsistence living. And to that mind, it reminded me, knowing how corrupt New York City politics are and the choices that were made about why did they pick that, with all that's going on in the city? Why did they choose that? With all the white-collar crime going on on Wall Street, why zero-in on that? And then in point of fact . . .

WOLFF: Let me just interrupt. The niche you're talking about is selling cigarettes one-by-one.

HENNELLY: Right, so for a dollar. And so what occurred to me was that he actually had more in common with the Sons of Liberty and the successful fight of the Stamp Act that led up to the American Revolution, and indeed the Shay rebellion, which was held by, put forward by, farmers who were veterans of the Revolutionary War, returned back to where they were from and then realized that the local government had passed laws that were going to throw them off their farms. So they took direct action because they were being oppressed by this political economy which was corrupt. And so I looked at detail, at who was it who made the decision to put that area under surveillance, because as it turns out, the New York City police had that area under surveillance, and that whole way of making a living they had targeted. The person that made that decision was the highest-ranking African American, Chief Banks, with the police department. He was at the center of some significant police corruption scandals. He was never indicted or convicted, but his lawyer let it be known in a letter that was made public that he would take the Fifth Amendment, which all tied into Mayor de Blasio's whole campaign finance scandal because the two principals that were close to de Blasio and giving money to de Blasio were part of the social nexus of the police corruption that Banks was involved in. That part of the story is not discussed. How was it that working-class cops were in the ridiculous position of having to have this kind of enforcement that ended up resulting in the loss of his life because of decisions made that we don't even discuss? And that's where the focus needs to be.

WOLFF: So that his crime was trying to make a living selling individual cigarettes, and the New York Police Department, with the range of problems it has, was focused on that, rather than on all the other issues.

HENNELLY: Right. Some merchant had made a call they had a problem. And so in the system we have, we have Wall Street creating all kinds of white-collar crime to target all kinds of people in this country, in the same five boroughs, and yet they fixated on loose cigarettes. That was the thing that they, actually, and when you think about it, the ripple effects – I mean
he had, I think, six children. He had prior to that been working for the city parks department. He had been sidelined by asthma. This is a person who was trying to do the right thing, and ironically, was kind of like the mayor of the place. He was a big guy, and he was known as a gentle giant, who kind of kept social order. And that piece is lost in the discussion. And the other thing I wanted to cast him is the video we see over and over again is him as a victim saying "I can't breathe, I can't breathe." The part of the tape that's important that we don't see is when he said to the police, and he stood up for himself and posterity, "Not today," referring to the decision to try to arrest him for something he said he didn't even do, and even if he did do, shouldn't have been seen as a crime.

WOLFF: Do you see a pattern? In the police actions, but also in the courts in our country, in which the class element is lost sight of, is denied, even when the racial dimension is seen?

HENNELLY: I think the best example is the situation with Jeffrey Epstein. And I had the opportunity from my positions covering the courts here in New York to sit right behind him at his arraignment. Of course, just to review for people, Mr. Epstein was a person who was supposedly a big-time hedge-fund individual, for whom the former Secretary of Labor when he was a U.S. Attorney, Mr. Acosta, worked out a plea deal where this very prominent person was able to avoid, Epstein was able to avoid, any kind of criminal sanction for what was a child sex trafficking. And he pled to a much lesser offense, which permitted him, a state charge, to go back and forth to his job and pretty much live his life without a problem. This was fine; this was back in, you know, 2007. But then there was such a hubbub after Mr. Acosta was nominated to be Secretary of Labor – and much to the credit of The Miami Herald, they resurfaced this story – and it turned out that there was so much evidence that had been overlooked by Mr. Acosta that the Southern District brought additional charges. That's right, the same Department of Justice that had worked out a deal with Mr. Epstein actually put him back into custody. So if you look at how that, how the system treats a Mr. Epstein versus Eric Garner, you really have in a nutshell how upside-down our current moment is.

WOLFF: What about the case of Kushner? It's also getting a lot of attention, and you've written about it. Does the case . . .

HENNELLY: Oh, Charles Kushner, the father . . .

WOLFF: . . . the father of Jared Kushner, Trump's son-in-law. Does that also illustrate the injustice of the justice system?

HENNELLY: Well, that's, and this of course is the story about Jared Kushner's father, who was a developer and a major donor to the Democratic Party nationally, and he was very close to Governor Jim McGreevey. He was appointed to the Port Authority, which is a very powerful body here, a multi-billion-dollar capital budget. It turned out that he was involved with political corruption. He was indicted, but he was able to work it out so that in the final analysis, he didn't have to give anybody up, he really was in command and control of the way his sentence went down, and so you really have two tracks of justice here. And it's becoming really, at this point, medieval. I mean, the stark contrasts are getting worse every day. And that's why you're seeing, I think, with this grassroots outcry, and then to some degree the corporate media, wants to keep it only about race. But, for instance, when they cover about Ferguson, and they talk about the upheaval there, they won't look at the situation related to the foreclosure crisis, and the economic crimes that have devastated these cities. And so we never seem to get to that piece of the thing that really threatens the kind of radical critique and analysis that can prompt people to take the action that's long overdue.

WOLFF: Yeah, you see it – to bring in something more recent, perhaps – you see it in the attack by Mr. Trump on Mr. Cummings, in Maryland and Baltimore, a city afflicted by the way capitalism has evolved; in many ways doing similar things in parts of Philadelphia, doing similar things in Camden, New Jersey, and somehow making it almost a racial issue so he can focus people's awareness of the inequality that is everywhere in our society by portraying it instead as though it has some racial origin, rather than an economic explanation.

HENNELLY: What's kind of ironic is if you go back and look at his stump speech, where he got the Rust Belt to reject – and that's the other thing I think is so relevant right now. Remember, he only managed to flip 200 counties that had voted for President Obama twice, so these were in place, and only by 70,000 votes; that was the margin. And these were places like Pennsylvania, Michigan, and Ohio. These are places that had a traditional labor base, if you will. What had happened is there was no recovery. And we talked about this at the time; we saw Trump coming. Other people didn't. And so the irony is that Trump had talked about how corporations had (in his – when he was running for president the first time) had abandoned America's industrial base and he was going to hold them to account. Well, that's what happened in places like Baltimore, Newark, Camden. We had people that moved – people from the South, who were people of color – moved for work. And there were union jobs here to maintain and support and uplift a family. And the jobs left, and the people were left behind, and the consequences are still living with us. So people just have to pay attention to the earlier Trump and compare notes.

WOLFF: You know, it seems to be a pattern: The system breaks down, it doesn't provide decent jobs for people, it doesn't provide income even if they get a job, they're now in a job where they don't know from week to week when they're going to work, how much they're going to earn, how secure the job is, has no benefits. The failure of the system to provide gets deflected, gets distracted by Mr. Trump. It's the immigrant who you're supposed to be angry at, or the Chinese, or the trading partner, or now African Americans. He finds, in a classic conservative mentality, everything he can think of to blame other than the system that isn't working. I find it both stark and amazing, and then I get depressed that people don't see it.

HENNELLY: Well, what's also a great concern is that it's so disconnected. If you've really observed what's happened in the world, it is just based in this kind of prejudice. It's not even borne out in reality on the ground. I'll give you one example. I have lived and worked as a reporter covering New York City from the time when there were 2,100 homicides a year. Imagine that. We're under like 400 today. You probably, people aren't aware of this; I've made this point on this program before. What changed? What changed was undocumented immigrants from all over the world came and made the city of New York a place to raise children, in neighborhoods that this industrial abandonment had wrecked entirely. Because undocumented immigrants – if you know some, if you work with some – there's three basic things. It's faith, family, and work. Rick, we know this. This is how their life – it's not like, let me go make trouble. It's like, let's stay out of trouble and advance the circumstance of my family. That's what created the moment here when you had a police force that became more multicultural, could speak a multitude of languages. But it was this fundamental democratic, demographic shift that transformed and revitalized New York City. Now ironically, they can't hang around to enjoy the transformation that's happening because multinational capital comes in and wants to have multi-million-dollar condos.

WOLFF: And wants to have headquarters, and clean out all parts of the city.


WOLFF: Bob, thank you, as always. It's a pleasure to talk to a . . .

HENNELLY: I'm at StuckNation, too. We always have to – that's the shorter handle.

WOLFF: Okay, StuckNation. Folks, I want to thank you for joining. I hope you found what Bob Hennelly has to say as interesting as we do, which is why we keep bringing him back. Let us know what you think. Once again, both our websites are ways for you to communicate: rdwolff (with two F's).com and democracyatwork.info. And again, a special thanks to our Patreon community for the support, encouragement they provide. You are a godsend for us, and we want you to know we appreciate you and would appreciate as many of you as would like to join our Patreon community as can. Thank you very much for your attention, and we look forward to speaking with you again next week.


Transcript by Marilou Baughman

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Showing 2 comments

  • Thomas Jamison
    commented 2019-09-09 09:56:47 -0400
    What keeps cooperatives from competing? I should imagine that is it mostly the banks which also keep democratically owned credit unions from competing with the privately owned banks in many ways.
  • John Horner
    commented 2019-08-31 06:09:50 -0400
    What keeps employee owned & democratically run businesses from competing with other business?

    John Horner

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