[S12 E38] New
In this week's show, Prof. Wolff talks about the large strikes in Seattle (teachers) and Minnesota (nurses), the significance of Sweden's big vote for ex-Nazi party, and how anti-Russia sanctions cause US electricity prices to rise at twice the inflation rate. In the second half, Wolff interviews Leilani Farha, global campaigner for housing as a human right and against the financialization of housing.
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 and those of our children. I'm your host Richard Wolff. I want to begin today's show, although I want to mention to you what else we're going to cover, I want to begin with some union information and strike information. We're also going to be talking about the right-wing shift in Sweden, the politics there, the return of Nazis and so on, the rise in electricity prices here in the United States, Germany nationalizing energy businesses and the rising U.S dollar. So we have a lot to cover.
Let me begin by shouting out to the 6,000 Seattle public school teachers and their strike and the 15,000 members of the Minnesota Nurses Association that also had a recent strike. They're heroes, these men and women, that are going out on strike. They're making it very clear that they're fighting in one case for decent public education and in the other case for decent public health. Yeah, they want better working conditions, which they deserve having gone through the pandemic and worked in many cases under unspeakable conditions, where they were told they were essential workers but are now told not essential enough to pay even a living wage. It's remarkable. But they're also fighting for basic values of public health and public education for everyone. They want these things done for the mass of our people. And it can and should have been done by taxing the disproportionately rich. Labor is on the move in this country and we're all the beneficiaries of it.
So let me turn next to Sweden. In a recent vote the Swedish voters voted about 20 percent - one-fifth of them - for a far-right former Nazi party. I mean Nazi as in, “Yeah, we're Nazis.” Now, they have changed and moderated this, but it is an open question. Which many of their behaviors continue to make an open question: how much Nazi remains in the former Nazi? Why would Sweden, a traditionally socialist country by its own statement for many decades, be suddenly doing this? Well, first of all before people get excited, the American media were all about Nazis becoming important. They got 20 percent of the vote. The parliament is now stuck between the center-right which has 173 seats and the center-left which has 176. Or it might be the other way around, I didn't pay that close attention. Because what's interesting is how close they are. This is a parliament split between the left-center and the right-center. It's going to go more right with this kind of movement. But the end hasn't come. It's not a Nazi government.
Well, why have Swedes voted this way? Eight and a half percent inflation. In other words their inflation is as bad as it is in the United States. They have suffered falling real wages, again like in the United States, only a bit worse. As a major recipient of immigrants these right-wing former or maybe not so former Nazis have scapegoated the immigrants, blaming the inflation on the immigrants who have nothing to do with it of course, blaming the falling real wages as having to do with immigrants. And that's a stretch, given where the immigrants work and where they live. And so they are also scapegoating crime, you guessed it, where the immigrants live. And saying all of our problems can be solved if we get rid of immigrants. You know, Trumpism more or less. And their slogan also might remind you of Mr Trump: 'put Sweden first.' That's their slogan. Okay, none of this is terribly subtle. It's not over yet, it is not by a long shot. 20% is a serious vote, no question. But it is not the end of where Sweden is going. The left in Sweden has to figure out what is going on and offer an alternative solution. Or else there'll be more of this.
I am struck though to end on this story by telling everyone in France in the last two parliamentary elections the far-left, not the center-left, the far-left got 19% in one case and 32% in the most recent case. That is remarkable and gets virtually no coverage in the United States. You think about that.
Okay, now I want to talk, and this is going to take a minute to do the arithmetic here, about inflation in the United States. And in particular the inflation in electricity prices, something too many folks are not paying attention to. Between August of 2021 and August of this year, 2022, electricity prices rose 16%. That's nearly twice the rate of inflation of goods and services. And this is extremely important, because if you raise the electricity price this much you're going to raise the price of everything else. Because everything that's produced is produced in a factory, an office or a space that is lit by electricity, runs by electricity, heated mostly by electricity etc. etc. We're at the beginning therefore of watching this rapid increase work it's way through the economy. Message: inflation not going anywhere real soon Jack.
Okay, terrible blow to consumers who rely on education. I won't mention the millions of Americans whose homes are heated by electricity and who are going to have a Winter coming up that will be one to remember even without the climate change that we're going to live through. Why is this happening? This is very important. First of all, it is not happening because of the war in Ukraine in any direct way. Military incursion in Ukraine by Russia, fighting between Russia and Ukraine is an awful experience, is an awful event. But by itself would not have much impact on our electricity costs. So what's going on? Answer: in retaliation to Russia invading Ukraine the United States led the European countries - places like France, Germany and all the rest - in going into economic warfare called applying sanctions to Russia. Economic warfare from the West was the response to Putin's invading Ukraine. Now, when you look at an economic war we begin, if we're serious, by comparing the economic strengths of the two sides engaged in a war. Russia has moved deep into the Ukraine because its army is larger, or at least it was, than the Ukrainian army. And it's a bigger country. Well, the same applies here. If you add the GDP - that's the measure of the size of an economy, total output of goods and services in a year - the GDP -ready? - of Russia is one and a half trillion dollars. The GDP of the United States is 21 trillion dollars. The GDP of Europe is about 10 trillion dollars. So if you put Europe and the United States together you're talking at least 30 trillion dollars, economic war resources against Russia, which is one and a half [trillion]... that's not an equal fight, whatever your thoughts are about this war. This is an economic war of David and Goliath. And Goliath is who we are in this part of the world.
Okay, what did Goliath do? Said "well, we're going to hurt the Russians, we're seizing their wealth." Which they did, in banks and reserves around the country. We're closing them out of international trade, really hurting them. And we're going to stop buying oil and gas over time. We can't do it right away because that would hurt us. The Russians, smiling, say "well, we're not going to accommodate your sanctions against us to your schedule, if you're going to sanction us we're going to counter sanction you back. And here's what we're going to do: we're not going to ship you oil and gas at all. That's our schedule, because we don't need you." Whoa! The Europeans discover they need Russian gas badly. But now there's a shortage of Russian gas. And the price goes crazy in Europe. Because you can't get it [the] price goes up for oil too, but there are ways around that. Gas comes in a pipeline from Russia, there's no quick way to get around that. So the price of gas goes crazy in Europe, because there's a shortage. What do American gas producers do? They say "we're not selling our gas here in the United States because the price hasn't gone crazy, we don't need Russian gas so our prices are low." Yeah, but if you're a gas seller you don't want to sell where the price is low, you want to sell where the price is high. So American gas producers are producing gas, all right, and sending it to Europe, usually in the form of what's called liquefied natural gas. And that it made into a liquid, basically, and shipped over there, where they get much more money. Well, guess what? Then there's a shortage of gas here in the United States, because we're sending it to the Europeans, because of the sanctions they put on Russia.
Well, it turns out - get ready folks - that almost half of the electricity produced in the United States is produced by burning gas. And as the American gas producers ship their gas to Europe, because it's profitable for them, more profitable to do that the price of gas is going up here. How far has it gone up? Get ready folks: 70% over the last year. 7-0, that's the increase in the wholesale price of gas. We're only seeing a 16% increase in electricity, not because we're not going to see more - we are - but it takes time. You see, in every one of the 50 states we have a commission. It's called the Utility Commission, and if you're an electricity producer you have to prove to that commission that you need a price increase and that you're not ripping everybody off. You know why we have those 50 commissions? Because all the utility companies were ripping everybody off. And in response we hit them with a commission. That's American capitalism, in case you forgot the history. So it's taking time for the electric companies to get the hearing in front of the commission to show them that with the rising price of the gas they need to charge people more. So some of them have done it, and so the price is already 16% higher. But with the wholesale price of gas 70 percent higher guess what? The sanction program that was intended to hurt the Russians is having a blowback problem. Russian electricity hasn't gone up this way. They have loads of gas and oil, because that's what they were exporting. And the cost of this sanctions program is getting bigger and bigger, and really going to whack the United States, as it already is.
Why do I tell you all of this? Well, let me conclude by reminding you virtually every war ends with negotiations. That's how they end. The two sides sit down and work out the end of hostilities. They declare a ceasefire. Then they sign a treaty. Sure, sometimes one side virtually surrenders to the other, but not mostly. It's a negotiation. Maybe the way to handle the growing explosion of costs of this war is to go back to doing that. Why wait? What are we gonna gain?
We've come to the end of the first part of today's show. And before we move on I want to remind everyone that Economic Update is produced by Democracy at Work, a small donor-funded non-profit media organization celebrating 10 years of producing critical system analyses through a variety of media. Like, for example, Anti-Capitalist Chronicles, a podcast hosted by David Harvey, that looks at capitalism through a Marxist lens. You can find his show and more at our website democracyatwork.info. Please remember there to sign up for our social media, for our mailing list to keep up to date with how you can access and support our work as we continue for another 10 years. Please stay with us, we will be right back with today's special guest the Global Director of THE SHIFT Leilana Farha, as we just discuss the right to housing as a human right.
RW: Welcome back friends to the second half of today's Economic Update. It is with enormous pleasure and real satisfaction that I bring to our microphones and to our cameras Leilani Farha. She is a remarkable person, the Global Director of THE SHIFT. It's an international movement, organized by the United Nations and cities around the world to secure housing as a human right. She was the UN's Special Rapporteur on the right to housing from 2014 to 2020. She's a globally recognized critic of the financialization, the turning of housing into a commodity to be bought and sold and profited from, like so many others. And she sees it, and that's what we're going to talk about, as in conflict with the human right to housing. She's also the co-host of a podcast, if you'd like to pursue her work, called PUSHBACK Talks. So, first of all, Leilani Farha thank you very much for joining us.
LF: Rick, it's a pleasure to be here.
RW: Good. Okay, I want to jump right into what for me is the key idea. Is the right to a home, an adequate place to live, to sleep, to work, to have a relationship with other people, to have children, all of the things we associate with the concept home, is that a human right? Or is it something we have to have the money to purchase? And if we don't, well, we're out on the street. What is this? Why is this even an issue? And what are you doing about it?
LF: Wow! A big question, and a lovely opener. It absolutely is a fundamental human right. The right to housing and adequate housing in particular is contained in a whole slew of international human rights treaties that governments, including the government of the United States, have signed and ratified. It's also in a whole bunch of political documents that governments have made commitments to, including the U.S. So there is no doubt that housing is recognized as a human right in law, and governments themselves have recognized it too, and it means exactly what you just said, Rick, which is - I loved your definition, not everyone really understands what the right to adequate housing means but it means home and it means all those things that you said: a place that's decent, that's warm, where you can have human relationships, where you can grow families, where you can retreat to when the world goes bad, a place from which you can be employed etc. etc. So, it's a right. And the thing that I think people don't really realize is when I said it's a fundamental right I said that because of the very close link between home and human dignity, between home and human life itself. And the right to life and the right to dignity are the cornerstones of human rights. So yes, in short, housing's a fundamental human right.
RW: You know, I read this morning, and getting ready for today I read an article, and I wish right now I remembered the thing, I read so many that they kind of go in and out of my head. But the point of the article I will never forget. It's a woman who's writing out of her own experience of having been homeless for a while with her mother as a child and then having had insecure apartments for much of her teenage years into adulthood and that when she went finally, needing it, to a therapist a year or two ago, if I got the story right, the therapist listened to her for some sessions and then said to her "in my professional experience you have PTSD." In other words that that illness that is usually associated with soldiers coming back from wartime experiences, post-traumatic stress is what it's about, that is as likely to result from being denied housing as a human right as it is from the horrors of warfare that beset soldiers. How do you see it?
LF: Absolutely, that's a moving story. And it's one that I've seen and heard, told to me over and over and over again. Because I've met with people living in homelessness all around the world, as well as people living in really precarious housing situations. And you can see the stress and trauma that they've experienced as a result of inadequate housing and inadequate security, you know, the the whole situation of homelessness. People ask me all the time "well, what are the causes of homelessness?" And I've got a short answer for that. The cause of homelessness is the failure of governments to implement the human right to housing. Because if they did implement it we wouldn't have people living in homelessness. So that is a very tidy understanding of what's going on here. Governments are failing to do what they are supposed to do, what is the morally right thing to do, and what they've legally committed themselves to doing. Which is not just addressing homelessness but ensuring that our housing systems don't produce homelessness, ensuring that our housing systems don't produce housing insecurity. That's not at all what's going on right now. And you and I can talk about that with respect to the financialization of housing, which you mentioned at the top, and the role that that's playing. But governments are not leading, governments are allowing the private sector to lead. And with the private sector leading we are seeing really horrible outcomes - women with PTSD because they've lived in homelessness and housing precarity, right? That's the outcome. We're seeing people dying on our streets across North America because governments are allowing the privates to lead.
RW: Well, you know, let me pick up a little bit and ask you to give us a bit more. The private sector in a capitalist system makes investments. In other words, [it] builds houses, renovates them, creates apartment buildings, whatever, if it's profitable. That's the logic of this system. If they do it it's because they expect it to be profitable. And if they don't do it it's because they don't expect it to be profitable, and therefore they invest their capital someplace else. So am I hearing you right that the private sector's profit-driven rationality produces a problem, namely a disconnect between the human beings in our community and the housing they have a human right to? And so we're asking the government to come in and to do what private capitalism has failed to do? Is that the argument?
LF: Could be. So here's the thing, I think that you can still make a profit and do housing, that's consistent with the right to housing. And I think it just depends on when you expect to make that profit; over what period of time and how much profit you expect to make. I don't want to say that capitalism is completely inconsistent with the human right to housing, I don't think that serves us well at all. First of all the human right to housing does not mean social housing only. It means that the whole housing system has to produce housing that the poorest household can access as well as housing that other levels-of-income households can access. That's what it means. And so I want to believe that with proper leading by governments - that means through legislation, through policies, through programs - the private sector could, in fact, contribute to the implementation of the right to adequate housing. That is not how the system is set up right now, no way. I mean right now you've got private actors, including private equity firms, real estate investment trusts, pension funds - big institutional actors - who feel a fiduciary duty to the investor, feel they have a fiduciary duty to the investor. And the tenant and outcomes for tenants is left on the wayside, right? Not part of the business model of housing right now. But could it? Could the housing system be reformed for better outcomes and human rights based outcomes? I think it could. But that would require governments to do something no governments are doing right now, or very few.
RW: Okay, let's agree for the moment on what you just said, that it could be otherwise. If you were willing to accept a lower rate of profit, perhaps, or a larger time horizon, so then, of course, you know, you forced me to push you a little, why isn't that happening? In other words, okay, you have a plan: lower rate of profit, longer time horizon. Why hasn't that been enough, between the government and the private sector to do the thing that we know needs to be done, namely to produce and maintain the adequate housing for those that are now left out of this system?
LF: Yeah, so two things I think: greed, for sure we live in greedy times. Like I think, Rick, you and I can agree on that. And particular people or entities are particularly greedy. The nature of private equity is to be aggressive and reap profits. And sadly after the global financial crisis, and you all in the U.S witnessed this worse than some other places, it was a time of incredible economic fallout, right? The global financial crisis - people were suffering economically and it was a time of incredible wealth building where? From what? From the very thing that caused economic collapse, housing. And we've seen since the global financial crisis just this steady march of private equity and institutional investors in the area of residential real estate, all in the name of greed. More profits, more money, period. And that's for me for sure.
But the other thing is what I would call 'state capture.' Who sits at political tables? Who wields political power? Private equity firms, institutional investors, the big players. They are helping to dictate policy, dictate law. They are using their money and political clout to squash any progressive laws that people try to put on the books. Look at what's happened in California. Some really interesting propositions have come up to try to allow for rent to just allow cities to contemplate rent control, not to do rent control, right? And they've been defeated. Why have those propositions been defeated? Because private equity is throwing money against those propositions. So the combination of greed and state capture, as I call it, has just allowed this to unfold and to continue on, even in the midst of a global pandemic, for example.
RW: Yeah, I recently spoke to one of the people that's sitting at the top of one of those institutions, who said, just like you did, and in a sense I want to reinforce it, that they were so traumatized by what happened in 2008-9 and 10, the so-called Great Recession or Great Financial Crash that they they saw that they weren't going to invest anymore in goods and services because the American people - I'm talking about the US now - don't have the money to buy it and are up to here in debt already. So the one area where the shift of income and wealth looked like there might be profit was housing, building a second home, building a more elegant home, building a pied-à -terre in a big city, that's where the money was. And that's where they were going to go. And the only other one was to convert the mass of single families into rental properties, which we know is going on. Look, we have only a few seconds left. What do you hope is going to happen?
LF: Yeah, so I said that part of the problem here is that governments aren't leading, and it's time that governments stepped up. And note I'm using plural 'governments.' And I don't just mean governments around the world, I mean all levels of government, whether it's a national, state, or municipal, or city-level government. They need to step up and start leading. And leading using human rights principles and values.
RW: Leilana Farha, you've been a wonderful guest. Thank you very much for the work you do and for the clarity with which you get it across. I hope in a few months we'll get you back and you'll give us a sense of whether there's been some movement along these lines. I hope you found this as useful as I did. And I look forward, as always, to speaking with you again next week.
Transcript by Brendan Tait
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About our guest: Leilani Farha is the Global Director of The Shift, an international movement to secure the right to housing and the former UN Special Rapporteur on the Right to Housing (2014-2020). The Shift was launched in 2017 with the UN Office of the High Commissioner for Human Rights and United Cities and Local Government and works with multi-level stakeholders around the world including with several city governments in North America and Europe. Leilani’s work is animated by the principle that housing is a social good, not a commodity. She has helped develop global human rights standards on the right to housing, including through her topical reports on homelessness, the financialization of housing, informal settlements, rights-based housing strategies, and the first UN Guidelines for the implementation of the right to housing. She is the central character in the award-winning documentary PUSH regarding the financialization of housing, directed by the Swedish filmmaker Fredrik Gertten. PUSH is screening around the world and to continue its momentum Leilani and Fredrik now co-host a podcast – PUSHBACK Talks - about finance, housing and human rights.
- The Shift’s website: https://make-the-shift.org/the-shift/
- Leilani’s Twitter: @leilanifarha
- Leilani’s Instagram: https://www.instagram.com/leilanifar/?hl=en
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- Sweden gives 20% of vote to far-right: https://www.bbc.com/news/world-europe-62913356
- US electricity prices rose 16%: https://www.axios.com/newsletters/axios-markets-022a93b0-a3e3-40e5-a5a6-7b814d12e4f7.html?chunk=0&utm_term=emshare#story0
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If anything, it appears that economic "sanctorsa’ have been working to orchestrate an artificial drop in price in order to damage Russia’s return on its commodity within a demand market. However, I don’t think its a well kept secret that unsanctioned dealers are acting as third party dealers in this commodity. It will be interesting to see how long this price drop lasts if utility companies wish to keep their electricity prices in the E.U. where they currently are— without looking like the crooks they appear to be right now.
When government fully engages (beyond subsidies which are problematic enough) in the provision of goods in services (in a Market Economy) that are also offered by private industry in a capitalist system, then the private sector providing for this service or good will surely collapse . Why? Because the private sector is obligated to pay taxes on its means of production whereas the government has an automatic and significant market advantage (currently trending toward 28%) by not having that burden in the same endeavor. Its called a market “edge”…and the government has no business wielding one. In the U.S., with all the recent talk about “affordable” housing urgently needed and provided by local governments (mostly offered to its own employees or preferred public service vendors at subsidized rates—usually half that of prevailing private market) this is where we are headed folks: Communism. The sad joke is that if these localities simply wouldn’t systemically overtax private property owners, then all homes would be more “affordable”.
The false flag of “affordable housing” is predicated on the fallacious belief that government is an economic engine of society. It’s not. Government (at least in the U.S.) is regulatory overhead that always comes at a cost to society.in a free market economy. The bigger it gets, the further the cost to society. This is why the U.S. federal deficit just past the $31T mark and now costs society roughly one billion dollars a day to finance its debt obligation. That one billion only goes to pay investors in government debt (mainly central bankers) and does NOT go toward paying for any healthcare, any infrastructure, or any government services whatsoever. IMO “affordable” housing is a mirage being shilled by snake oil salespersons like Ms.Farha. In government hands, housing is not cost effective to the U.S. taxpayer. Government has no business building, developing, or offering “affordable housing” stock in a free market economy. The presence of a subsidy, by definition, infers partial or complete market failure. Building “affordable” housing under government control and/or ownership (extreme subsidy) will likely only increase our level of public debt and expedite widespread market collapse. The end game appears to be the institution of outright communism…and the game begins by getting you to accept the false notion of housing as fundamental human right. If that type of society is one you wish to work towards and live under then, by all means folks, keep buying Ms. Farha’s snake oil.