Economic Update: Lessons From A Crisis Year 2020

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This week's show features a survey of the major economic events of 2020 that were poorly covered by mainstream media: the twin crises of viral pandemic/capitalist crash; protesting right-wing regimes (France, US, India, Poland); how the US Census Survey reveals the extent of US suffering; how Federal Reserve policies, intended to combat Covid-19 and economic crash, worsened income/wealth inequality; and the correction of poor unemployment data during a massive jobless crisis.

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 — ours and our children's. I'm your host, Richard Wolff.

I want now, since we're nearing the end of the year, to produce a list, and go over it with you, of some of the extraordinary events of an extraordinary year. More than most, we have been buffeted by major social changes, many of them bringing to a head problems that have been bubbling not far below the surface for a long time. And I want to approach them, and talk with you about them, by focusing on what the mass media, the mainstream media, have either failed to notice or handled in a way that leaves much to be desired.

Let me begin with what will obviously be the appropriate starting place. Two nearly simultaneous crises hit this year — hit the United States, but hit large parts of the world over this last year. And you know what they are. One is the economic crash of global capitalism. Here in the United States, it started, according to the National Bureau of Economic Research, in February. A month later, in March here in the United States, the second crisis hit, namely that of COVID-19. I want to give the dates because right off the bat, here is a problem. Covid did not cause the crash. The crash happened before covid got here. The crash was worsened, the crash was triggered in some places, but it wasn't caused by this virus. And that's itself one of the key lessons I want to underscore.

Capitalism — as I have pointed out many times, and this is well known by economic historians — has been around a good 250, 300 years, starting in England and spreading to the rest of the world. Over that time, and everywhere, it has crashed on average every four to seven years. So often and so regular are these breakdowns that they have a whole host of names. I'm going to list them once and then not repeat them: “crash,” “bust,” “crisis,” “recession,” “downturn,” “depression” — you get the picture? We have many words because we have, unfortunately, many experiences.

The COVID-19 crisis shouldn't be called that. It's a capitalist crisis that has occurred together with a public health disaster. In a way, that's capitalism's worst nightmare, that one of these crashes would happen in the economy together with something in another part of society, and it would be too much. That's what we're living through. If a crash happens every four to seven years, and if the last one happened in the United States in 2008, guess what — we were already overdue. Take 2008, add seven years, is 2015. We got away with no crisis until 2020. The stock market and financial press were all aware that we were overdue. If it hadn't been covid, it would have been something else, as it always has been.

So what was the reality of 2020? Two crises overlapping: covid and capitalism. But it was the capitalist system that made the response to these crises so bad. Let me explain. We weren't ready for the virus. Even though we've had viruses throughout human history. We've had a terrible virus in 1918. We've had recent virus disasters: ebola, MERS, SARS. I mean, there is no excuse for being unprepared. And what does “prepared” mean? Having stockpiled and produced all the tests, all the masks, all the gloves, all the ventilators, all the hospital units we need. We didn't. We didn't have them. We still, as I'm speaking to you, don't have them.

Why not? Do we have companies that can produce all of that? Yes. But they didn't. And you know why they didn't? Because that's not how capitalism works. They didn't because it wasn't profitable. Think about it. Understand them; I tried to. It doesn't pay to produce — say, masks as an example — produce millions of them, and then what? Stick them in a warehouse. In a warehouse, you have to pay for that storage. Then you have to pay for someone to monitor them, because if they get dirty they have to be cleaned; if they wear out they have to be replaced. And for how long will you have to expend money for all of this? Answer: who knows? The next terrible virus could be two years or 20 years from now. That's an enormous risk. It isn't profitable to do production like that and take such risks. So private companies who could have didn't, because it wasn't profitable. They invested their money in something else, which is what capitalism urges them to do. So we didn't have the materials ready. We were unprepared because a private capitalist system works that way.

During the year I explained that we know this. This is not a mystery what I'm telling you. You know how we know it? Because there's another industry — the military — that works the same way. Private companies cannot produce a missile, put it in a warehouse, monitor it, secure it, make sure it's operative, and then, what, wait for who knows how many years until the next military need arises? No company's going to do it. Too risky, not profitable enough. So we have a solution: The government comes in, buys all the missiles and tanks and airplanes, and then at government expense — that is, at your and my expense — the government stockpiles it, monitors it, guards it, keeps it in order. Isn't that interesting. You know what this is called? The “socialization” of the costs of the military.

But we didn't have a government that similarly socialized the costs of public health. And we are living the disaster that follows from that. This is a system in which the ideology of the governing parties — both Republican and Democrat — is that somehow the private sector is best. Leave it to the private sector. You see, they are efficient, and all of that. We're dying at record numbers because the private sector isn't efficient at securing public health. It's a big, fat failure at doing that. And the government, instead of compensating for the failure of private capitalism, made it worse by deferring to a private capitalism that was unprepared and now, to make matters worse, is similarly unprepared to contain the virus.

Let me explain again. The solution to the virus, in terms that we have learned from other countries much less wealthy than ours, is to lock down everything. Stop everything. Share the burden with everybody. Stop everything. We could have done that the way South Korea, and Taiwan, and the People's Republic, and Australia, and New Zealand, and many others did. To understand, lock down, shut it down, and then you can stop the virus. And then you can resume your economy. No, we didn't do that in this country because the ideology is the government shouldn't step in. But nobody else can coordinate that. We should leave it to the private sector, said Mr. Trump and the Republicans. And the
Democrats didn't say much different. And so we left it to the private sector. And you see, you're living in — or dying in — the results.

Why didn't we have a lockdown? Because private companies didn't want to lose the profit. They wanted to keep functioning, they wanted you in the store, they wanted you in the office, they wanted you to do what was necessary to keep the economy going. And the end result is our economy isn't going, because there isn't a trade-off between the two. There's no option. You’ve got to deal with the virus, or it will deal with you. And we are the world's worst example of how not to handle a virus — and because of capitalists wanting to make money.

Let me give you an example. The mass of people, and the mass of stores, can't pay rent. So we've allowed many of them not to for a while. But, of course, that jeopardizes the landlords, whom they're not paying rent to, so they're in trouble. So what do they do? They try to offload their difficulty onto the banks, from whom they’ve borrowed, and to whom they don't want to repay loans, because their tenants aren't paying rents. And then the banks are in trouble, and they — this is crazy. Stop it all. Tell the tenants not to pay; tell the landlords, don't you pay; and take care of the banks with the Federal Reserve, which we know how to do.

And so we lock everything down. And we share the burden, really — not just verbally, but really. The government can do that. The government could have done that. But our government didn't do it. And that's not because the government is remiss. It is, but that's not the reason. The reason again is this deference to private capitalism — as if it doesn't need, doesn't require, the government to intervene. We are living through, and we are dying as a result of, this ideology of capitalism first and foremost. Don't be fooled. As the costs — and they are mounting — of this deference to capitalism hit the minds of the American people, there will be a turn against capitalism that will shake it to its foundations. If there's any lesson of this year, that's the one I would underscore.

The next big event happened mostly in the last month or two of the year, and I want to talk about it because it's international as well as here in the United States. There were major popular rebellions against everything I've just said: the deference to private capitalism; allowing the governments of capitalist societies to basically deflect the anger of people suffering low incomes, suffering bad jobs, suffering unemployment, suffering the covid virus and its coming together with the crash of capitalism; the attempts of these governments to deflect people's anger — righteous anger, justified anger — onto some scapegoat.

Let me go through the rebellions against that, because they also point to a new future. Masses of people in France are in the streets, as I speak to you, fighting against their kind of Trump Light government, President Macron. He has been doing two things classic: deflecting the anger of the French over covid and the economic crash by scapegoating Muslims (that's popular these days), and also by telling people they can't photograph the police when they do misdeeds. And the people are in the streets of France. The Yellow Vest movement is rejuvenated. Mr. Macron is isolated. He's already had to withdraw one of those measures about the police. And it's because of popular rebellion.

Masses of people in Poland, suffering economic decline and covid, have decided they don't want the government's punishing of abortion and going to extreme anti-abortion. They're in the streets changing everything. The United States voted out Mr. Trump. And in India 250 million people staged a general strike on the 26th of November. Two hundred and fifty million — that's three quarters of the population of the United States — against Mr. Modi. And I'll have more to say about that on another occasion.

We've come to the end of the first part of today's show. Before we move on, our new book, The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, is out now and available at democracyatwork.info/books. I want to also thank our Patreon community for their invaluable support. And if you haven't already, go to patreon.com/economicupdate. Sign up today for access to exclusive content and more. Please stay with us; we will be right back.

Welcome back, friends, to the second half of today's Economic Update. I want to continue talking about the major stories and events in the economy of the United States and the world in 2020, particularly focusing on those that have not gotten either adequate, or the right kind, of attention from the mainstream media.

For my next one, there's been a lot of talk about what is the real condition of Americans, as they go through this combination of a public health crisis and a capitalist economic crisis. The conservative types say, oh it's not so bad. The less conservative types admit, no it is bad, at least for some. I would like to have a bit better understanding, and now there is a resource that allows me to get a better understanding and share it with you. The United States Census Bureau in Washington, together with several other federal agencies, undertake something called the Household Pulse Survey. The most recent one was conducted between November 11th and November 23rd this year, and the results were released on December 2nd. And I want to tell you what they found from a survey of households here in the United States in the middle of November, and therefore pretty up to date. And so we can rely on these numbers as giving us some sense of what it's like to go through what is happening in the United States in 2020.

Here are some of the major findings of this Household Pulse Survey: Thirty-three percent of households say they are having a hard time covering basic expenses of the household. Thirty-three percent, same percentage, expect one or more household members either to lose a job, or to have fewer hours, or a pay cut over the next month or two. That's what they expect. And remember, anxiety has a lot to do, and your mental health has a lot to do, with what you expect is coming down the pike. Thirty-three percent, again the same percentage, expect to be evicted in the next 60 days. One-third of American households are talking — parents to children, spouse to spouse — about eviction in the next 60 days. In the dead of winter. Think about it. Twelve percent, that's one in eight households, don't have enough food to eat. And 5.7 million households answered the questionnaire, quote, “We often don't have enough to eat.”

This is a country experiencing spectacular enrichment of the already rich in a booming stock market that makes the 10 percent who own 80 percent of the shares very much wealthier than they were. But alongside of that, much, much larger percentages of our people are going through what can only be called a system-wide decline in the standard of living. It's almost as if the whole covid and economic crash are a process of lowering the expectations and the standards of living of the majority of the American people. And I leave you with the question, why might that be?

The federal government's policies — how to respond to covid, how to respond to the economic crash — have been remarkable. We've relied mostly on the Federal Reserve to pump huge amounts of money into the economy. That's been the overwhelming, dominant response. Stimulus from the Treasury, yes, but mostly monetary. And where has the money gone? Mostly into the stock market. You see, it makes no sense for that money to find its way into hiring more workers, because we have covid. Producing more goods? Why do that when people are out of work and can't buy them?

So the money doesn't go into the real economy, as we call it. It goes into the paper-shuffling economy — you know, the stock market — driving up prices as everybody gets that money from the Federal Reserve and goes in to buy shares and sell them at a higher price. And the 10 percent richest of our people, who own the bulk of the shares, they're doing well, and the masses are not. In other words, how capitalism in America responded to the crisis of capitalism and the health crisis, which it could not prepare for, is by doing its capitalist thing: helping the most those who need it the least, and helping the least those who need it the most. There's a perversity that's extraordinary.

Now, the head of the Federal Reserve, Mr. Powell, keeps denying all of that. He doesn't want the Fed to be responsible for what is clearly a growing inequality of what was already an unequally distributed economy. But at least one of the Federal Reserve governors, Mary Daly, who's president of the Federal Reserve Bank of San Francisco, has admitted it. She says, you know, we are making the country more unequal, and that's going to come back to haunt us. You're right, Mary; it is. And it'll be soon, too. To respond to a crisis like this in the unequal, unjust way you have makes you complicit. Nor will that be overlooked.

I want to come next to the unemployment story. There, again, the numbers are so confusing and come at you from some different direction that makes it very hard. So I wanted to look in and see if I can clarify. And I'm not the only one. The Government Accounting Office, which is a special branch of the government that monitors what the other branches are doing, delivered this year a terrible criticism of the Department of Labor, saying basically that many, many of the unemployed are not being counted. And, even more unusual, the Department of Labor agreed with the criticism. And I found the former chief economist of the Department of Labor, Heidi Shierholz, who now works with the Economic Policy Institute. She said that her calculations at late October showed 27.5 million Americans were either unemployed looking for work, unemployed no longer looking for work, or not counted, or suffering significant pay declines. That's 18, 19 percent of our labor force. One in five of our workers are really screwed; that's what she found. And they're screwed by an economy which can't find anything appropriate for them to do, nor an income for them to live off of.

Over the whole year, let's remember, over 60 million Americans had to file for unemployment compensation, right? That's about 40 percent of our labor force, nearly half. And you know what that means? They were unemployed for some weeks, some months, during which time, of course, they used up whatever savings they had. They could not live on unemployment insurance in most places, even if they qualified. Or they have leaned on their family and friends for whatever help they could get from similarly pressed people. You've wiped out the security that they may have accumulated. You've made them vulnerable more than they were before at a time when, as I told you, the expectations of catastrophe coming down the pike are in the minds of at least a third of the households of the country.

The next story gets me particularly upset. And I want to share my upset with you. Maybe then it'll go down for me. This has to do with the demand, the slogan, of the Black Lives Matter movement and others to, quote, “defund the police.” This slogan — which is all it ever was, a slogan — produced all kinds of bizarre consequences.

Where does it come from? Well, I believe, from the very numbers I've told you: of unemployment; of anxiety about your job, about your eviction, about your future; your hunger, that you can't get enough to eat. These are conditions that have always produced social upset, particularly among people who have physical- or mental-health problems. To ask, in this period of time, under these pressures, for reductions in mental-health facilities (which is what we've experienced), reductions in physical hospital and clinic capabilities, particularly in rural areas (that's what we've had), we have created greater need in the population for help, and provided less help at the same time. That's a social explosion.

And if you put police into that situation and say, well, you take care of it, that is an invitation for the disasters we've experienced. Frightened police, anxious police, racist police — they're not going to handle these situations real well, don't you know. And they haven't. And so what happens is a demand: Hey, let's stop building up the police, the one department that keeps getting more money while all the social services get cut back. That's the problem, not the solution. We should have learned that, because we've been doing that for a long time, and it hasn't solved anything.

What's the proof? Well, I thought I would get you some statistics to prove that the way we're handling this is completely nuts, as well as terribly tragic, as well as dividing our country once again in the white-versus-black-and-brown scenario that dogs this country's history from the beginning. And what I thought is, I'd look at the following: What's the percentage of people incarcerated, how many people do we put in jail, and how does it compare with the rest of the world? And what I found — and I knew what I was expecting — blew my mind far beyond what I expected. And so I'm hoping it will strike you comparably. Here we go.

If you make a list of countries (which has been done), and you ask what's the percentage out of every hundred thousand in a population, what number is currently incarcerated in a federal, state, or local jail, prison, you name it; and you take the 50 states of the United States as if they were countries and you look at them, here's what you come to: The average in the United States is 698 people per hundred thousand are in jail. Out of the 50 states, you might be interested to know that the worst one is Oklahoma — 1,079 people per hundred thousand are in jail. The average in this country, again, 698. Vermont has 328. Let me do that again. Oklahoma 1,079 per hundred thousand, Vermont 328. look at the variation. What is it, people in Vermont don't commit crimes and people in Oklahoma are running around doing nothing else? What in the world is going on? But it's worse. The average in America, again, 698. Germany 78. Do you understand? Ten times the number of people in America are in jail as in Germany. In Sweden it's 57. In Nigeria it's 36 per 100,000. In the United States 698.

We put people in jail in this country. That's our solution to the problem, and it hasn't worked. It costs more to maintain those prisons than anything else you could do. Defunding the police is a slogan designed to draw our attention to alternative ways of dealing with our problems. Because the one we have — prison building and prison filling — is a big, fat failure that no other country has had to resort to, just us.

We've come to the end of today's program. Thank you for being with us, and I look forward to speaking with you again next week.


Transcript by Marilou Baughman
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Showing 4 comments

  • Pasqual DiGesu
    commented 2021-01-13 20:42:27 -0500
    Dear professor, thank you for sharing my views. The freeze of the economic cycle had to include the entire cycle or wheel, everyone sacrificed profits including the state which automatically protected everyone from loss of principle assets for future reopening. The virus would run its course in 6 weeks resulting in those infected to be cured or deceased but the spread would have stopped and the infected would have run their course ending the life of the virus. Of course the borders would have to be closed until other nations resolved their problem also, unfortunately it is they that need to close their borders to us. As for prisons in America, they are now an enormous business with powerful lobbies, like the nursing homes here in NYS. My defense contractors were entering the retail business of bad quality packaged foods for prison stores rendering a large mark up and profit for sales in prison shoppettes. I know just how bad because I sampled them.
  • Ritter Adams
    commented 2021-01-13 04:29:18 -0500
    Thanks for sharing the information.

  • Ritter Adams
    commented 2021-01-13 04:28:19 -0500
    Thanks for sharing the information.
  • Benjamin Schroeder
    commented 2020-12-29 10:06:52 -0500
    Professor Wolff, 12/28/2020
    I think you missed out on an especially important part of the Economic consequences of “The Sickness is the System”. We (the government, the manufacturers, and others) pollute the world for our/their profits. Our world is becoming or turning into a waste dump on land, in the sea’s/oceans and mountains of waste material in rural areas.
    Not to mention the auto’s junk yards, Volkswagen lots with cars that did not meet emission standards, the tires dumps, the used industrial machinery, the used train locomotives, old steam locomotives, old trolly’s, the aircraft bone yard in Arizona, and I can go on and on.
    Piles and piles of it (Waste, Garbage, Trash, Junk, etc.) ! It is all around us. The world is becoming full of it! This is a result of our economic system (The Sickness). We are producing more and more without paying for the waste, garbage, trash, junk, etc.
    How has this (Waste, Garbage, Trash, Junk, etc.) gotten rid of? Mountains of this is in landfills, as mountains are built in the country outside cities, old rock mining quarries, dumped into our oceans, private waste sites operated by power companies, or given to other countries, etc.
    Is this what is we will give to our children and grandchildren?

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