[S11 E08] New
On this week's show, Prof. Wolff discusses Amazon's profits; New York state's eviction crisis and capitalism's reproduction of poverty and inequality; New York's stock transfer tax; raising the minimum wage; and the subsidizing of billionaire's big sport businesses.
Transcript has been edited for clarity.
Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, debts, incomes — our own and those of our children. I'm your host, Richard Wolff.
I want to begin today with a theme for the program as a whole. And the theme might be called either “the problems of capitalism normally” or “the problems of capitalism when it's in a period of decline.” I'll try to move back and forth between them because I want to focus on capitalism's problems, because those are what confront us here and now.
So it's appropriate that I begin with the Amazon corporation, a supposedly success story of current days of capitalism. And I want to focus on some of the things you may not have heard about or know about this particular corporation. So I won't be talking about the fact that its CEO — or now, I should say, former CEO — Jeff Bezos, is now the second-richest person on the planet, after Elon Musk from Tesla outdid him over the last couple of weeks. But that'll bounce up and down somewhere between $180 and $200 billion — way more money than, for example, would take care of the entire rental arrears of 20 million Americans who are facing eviction. I'll put all that aside.
I want to go back to the year 2015. Amazon, at that point, started what was called the “flex program” for drivers. It needed to get people to come and work at Amazon, to deliver the packages that it is famous for. And they promised these workers to pay them $18 to $25 an hour, plus — and this is the important part — 100 percent of tips that were to be provided for delivery of packages, as many people do. However, it turns out that for several years after 2015 Amazon actually took the tips and used it to pay the basic rate, so that the workers never got the tips that were left by you and me for them.
The United States government prosecuted Amazon. Amazon got caught. And let's always remember that what you catch, if you're the government going after corporations, is a small part of what's going on. Anyway, they had to pay, and agreed to pay, $61 million (that was the portion of what they had done that got caught) to compensate the workers for the tip money taken from them.
You're a multi-billion-dollar corporation, and here's the lesson: The enormous wealth of Jeffrey Bezos, and of people like him, the enormous wealth of these corporations, is based on endless examples of this kind of either illegal or quasi-legal nickel-and-diming — that's what this is about. And this system reproduces that behavior over and over again.
On January 25th of the year 2021 hundreds of workers at an Amazon warehouse in Chicago were presented with a choice: You can sign up for a 10½-hour graveyard shift or you lose your job. Management informed the workers that their warehouse, known as DCH1, would be shut down. And they were offered a shift called the “megacycle” at a new Chicago warehouse. This had been a warehouse area that had been hit by protests and strikes. Yeah, that's how you get treated if you dare to protest stealing tips and other stunning behavior.
No wonder that in Canada there's now a website called “Not Amazon,” which allows you to get things delivered from local vendors without going through the controls and fees that Amazon charges. And that is developing here in the United States as well. Profits for the few at the expense of the many. No wonder there are unionizing drives. And the one in Bessemer, Alabama, is in full gear as we are talking now, and is a worksite for almost 6,000 workers. In the history of Alabama this is a very important moment in terms of unionization. But if ever a corporation, by its behavior just now, explains why you need a union, well, Amazon is it.
My next update deals with New York State, but what it deals with is a problem that exists across the United States. But we have some solid statistics in New York State, so I want to make that as an example. In New York State there are 1.2 million families — so we're talking a minimum of five to 10 million people in those families — who are now facing what are called “rent arrears.” What that means is they haven't paid their rent — some of them for a month or two; some of them for 10 months. Many of these families are with children.
So now let's look a little deeper into these numbers. Twelve and a half percent of New Yorkers are collecting unemployment insurance — one in eight workers. And there's a big overlap between those who can't get a regular salary, who are having to live on unemployment, and those who therefore cannot cover their rent. You'll understand that even more when I tell you that in 2018 — so that's a good two years before the pandemic hit — already then, 22 percent of New Yorkers, more than one in five, paid more than half their income in rent. That's considered to be deep trouble. You can't live in our society if you're paying more than half of your income simply for your living situation. But that was true for almost one in four New Yorkers before the unemployment hit, before the pandemic hit.
Before the pandemic — one more statistic for you; actually two — before the pandemic, families with children made up 70 percent of the population of shelters in New York State. That's right, families with children were the typical shelter occupants, already before the pandemic and the unemployment hit. That’s children, whom you really cannot blame one millimeter for what's happening to them.
And then think about the consequences of doing this to all those children. And I'm going to give you my last statistic. In 2016, a survey showed that 85 percent of children living in shelters didn't get proficiency in math and reading. That's the damage done to their educations from being shelter occupants, which so many of them are.
New York State is one of the richest states in the United States, which is one of the richest countries in the world. And we are treating our people, especially our children, in a way that illustrates that capitalism is at least as efficient in producing poverty, and reproducing it, as it is in producing wealth — and reproducing, thereby, a level of inequality that calls the entire system into question.
If only we were serious as a society about doing something for this kind of inequality. Condemning this generation — as we have, as a nation, for so many previous generations — to these levels of discrimination and inequality. The children, who made none of these decisions, losing their education, living in the worst conditions, suffering all of the large and small indignities that go with it.
We are reproducing horrific inequality. And if that continues, then I make you a prediction, which I rarely do: We're going to have as angry and upset a population four years from now as we've had over the last four, probably worse. And in that way we'll have been prepared for the next Trump — to blame it all on whoever they can come up with. I'm sure QAnon will have an answer for why all this trouble is happening. But the bitterness, the anger, and the resentment — well, that's building because you're not dealing with this. I make an appeal to the new Biden administration: Deal with the fundamental systemic reproduction of inequality, or else it will come back to haunt you.
My next update (and I will begin this before our mid-program break and then come back to it) has to do with a way of raising money. Again, I'm going to be using New York State because it's a wonderful example, but parallel things apply to other states. New York State has a thing in its tax code called a “stock-transfer tax.” Think of this as a sales tax if you buy and sell stocks. You know, how we all pay a tax if we go to the hairdresser, or we buy a shirt, or we pick up an appliance. There's a sales tax when you buy goods and services like that.
And so back in 1905, a long time ago, it occurred to fair-minded people that there ought to be a sales tax when you buy shares of stock. Okay, so the idea was let's do that. Very low — pennies, few pennies — one, two, three, four, five cents per share when you buy it. It's a sales tax. And it was thought to be fair because this is a big, rich playground, the stock market, for an awful lot of people who certainly can afford it. That if it's reasonable to tax the expenditure of people who buy food for their family, well then it's reasonable to tax people who buy shares and have enough money even to think about doing that.
And then finally there was the idea that there's too much speculation anyway. We should be taxing people who are buying and selling 10 times a day, you know. Taxing that kind of speculative activity is a reasonable thing. You know, it’s the same kind of logic that says let's tax cigarettes, or let's tax alcohol, because we'd like to kind of push back against overuse of those things. Well, if you want to push back against speculation, then taxing the speculator, making them pay a little, is perfectly logical.
And the tax was collected here in New York State until 1981, when the then-mayor of New York came up with a wonderful idea to get support from rich people. He said, we'll collect the tax (because he didn't have the courage to cancel it), but we’ll rebate it. So actually, to this day, New York State collects a very small stock-transfer tax, but then gives it back to the people who buy. It’s as if you paid a sales tax, and then at the end of the year you got all that money back. That's what we do; we don't tax stocks. It's an amazing thing, and I’ll come back and talk about what it means after our break.
We've come to the end of the first part of today's show. Before we get to the second half, I want to remind you, our new book, The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, is available at democracyatwork.info/books. And I want to thank, as always, our Patreon community for their ongoing and invaluable support. If you haven't already done so, please go to patreon.com/economicupdate to learn more about how you can get involved. Please stay with us; we'll be right back to continue this story.
Welcome back, friends, to the second half of today's Economic Update. We were discussing before the break the stock-transfer tax — a sales tax, if you like, on buying shares of stock in the stock market that's been on the books in New York State since 1905, when it struck people to be a fair way to make that part of the economy pay its fair share of the cost of running the government. Then in 1981, to pander to the wealthy, — who play the stock market, since most of the rest of us don't — they rebated it. That's what they called it. They continued to raise it, to tax people, because they didn't have the courage to say, well, no tax. And what they have been doing — and they do to this day — is they rebate it. They give people back the money officially charged as a tax on buying shares of stock.
And now I want to talk with you about the justification, and what it means, of this craziness of collecting, and then not keeping, your money. And let me underscore, we're talking about billions of dollars a year. It would transform the state of New York's financial situation even if you collected only a penny, or two, or five per share, which is a trivial amount of money when you think about what's done. And to give you a sense of it, imagine if we had imposed it over the last couple of months with the craziness in the GameStop scandal. You know, the crazy shooting up of prices of that company, and then the crazy drop. Well, millions and millions and millions of shares were bought and sold by speculators trying to make a killing off the price going up, or the price going down. But those are all transactions. And had they had to pay a sales tax, even a small one, the revenue take for the state of New York would have gone a long way to offset the rest of that horrible speculation and made a silver lining, if you like, in terms of providing the people of New York with some benefit. And of course, if you didn't have a stock-transfer tax in New York, you could have it nationally.
And let me start with that. One of the arguments made by corporations in the stock field, on Wall Street, is, you can't do that. If you did that, we would move the transfer of stock, the buying and selling, out of New York State. We'd go across to New Jersey, or somewhere else. Well first of all, that's not so easy. That involves expenses that have to be undertaken to do such a move, technologically and so on. Not so easy. And it would require legislation, etc. So it's a bit of a fake, number one. Number two, it's a risky fake. Because how do you know that New Jersey, once you've spent the money and moved it over there, won't do the same thing? Especially when New York State is showing them what's going on here, which we would do. Or then let me generalize it. Maybe a progressive legislator — AOC, for example, from New York — could make this a national issue, that there should be a sales tax, a national one, on this.
After all, in our society, we don't tax property in the form of stocks and bonds. I've talked about this on our program before. We tax income that comes from them, like we tax the income that comes from a home that we rent out to people. We have to pay an income tax on the rent, but we also have to pay a property tax on the value of the house. But it doesn't work like that with stocks. You pay an income tax on the dividends you get, but nobody makes you pay a property tax on the value of your stocks and bonds. That's why it's so strange. If you sell your hundred-thousand-dollar house, and you buy a hundred thousand dollars’ worth of stock, you have to pay property tax in your town, for the house. But once you've sold it for the stock, you don't pay property tax to anybody. This is a benefit that rich people, who have enough money to have a significant amount of stocks, have been benefiting from for decades. It’s long overdue to give them, for example, a stock-transfer tax from which they've also been exempted. It's the outrageous indignity.
And then there's the last argument: You can't do that because companies or stock markets will leave the United States. I love this argument. They'll leave the United States. Will they? They might. But the notion that we are powerless to prevent that, or to punish it if some would like to do it, is wrong. Of course we can. Imagine a stock market that left the United States, with a president and a government that said, uh, excuse me, you're staying and you're paying the tax. But if you wish to avoid the tax that you should have been paying for a century anyway, by running away, fine. We will then not do business with you. You will not be able to come to our country to make the kind of money you need to make, to make any stock market in the world work.
We will do it by jawboning from the president. We will do it by organizing boycotts. You are not going to punish the future in the way you have evaded taxes in the past. That system is over. Imagine a president, or a political party, or a movement, making a commitment to do that, saying that the people have the power to make taxes paid by those who should never have been exempted from them. And the stock game players on Wall Street are a prime, appropriate target. They have ripped off the rest of this society for long enough. There is no reason to enable or allow them to do it.
And nothing exemplifies this better than the craziness of New York State having, in effect, a stock-transfer tax, a sales tax on shares, in the law since 1905 that is rebated since 1981 so that the richest amongst us don't have to pay. Extraordinary. But it is the kind of extraordinary bias built into the tax structure of this society. And you can tell, by who benefits from this odd tax structure, who has the power to shape that structure so it works that way.
My next update is another example of where arguments are used that simply don't hold water. And it's very important, and it's being debated in Washington right now. This has to do with raising the minimum wage. Yeah, we have to come back to that topic again because it's hot in this country again. The current federal minimum wage is $7.25 an hour — among the very lowest in the world. And by that I mean the industrial societies that are comparable to the United States. No European country pays that little as a minimum wage, whether it's legally enforced or just customary. It's extraordinary. I'll give you one example of a country that in other ways is economically like ours: the United Kingdom. The minimum wage of the United Kingdom right now, as I'm speaking to you, is $11.95 an hour, not $7.25 an hour. You get it? It's not even close in terms of what we are doing.
Okay. We should be raising it as prices go up. Because if you don't, and you give workers the same minimum wage as the prices go up, they can't afford what they were able to buy last year this year. And they'll be able to afford even less next year. Well, the last time we raised the minimum wage to the big $7.25 an hour was in 2009, folks. That's 12 years ago. Every one of those years, prices went up in America for everything you have to buy. But the minimum wage didn't. That's hurting the poorest amongst us every year. The Democratic Party proposes to raise it. The Republican Party opposes it.
And here comes the argument which, sadly, the Democratic Party doesn't know how to refute. Here's the argument; ready? If you raise the minimum wage, there'll be some employers, typically small businesses, who will go out of business or, fire workers, because they can't afford to pay the extra bucks — for example, moving the minimum wage to $15 an hour, which is what's on the agenda now from the Biden administration, thanks to the pressure of unions and social movements over the last few years.
Now let's look at this analysis, because it is stone-cold wrong. Do we want a society in which there are small businesses that are successful? I happen to believe that the answer is yes. I like shopping with little businesses, where I can get to know the people. I believe in that, I like that, I want that. And I think most Americans do as well. Side by side, I want workers to be paid a wage that allows them to have a decent life, for themselves, for their children. And that includes having an automobile in our culture, which builds on that; having an education for those children; and so on.
Guess what — I want a decent minimum wage, and I want small business. So you know how you get that? You don't get it by saying, well, it's either-or. Either we're going to help the low-wage workers by raising the minimum, or we're going to salvage small businesses. That's like running up to someone and saying, I'm giving you a choice: I'm either going to shoot you or stab you. Your response isn't to agonize over which of them to choose; your response is to say, I don't accept that as a choice I'm to make. And that's the answer to the minimum wage. We can have small businesses that are viable,
and we can enable them to pay a decent minimum wage, because a decent society would do both those things.
Now, how would we do it? Here's your answer. Number one. And by the way, I'm just borrowing from other countries that have done a much better job, like those other ones that pay a higher minimum wage. Here's the first: Require that all levels of government — federal, state, and local — give a minimum percentage of their orders to small businesses. That we do not allow the patronage of large businesses, who have the money to (let's be polite) persuade, or (if you're not polite) bribe politicians as to where they do their buying. Let's make small businesses get a bit of that. And let's give them a tax break. And let's give them subsidies.
And you know why we should do that to small businesses? Two reasons: One, so they can pay minimum wage. It's a way of saying to the small business, here, you're going to have to pay workers decently, but we're going to offset the cost to you from that by giving you this tax break, this subsidy, this set of orders for your output.
And you know why, the second reason is to do that? Because we already do that as a society for big business. So we're just saying, hey, big business, you're not going to steal all that for yourself. We're going to maintain something we really want: small businesses. And you're going to help pay for it.
And just to give you an example, I picked one out of the hat. There are millions of them. Here's the statistic which I thought would be appropriate because here we are, right after the Super Bowl. Okay. In the economics of today's major sport franchise, 64 billionaires are owners of major sports franchises. Twenty-eight sports teams are owned by billionaires who got $9 billion in public subsidies for the stadiums they use. That's right — you and I, our taxes, help pay for those stadiums. That's a subsidy. That's why they can pay higher wages; because we subsidize.
We don't do that for small businesses half as much as we could. And if we did it better, they could pay minimum wages and we'd have both an appropriately paid working class and the kind of small businesses we want. Don't be fooled. Those are not either-or’s. And it's only big business that pays politicians to pretend that that's the issue.
Thank you for being with me today. I hope you have been interested and informed by these analyses, which is why we produce them. This is Richard Wolff for Democracy at Work, hoping to talk with you again next week.
Transcript by Marilou Baughman
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