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Richard Wolff

May 17, 2021

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[S11 E19] New

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On this week's show, Prof. Wolff discusses Bernie Madoff's $ 82 billion swindles and capitalism's incentives for swindling, the economics of wars in Iraq and Afghanistan, US government's racist housing policies, and refuting the defense of capitalism as "lifting people out of poverty." On the second half of the show, Wolff is joined by Professor Nina Banks to talk about economics and correcting the undervaluing of community building work by women of color.

About our guest: Nina Banks is Associate Professor of Economics at Bucknell University. She is also the president of the National Economic Association (NEA) and serves on the Board of Directors of the Economic Policy Institute (EPI). She received her doctorate in economics from the University of Massachusetts Amherst. Her book, Democracy, Race, and Justice: The Speeches and Writings of Sadie T.M. Alexander (Yale University Press) will be out in June.

Transcript has been edited for clarity.

Welcome, friends, to another edition of Economic Update, a weekly show 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 this show by remembering Bernie Madoff. He died very recently, at the age of 82. His life was in many ways a testimony to what capitalism makes possible. The stunning fact that estimates indicate that he was able effectively to swindle $82 billion worth of stocks, bonds, and cash out of many, many individuals, organizations, and institutions is a testimony to what capitalism makes possible. But I want to point out something others perhaps haven't. And that is that capitalism has built into it incentives for this kind of behavior. It was an incentive for him to take the money he got from later investors and use it to juice up the rate of return he could give to earlier investors, who thereby raved about how great he was at investing, when he was basically just fudging the numbers. And he could build on this for decades.

Why am I stressing that the system has incentives for corruption and crookedness on a grand scale? Because so many people seem to need to defend capitalism with the idea, well, whatever its flaws, it has incentives. There are rewards given to entrepreneurs who start a new business. Well, there's some truth in that, but it needs to be balanced with an understanding that this system has a set of incentives that produce disastrous results: corruptions that ruin large numbers of people, that misallocate huge amounts of resources that could have and should have gone somewhere else. Every system has a mixture of incentives, good and bad. And if you want to compare capitalism to socialism, for example, you'd have to compare what the incentives, good and bad, are for each system, rather than pretending that capitalism has incentives that are all charmingly positive, without the negatives that the Bernie Madoff case puts right front and center.

My next update has to do with some of the economics of the withdrawal of American troops from Afghanistan. President Biden has set a September date this year, pushing it back from the May date that Trump had originally proposed, and I want to talk about that. First, both the wars in Iraq and Afghanistan have been the longest wars in American history. No other wars we've engaged in were anywhere near that long. And up until now, in Afghanistan, the explanation was we couldn't withdraw, we couldn't leave, because certain basic conditions had to be met. Well, suddenly the conditions don't have to be met. Because the conditions put forward in the past haven't been met, and even the government trying to cover this up, in one way or another for what it is, hasn't come up with any conditions that have suddenly been met. It's just taking too long and it's time, whatever exactly that means.

So now let's take a look. In the year 2000, the beginning of this century, defense spending was 2.9 percent of GDP. We measure defense spending as to how much of the wealth produced in this country each year is going for defense, or basically the military. It was 2.9 percent in 2000. I should remind everyone, in case you think that number is small, the United States in the year 2000 spent more on the military than the next 10 countries together did. And that 10 includes China, Russia, and the eight other countries, all of which are allies of the United States. By 2011 it had risen to 4.5 percent. That's a 50-percent increase in the proportion of our total output of goods and services used to fund the military. And even in 2021 it's back down to only 3.4 percent, which is a lot more than what it was as a burden on the wealth of this country back in the year 2000. So military spending has gone way up and has not come way down.

Well, who are the winners and losers in this war? It would be hard to argue that the winners are those who died, or those who were wounded, or those civilians who lost their lives. And, you know, it didn't do much for America's geopolitical position. The Taliban, according to all information that I have, is still dominant in the countryside. Only the cities are precarious, and it's not clear what will happen there once the United States leaves. All the other so-called coalition countries have announced they're leaving also. So we'll see what happens. Those people there do not love the United States because it has decimated that country. And that happened in Iraq too. So it's not clear what exactly has happened. Those people don't love the United States; they don't welcome whatever the United States brought them. They may be afraid, but you have to wonder whether that's really an advance for the United States, with its 800 military bases around the country.

There was one clear winner: the defense industry. They were able to sell into this storm endless amounts of ammunition, and guns, and planes, and missiles, and you name it. And I want you to think about that. They were unambiguous winners. Everything else is either a loser or a “winner,” in quotation marks, with lots of ambiguity. And perhaps the most frightening is the show now of a new cold war with China, which of course will justify — is already being used to justify — more military spending.

My next update has to do with a book by an author named Richard Rothstein. It's called The Color of Law. There's now a film being produced about it. This is a remarkable book because it studies the housing industry in the United States, and particularly the role of the United States government, through something called the Federal Housing Administration, FHA. And it shows that throughout the 20th century's existence of the FHA, it systematically discriminated against African Americans, in terms of lending them money, enabling them to buy their own homes, enabling them to rent in federal housing projects designed for people with limited incomes. 

And what Rothstein does, besides showing from the memos — and by the way, this was all open. It was said in instructions to lower levels of the FHA, do not allow non-whites to enter these projects. Do not make loans to non-whites. What's going on here is, of course, yes, racism, and particularly the power of the South in the United States to make a racial part of government programs all over the country. And that was done.

But it has to be explained somehow why this is done. In the South, capitalism’s security came, in part, by splitting its working class, white and black, so that their upsets, and angers, and bitternesses would be directed at one another, rather than at the employers they both faced in their different way. And this had to be built in. And it was picked up by not a few Northern and Western employers who understood the same game. Black institutions and black social movements weren't strong enough in those days to fight this very effectively. They tried, but it didn't work real well. The government was interested in saving money because of the usual fear of taxing, so not giving help to African Americans made the program cheaper than it otherwise could be. You could put it all together.

But it's important to understand that the private sector was the cause, and the government policy was the result which reinforced the cause, in a vicious cycle that separated the experience of African Americans and whites over the last century. That has to be understood as the systemic differentiation that we did in this society and that now is demanding compensation, correction. And that's going to be difficult when you try to offset or reverse something so deeply ingrained in both the private sector and the public sector for so long, across so much of a society.

The last economic update we'll have time for today is my response to something I'm hearing more and more often: a defense of capitalism, which I understand has to be articulated today, when a majority of young people keep answering public opinion polls that they prefer socialism to capitalism, including Gallup's polls. I understand this frightens the people who have always defended capitalism. So they've come up with a kind of final fallback of what it is they're going to say to defend this system. 

And here is the argument: Over the last 300 years that capitalism spread across the world, millions and millions of people have been lifted out of poverty. That is, if we count people below living on one dollar, or two dollars, or three dollars a day (and by the way, those are the benchmarks that are being used) well, millions of people are not in as bad shape today as they were 100, 200, or 300 years ago. The argument that’s made this way is intended to convey an interesting idea: that it is capitalism that lifted them up, and that therefore we should be grateful, with all of capitalism's flaws, that it did this good thing for the world's poor. 

All right, let me respond on several levels. Number one: If you separate out China from the rest of the world, the numbers don't look anywhere near so large. Why? Because the Chinese, with their enormous population — the most populous country on this planet — they're the ones who rose the most. And that wasn't capitalism that did that. That was the Communist Party of China in the Revolution of 1949. Before that, China was one of the poorest countries on this earth. And if you are interested in it, go get the novels of a writer named Pearl Buck. She wrote eloquently about the conditions in China, where she lived, and you can understand something about Chinese poverty then. The Communist Party Revolution in 1949 changed all of that. They built a new society, with new infrastructure — they did everything. Yes, in the 1980s they welcomed private capitalism. But the attempt to suggest that the only reason China helped the poor was what it did with private capitalism tends to ignore that the communist party was, and remains, in charge, that there are many parts of industry owned and operated by the government — it's not the capitalism that we normally speak about.

But there's an even more important reason not to accept this defense. Most of the advance of poor people was not done as a gift from capitalism. It was done in opposition to capitalism. Whether it's a rising minimum wage, whether it's a better tax system, whether it's funding public schools, or national health — over and over again, what lifted poverty was the effort of the poor and the working class to get things which capitalists as a whole and their institutions opposed. Just look at the struggle over the minimum wage in this country at this time. It's bizarre for the defenders of capitalism to give credit to the capitalists that always opposed, and do not even account for, the alleviation of poverty.

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. I also want to thank our Patreon community for their ongoing and invaluable support. If you haven't already, please go to patreon.com/economicupdate to learn more about how you can get involved. Please stay with us; we will be right back with today's guest, Professor Nina Banks.

WOLFF:  Welcome back, friends, to the second half of today's program. And it is a pleasure for me to welcome to our microphones and to our cameras a professor of economics that I have known for many, many years — since the time we worked together at the University of Massachusetts in Amherst. She is Nina Banks. She's an associate professor of economics at Bucknell University. She's also the president of the National Economic Association, which we'll talk about a little later, and serves on the board of the Economic Policy Institute in Washington, D.C. Her new book, Democracy, Race, & Justice: The Speeches and Writings of Sadie T.M. Alexander, is due to be published by Yale University Press this coming June. So let me begin by thanking you, Nina Banks, for joining us today.

BANKS:  Thank you, Rick, for having me. I'm delighted to be here.

WOLFF:  Yes, and I'm really glad to see you again, I’ve got to say it, just on a personal level. Okay, let me set the context here. 

Critics of capitalism, and other economists too, have noticed for years that there is something bizarre about the statistics that capitalist societies use, ostensibly to measure the wealth that they produce — the GDP, things like that. And what people have noticed is, what seems to count is only what work is done that is then paid for, typically by an employer. Whereas all of the work, and all of the goods and services produced by people not working for an employer, in some other situation, seems not only not to be counted, but there's a strong implication that it's not counted because somehow it isn't valuable. And that needs to be criticized. That needs to be attacked. It needs to be understood. 

And one of the reasons I thought Professor Banks would be a useful person to have on this program is that her focus is exactly on aspects of that issue. So let me begin by asking you why you focus on the work — particularly of women, and particularly of women of color — that is uncounted, unvalued. What's that about, and why did that capture your interest?

BANKS:  Thank you. It's a great question. It captured my interest because I am a feminist economist, and feminist economists generally focus on gender disparities, either in the formal workplace or, I think, especially in the realm of the household. And so you talked about this process of uncounted work. Feminists take a look at the work that women disproportionately perform within the household — cooking, and cleaning, and laundry, and caregiving services — which are very important but also benefit other household members.

But what I found — and I used to use that framework quite a bit — but what I found over a period of time is that it really did not do an adequate job of capturing a lot of the unpaid work that racially marginalized, or what I refer to as “racialized” women, perform for their own communities. And so what I ended up doing is developing a framework — it's an intersectional feminist political economy framework — that puts the lived experiences of African-American women at the center in our understanding of unpaid work. 

And I think about it in terms of African-American women's understandings of womanhood and also of feminism. And so the key to that, to thinking about that, is the focus on lived experience. That’s really important here. If we look at the lived experiences of white American women, for example, white American women's lived experience is not informed by racial oppression — generally not. And so the theories that they have developed about women's oppression are really tied to their experiences relative to men. And so white women have tended to develop theories that prioritize women's oppression within the household. But that is really not the experience, the lived experience, of African-American women, or other racialized women, within the United States.

Our experiences, our lived experiences, are informed by our membership in racially oppressed communities. It affects our identities as women, and also a sense of shared responsibility that we have to a community. And so my argument, then, is that what it means to be a woman, and our experience of gender oppression, is not just about relations within a private household relative to men, but also it's based on factors that are external to the household. 

So I ended up developing this framework, really, that focuses on informal work that women are producing collectively. They are cooperatively producing unpaid work. So it's not channeled through a market — there's no buying and selling — and they are not paid for their services. And typically when we think about these activities, we think about that as political, and not so much economic. And my argument is that there is a lot of work, a lot of unpaid work, that goes into all of those activities and that we, as you said, we should count it. We should look at it and quantify it, because it has enormous benefits to the community

WOLFF:  Could you give us a few examples, just so it becomes a bit more concrete, of the kinds of things you're trying to understand, value, and so on?

BANKS:  Yeah, there is a long history of this. And I go back in my analysis to the late 19th, early 20th century. And much of the work that I look at developed in response to Jim Crow racial segregation. So the work that I talk about is women organizing collectively in response to threats, and harms, and unmet needs to the community. By the 19th century, the late 19th century, Southern states instituted Jim Crow laws that disenfranchised black men, but that also segregated facilities — segregated schools, for example. Black children, white children went to separate schools, and black schools received less funding, teachers had lower salaries. You know, public accommodations were also racially segregated, and private industries also were able to exclude African Americans.

So what happened is the African-American community responded to this racial exclusion through self-help initiatives. And black women were always instrumental in that process. In the early 20th century, black women referred to this as racial uplift, or sometimes as racial betterment. But again, my argument is that we really should be thinking about that as constituting unpaid work. There are lots of examples, but I want to place an emphasis on the fact that these are activities that have not been theorized as work, and often not recognized as work. They're largely unseen.

One example that I talk about in the article in The Review of Black Political Economy is the Atlanta Neighborhood Union, which formed in 1908. A group of African-American women came together in order to meet the needs of this growing, impoverished population in their city. White city officials weren't responding to their needs, and so a group of African-American women took it upon themselves to really conduct a needs assessment of the community. And they uncovered tremendous needs, with respect to health care, and education, and recreation. And so then they engaged in fundraising activities. And then they went about actually founding those various organizations. So that's a good example.

There are examples from the Great Depression, which of course affected African Americans much more severely than it affected white Americans, in terms of job loss and also in terms of shutdowns of small businesses. African Americans in the AKA Sorority, for example, went into the Mississippi Delta and observed that black people who lived in rural communities there were very much in need of health-care services. Racial segregation meant that African Americans weren't able to access the local hospitals, and they had to travel large distances in order to obtain health-care services. So the AKA set up a mobile medical health unit. They sent teams of doctors into the Mississippi Delta to provide health services to impoverished African Americans through immunizations, and health screenings, and health information. That's an example.

Another very recent example that I learned about just a few weeks ago is the case of a group of African-American women in Delaware who banded together over a period of time. Their association was called, I think it was called, the Coalition for Education Reform. And what they noticed and documented is that over about a 10-year period the school district was dumping black children, primarily black boys, into a special-needs program. And so the women came together to challenge that, and to document it. So that's a really recent example. And finally they were able to get a lawyer to look into the dumping of black boys and black children into the special-needs program. So those are some of the examples that come to mind.

And I think another really important, recent example would be the environmental justice movement. That's also an area where black women have been very, very active in coming together collectively to challenge various racial harms and disparities to the community around unwanted land uses.

WOLFF:  Tell me, why (and we're running out of time, as always with these interesting interviews) why do you think this has been ignored the way it has? It's sort of obvious, once you tell us these stories and give us these examples, that really valuable services are being produced by human labor and made available to the community. Why has this been ignored? Why are you finding yourself, you know, exploring a new area, in some sense, in terms of economic analysis?

BANKS:  Yeah, I think that's the million-dollar question. Because I think that it's complicated. I think that, on the one hand, African-American women who engage in these activities tend to think of it as services. But I think the other part of it is that there tends to be a devaluation of work that African-American women perform for their own communities and for their own families. And so I think that that also is part of the reason why there has been an erasure of this work, or that it's been unseen.

WOLFF:  Yeah, I think it fits into the very way that capitalism in this country has systematically, culturally devalued the working class — white and black — and this is a particular way to do that for the black community, and so on.

BANKS:  It's important here, I think — what you just mentioned is also significant because the value that is placed on women's work varies according to race. And so the example that I often give is the case of a middle-class white woman who is a homemaker. Although she is doing work that does not have much value because it doesn't have a market value attached to it, she is socially valued as a caregiver, as a homemaker. But a black woman has never been valued as a mother in our society. And certainly, a poor black woman who wanted to be a stay-at-home mom and receive support from the state would be devalued for that choice.

WOLFF:  If not demonized socially, as well.

BANKS:  Absolutely.

WOLFF:  Okay, in the very few seconds we have left, tell us a little bit about the National Economic Association that you're the president of, and what it is about, what its goals are, so that people become familiar with it.

BANKS:  Yeah. The National Economic Association is the main association for professional economists. It was formed in 1969 as the Caucus of Black Economists. We do research on racial disparities, and anti-blackness, and harms to the black community. We focus on institutional and structural racism. I'm really proud to be the president of the National Economic Association because I think that African-American, the black American, economists have always been at the forefront of thinking very critically about racial disparities in the United States and proposing very bold solutions to the problems of racial disparities against black and brown communities.

WOLFF:  Professor Nina Banks, thank you for your time, thank you for the research you do, and thank you for sharing it with us. It's a pleasure to see you again, talk to you again, and I'm sure my audience listening and viewing will share my appreciation for your sharing your work with us. Really, thanks again.

BANKS:  Thank you, Rick. Thank you for having me on your show.

WOLFF:  Take care, folks. I want to thank you all for joining with us and tell you that I look forward, as usual, to speaking with you again next week.

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