[S11 E04] New
On this week's show, Prof. Wolff presents short updates on the Economic Plans of the Biden administration and US economic inequality, and why raising minimum wage to $15/hour is insufficient to deal with US economic inequality and its social consequences. The second half of the program features an interview with Kristen Ghodsee on women and the socialism vs capitalism debate.
Transcript has been edited for clarity.
Welcome friends to another addition of Economic Update, a weekly program devoted to the economic sides of our lives—jobs, incomes, debts—our own, our children’s, and I’m your host, Richard Wolff.
I want to talk today about the economic plans and programs announced by the new Biden administration, and particularly by the economic team of advisors gathered around him. I want to talk about it in relationship to inequality, for two reasons: Number one, I think millions of Americans voted for Mr. Biden because they want less inequality in the United States than we have. That has been confirmed by many public poles, indicating overwhelming support for less inequality in our society. The second reason is that as an economist I can assure you that economic inequality is a very profound shaper of pretty much everything else that goes on in our society, and if you’re troubled by some of the directions our society is taking, economic inequality has to be part of what you are concerned about. So, let’s begin.
The Biden team has talked a great deal about an enormous spending package, usually in the area of 2 trillion dollars more or less, that they propose to spend on a variety of different things: checks to individual Americans, improved unemployment benefits, funding for cities and states that have been starved of federal help under the Trump administration, and so on. And, how is this 2 trillion going to be paid for? Answer: Borrowing. Why do I know that? Because the team proudly tells us they’re not going to have to raise taxes. Well, if you’re going to spend 2 trillion more and you’re not going to raise taxes, the way you solve that problem is by borrowing money. Let me drive home what that means. Who do you think the government borrows from? Well, it doesn’t borrow from mostly you and me, because we don’t have enough money to lend to the government. The bulk of the lenders to the government of the United States are wealthy institutions, wealthy people, both domestic Americans and those abroad. So, most of the money goes right where you might expect, into the hands of those who need it least. If you borrow all that money, you’re going to have to shovel future monies into the pockets of those who need it least. What’s an alternative? You could tax the corporations and the rich. If you did that you would raise the money needed to help the 2 trillion you’re going to spend, but you wouldn’t have to borrow it, and therefore not have to pay interest to those lenders, who again, deepen the inequality by collecting all that money into their hands.
Let me talk a little bit about what the taxes are that the Biden administration should be talking about. The first one is obvious—income tax. Make the income tax more steep, more progressive. Go after those at the top. Let me remind you; in the 60s and 70s of the last century, a time when the American economy had less unemployment than it does now, and was growing faster than it does now, we taxed corporations and the rich much, much higher than we do today. The argument made over the last 30 years that by reducing taxes we would stimulate our economy—false. What we actually did was to produce an economy with more inequality, less growth, and more unemployment much of the time; therefore, the argument doesn’t hold. Nor is it equitable, nor does it reduce our inequality to not tax income at higher rates for those at the top.
Here’s another guess about what we could do and should do: Wealth tax. Let me explain, because so few Americans understand this. Do we tax property in the United States as opposed to income? We do tax income. We don’t tax it all at the same rate; the rate applied to people who earned their income by labor is higher than the rate we apply to people who earn their income by charging rents or getting dividends, or capital gains. That’s another story for another day, but very unjust. No, I want to talk about whether there’s a tax on the value of your property, which is a separate question from taxing income that you earn. Do we tax property? Well, the answer is “yes” and “no,” and therein lies an enormous part of the inequality of the United States. We do tax property in the form of your house, your land, your automobile; certain kinds of tangible things like that. Cities and towns live by taxing property whether or not your property earns an income. If, for example, you have a house and you rent it to people, you pay an income tax on the rent you get, plus a property tax to your town for the property you own. But, here’s something you may not have understood: We do tax land, and buildings, and business inventories. We do not tax (in the United States) property held in the form of stocks and bonds. If you have a 100,000-dollar house in a community in America, you pay a property tax to that town. If you sell that house and use the 100,000 dollars to buy a 100,000 dollars’ worth of stock in some company, you know what your property tax is? Zero. There is no property tax on stocks and bonds. And, who owns the bulk of stocks and bonds in our society? Here’s the answer: The 10 percent at the top own 80 percent of the stocks. This is an enormous tax exemption for people who qualify for it, because they’re rich enough to buy stocks and bonds, which most Americans aren’t. The inequality and injustice of this tax system is stupefying. What ought to be done is to get two birds with one stone: Tax income and wealth and use it to tax the mass of people; that’s what the situation in this country requires, and that’s why millions of people hoped that by voting for Mr. Biden they would get something like that. It is very disheartening to hear that they’re going to spend money to help people at the bottom—good enough, that’s good—but, they’re not going to use it as an opportunity to undo the inequality that has gotten so extreme. They could do it, they should do it, and we’re waiting but we’re not terribly hopeful.
Footnote: In the 1930s, when Roosevelt took much greater steps to help the mass of people, he did pay for it in large part by taxing corporations and the rich. That’s why the tax rates were so much higher in the 60s and 70s, as I began this conversation.
Okay, I want to now turn to another act being proposed by the team around the new president. That is, to create an increase in the minimum wage—the federal minimum wage in the United States—to 15 dollars an hour. I want to remind everyone that when you do that you don’t just change the incomes of the people at the bottom, the people who were getting less than 15 dollars an hour. You effect many other people’s income, because many jobs pay a wage based on what the minimum is. So, they pay the minimum plus 10 percent, or the minimum plus an extra 3 dollars an hour, or however they calculate it. By raising the minimum, it’s kind of like raising the floor for a whole lot of other levels of income as well, so it’s a big deal to change the bottom.
Now, let’s look at it, and will it really do something about unemployment and inequality above all else? Well, let’s look. What is the federal minimum wage right now? Seven dollars and 25 cents an hour; that was the last rate increase back in 2009; that’s when that was passed, so we’re talking 12 years ago we passed the law that raised it to $7.25. We have not raised it since. Every year since then, prices have gone up—every year of those 12 years—but we didn’t raise it. The Democrats couldn’t and the Republicans wouldn’t raise the minimum. That’s one of the reasons economics became more unequal in the United States. All the people who can raise their prices for whatever it is that they sell, did so. But the people who live at the bottom, couldn’t and didn’t get an increase, even with the cost of living. A terrible blow to anyone’s desire for equality. It’s so bad, that out of the 50 states in the United States, 29 states (that’s a majority!) have set a state minimum wage above the federal, because the federal is so abysmally low… but not all states. There are two states where the minimum wage is below the federal wage, as abysmal as it is. Wyoming and Georgia have a minimum wage of 5 dollars and 15 cents an hour. Now, let’s take a look at it. If you get 15 dollars—notice, that’s a lot more than $7.25—it’s more than a doubling of the minimum wage, so I don’t want to take away that that’s something, but I just want to underscore how inadequate it still is. Fifteen dollars an hour and a 40-hour week—that’s right, every day you work 8 hours. If you get the new, 15-dollar minimum wage you earn 6 hundred dollars a week. If you work all but two weeks of the year for money, that means you earn 30 thousand dollars. For those of you who don’t keep track of these numbers, that’s not very much above what we call the poverty level for a family of four. Let’s remember, many millions of families in the United States have one adult income earner, not two, and so there are lots of families that are living on $30,000 if they get the 15-dollar minimum wage. Meanwhile, Mr. Bezos is earning billions every year. In other words, you’re not making a big blow against unemployment and you’re not making a big blow against inequality by something as small as this. You want to do something about inequality? Then you’re going to have to do a lot more than raise the minimum wage to 15 dollars. The $30,000 you get in a year, if you work 40 hours, at the new minimum wage of 15 dollars… that $30,000? That wouldn’t pay for one, 8-month year at a 4-year, private college in the United States. Keep a sense of the relationship here. You are not undoing inequality with this action. However often it is said, “Gee, we’re raising the minimum wage!” people should remember…wow. Then, there’s the argument of the right wing, which doesn’t even want to give you the 15 dollars an hour. They make the following argument: If you raise the wage, there will be some employers who won’t keep people working if they have to pay them more than $7.25, the current minimum. You know, that’s correct; there will be some… and think about them the next time you’re in church or synagogue, or mosque, but put it aside. The economics is terribly stupid. Why? Because all of those people who get more money, who rise from $7.25 to 15 dollars an hour, they’re going to have much more money to spend. They’re going to buy more goods, and guess what? That’s going to lead people to get more jobs. So, yeah, you’ll lose a few jobs from employers who don’t pay you, but you’ll gain a bunch from the people who have more money, and you will have done something about inequality; something serious rather than something which is mostly symbolic.
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 of our new book, The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself. It is out now and available at [email protected]/books. I want, as always, to thank our Patreon community for their invaluable support. If you haven’t done so already, 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 Kristin Ghodsee.
Welcome back friends to the second half of Economic Update for today. It is my pleasure to bring to you, to our microphones and cameras, Professor Kristen Ghodsee; is Professor of Russian and East European studies at the University of Pennsylvania. Her articles and essays have appeared in publications such as The New Republic, The Lancet, Ms. Magazine, the Washington Post, and the New York Times, and have also been translated into over 20 languages. She has published nine books on a variety of related topics, but the one we’re going to start with today is the one that I admit, caught my attention: Why Women Have Better Sex Under Socialism. Thank you very much, Professor Ghodsee, for joining us.
KG: Thank you so much for the invitation.
RW: Okay, I’m struck by the fact that an old friend of mine, who has been on this program, Yanis Varoufakis from Greece, wrote one of the blurbs for your book and recommends it highly. Given the provocative nature of the title that gets people’s attention, tell us what the point of that book was. Tell us a little bit about why you wrote that book, and what is the argument you make there?
KG: Right. This book really kind of emerged out of about 20 years of research on women’s lives in Eastern Europe. The quote from Varoufakis on the back of the book, is that “capitalism is a calamity for women,” right? I want to say first of all, that I think capitalism is a calamity for everyone right now, men and women alike. Because my research really focuses on women’s issues, and specifically women’s issues in eastern Europe, I was really interested in the fact that starting as early as the mid-19th century with people like Charles Fourier and Flora Tristan in France, and Henri de Saint-Simon, who really talked about the ways in which socialism—utopian socialism in their formulation—could not really come to fruition without also a concomitant commitment to women’s emancipation, and that if you go back and you look at some of these early socialist theories, in fact, they were very much concerned with the women’s question as well as with the emancipation of workers, freedom from the proletariat, and the end of exploitation, and that the end of the exploitation in the family was as important a goal as the end of the exploitation of workers. Then you have later theorists like August Bebel, Frederich Engels, and Clara Zetkin, and Alexandra Kollontai in the Soviet Union (before the Soviet Union), really talking about sexuality and women’s economic independence, and the ways in which the commodification of women’s sexuality is part of capitalism, and that once you overthrew capitalism, you would have a sort of new kind of women, right? The woman of the future Bebel talks about in his book, Women in Socialism. These were theoretical claims, and I’m a social scientist. One of the things that I thought was really interesting, was what happened to women in Eastern Europe after 1989 or 1991, if you were in the Soviet Union, when you introduced capitalism? As a social scientist, I was thinking if I wanted to test these theories about the impact of economic systems on women’s lives, you could imagine a kind of double-blind study or whatever; you took a group of women and you raised them under capitalism, and you took a group of women and you raised them under some kind of ideal form of socialism, and then you came up with some kind of rubric and you measured the self-reported life satisfaction or whatever, sexual satisfaction, happiness… however you wanted to measure it, but of course you can’t do that study, because it’s unethical. An IRB wouldn’t let you have babies to grow up in this way. So, what we look for as a social scientist is the natural experiment. I think what’s really fascinating about Eastern Europe after 1989 or 1991, is that it provided a natural empirical experiment. Especially in a place like Germany, which was divided during the Cold War, where you had one population of Germans on one side of the wall, and another population of Germans on the other side of the wall growing up under two economic systems, and then lo and behold, in 1990 they come back together. Social scientists just had a field day on this, right? They asked them all sorts of questions about how the economic system changed their lives in a variety of different ways. So, the claim of the book is actually quite simple: It’s that, in fact, socialism—and people are going to debate about what that word actually means—because some people call it state socialism, others call it state capitalism, whatever it was that they had in Eastern Europe—communism—before 1989 or 1991 in the Soviet Union, was in fact better for women’s lives on a variety of different rubrics, than capitalism in the West. I even take that argument a step further, and I say what because of the commitment to women’s emancipation that these state socialist countries in Eastern Europe had during the Cold War, between 1917 and 1991 in the Soviet Union, and between 1945 and 1989 in Eastern Europe, their commitment to women’s rights actually ended up putting pressure on western countries to kind of step up their game when it came to women’s rights. So, it’s a very empirically based argument. A lot of people who pick up the book are actually… it kind of has this titillating title, which of course the publisher chose, but in fact, it is a very seriously empirically rich and grounded book that really tries to grapple with the data that is available to us. Again, I understand that there are some methodological questions, but there is data available to us that shows us that not only were women’s lives, in some respects, much better behind the Iron Curtain during the Cold War, but that after 1989 and 1991 their lives rapidly deteriorated with the introduction of free markets.
RW: Well, you know, it’s a wonderful example of something I’m concerned with and have been on this program, which is ending the Cold War in mental activity, so we’re not good guys on the one hand and bad guys on the other, and all that goes with that… and we have more balanced strengths and weaknesses that exist in different ways on the two sides. I see your work as moving us in that direction, and therefore, very important. I know from my audience, could I press you to give us a couple of examples of how things were better then, so people are confronted with that and how they deteriorated afterwards?
KG: Sure. Okay, so obviously the title of the book is about intimate experiences, and one of the things that we have are empirical studies that were done prior to 1989 and post 1989, in 1990, 1991, 1992, 1993, in Germany, before and after it was reunified, about things such as sexual satisfaction, about things such as marriage rates and desirability to get married. What we find… the empirical that’s there… and of course, it’s self-reported, and there are all sorts of issues with self-reported data, but given that you’re asking the same questions to both sets of people before and after the fall of the Berlin wall, what we see is that women in the eastern part of Germany (the former GDR), report much higher levels of personal satisfaction with their relationships, both on sort of an emotional level, as well as on an intimate level. Furthermore, we also find that men and women in Eastern Germany were more likely to want to get married than in Western Germany, where men were far less likely to want to get married than women. There was a big discrepancy between the desirability of marriage as an institution. Partially because for women marriage is an economic relationship, and for men—because they realize that it’s an economic relationship, that women are going to need to be supported in some ways—especially if they have children, there is a discrepancy between the desirability. But, it’s not just in the intimate sphere. I talk about citizenship, I talk about women’s political participation, and I talk about women’s education and training. So, for instance, we can look at a study that was done in 2018, comparing the gender gap. There’s a standardized test that is given across Europe, in mathematics, for instance. The name of study is called Girls, Math and Socialism, I believe. There is a standardized test that is given to all children across the EU, and as you know many of the new EU member states are former socialist countries. What we see very clearly through this study is that the gender gap between boys and girls in mathematics is much smaller in former socialist countries than it is in capitalist countries, and that persists to this day. In some of these socialist countries, there’s no gender gap at all in mathematics. We can also look at the percentages of women in science, technology, and engineering. At a much earlier period of time in the Soviet Union and in Eastern Bloc, women were integrated into fields that are still heavily masculinized in the United States and in Western Europe; so, the figures are really striking. In 2019, the percentage of graduates in science, technology, math, and engineering in Germany—even the reunified one—is only 28 percent, compared to a place like Poland where it’s 43 percent, or Romania where it’s 41 percent. So, there are these huge payoffs, and that’s just in the professional field. When we look at the intimate field, again, socialist countries very early on in the Soviet Union under somebody like Alexandra Kollontai, they tried to socialize domestic work, so there were kindergartens and creches, and children’s homes, and public cafeterias, and public laundries, and mending cooperatives. Now, the early Soviet Union was not able to maintain its commitments to those programs, and so for a variety of reasons they were largely reversed or disappeared briefly after 1936, with the third Soviet Family Code. But, in Eastern Europe after 1945, because of male labor shortages due to the war, many of these policies were reinstated. If you look across the Eastern Bloc—and there was a lot of variety—I’m not saying it was uniform, but there was a lot of variety, but pretty much without exception, they all had very strong commitments to the socialization of childcare and housework, as much as possible. Again, there is a lot of variety here, so excluding the Soviet Union between 1936 and 1955, Romania after 1966, and Albania, almost all of the other countries had a very, very good commitment to women’s reproductive rights as well, much earlier than in the West. Then that is on top of being mobilized into the labor force, employment opportunities, and what ultimately is economic independence. That is the key, sort of lynch pin I think, to women’s greater participation in the economy and greater participation in the polity. Now, that’s not whitewashing the fact that in many respects—again, lots of variety in the Bloc—these were somewhat oppressive societies, and some much more oppressive than others, especially in the 1930s and 1940s under Stalin in the Soviet Union. But, I think it’s really important, as you said, to deal with the Cold War that’s in our minds. Women’s rights are one of the things that these Eastern Bloc countries did really well. In Germany today (they just celebrated the 30th anniversary of reunification), even in Germany where they still consider the GDR to be a “totalitarian state;” one of the two totalitarianisms that affected Germany, even West Germans are willing to accept that, “Okay, on this one little thing—women’s rights—at least there, the East Germans got it right and we haven’t done as well.” I think it’s also important to realize that these Eastern Bloc countries took their package of reforms (kindergartens, creches, support for women’s employment, supports for women’s education and training), they took that package and they exported it anywhere in what we call the global South, where people also were experimenting with socialist ideas. This had a huge impact on the development of women’s rights, women’s issues, and women’s questions across the globe throughout the Cold War. If anything, I would say that after 1989 and 1991, we have pretty good evidence to show that women’s rights have actually started to, you know, lose the support of the global community, because the Cold War is over. As with so many other things, having a clear ideological enemy sort of forced western governments to really deal with some of social issues that they would rather just sweep under the rug, and women’s issues were certainly one of the most important. So, I can give you lots of examples of these different kinds of very specific policies, but I think that’s the general idea.
RW: No, you have it. That’s excellent. It’s exactly what I was hoping to elicit from your research. I wish we had more time; we don’t. Let me end with a very brief question, because we have very little time: Do you think what your work is, is part of a rediscovery that may change things again?
KG: Absolutely. I think that, you know, one of the biggest problems with discussions of socialism in the West, is that the Soviet experience or the Eastern Bloc experience is used as a cudgel to silence discussion of socialism as a real political alternative. I think one of the things that my work does, and I hope it contributes to larger debates and inspires other scholars who come after me, is to look back at some of these Eastern Bloc countries and say, “It wasn’t all bad. There were some good things,” and because of that we can learn from those things, get rid of the bad parts, salvage the good parts, and move forward into a more just, equitable, and sustainable future.
RW: There’s nothing I can add to that. Wonderful. Thank you so much, Professor Ghodsee, for your contributions and for this kind of research. I join you in hoping that it stimulates and inspires many, many others.
To my audience, thank you for joining us. I think we’ve learned a lot, and I look forward to speaking with you again next week.
Transcript by Ann Ford
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About our guest: Kristen R. Ghodsee is Professor of Russian and East European Studies and a Member of the Graduate Group in Anthropology at the University of Pennsylvania. Her articles and essays have been translated into over twenty languages and have appeared in publications such as The New Republic, The Lancet, Ms. Magazine, The Washington Post, and The New York Times. She is also the author of nine books, most recently: Second World, Second Sex: Socialist Women's Activism and Global Solidarity during the Cold War (Duke University Press, 2019) and Why Women Have Better Sex Under Socialism: And Other Arguments for Economic Independence (Bold Type Books, 2018 and 2020), which has already had thirteen international editions. Her latest book is Taking Stock of the Shock: Social Impacts of Transition in Eastern Europe and the Former Soviet Union, co-authored with Mitchell A. Orenstein and forthcoming with Oxford University Press. Ghodsee has held visiting fellowships at the Radcliffe Institute for Advanced Study at Harvard University, the Institute for Advanced Study in Princeton, the Woodrow Wilson International Center for Scholars in Washington DC, the Aleksanteri Institute at the University of Helsinki in Finland, and at the Max Planck Institute for Demographic Research and the Freiburg Institute for Advanced Studies in Germany. She was also awarded a John Simon Guggenheim Fellowship for her work in Anthropology and Cultural Studies.
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