U.S. Becomes World’s 'Most Unequal' Economy | Richard Wolff
Summary
Global Economic Shift: The podcast discusses the shift in the global economic core from the West to the East, emphasizing the growing economic power of Eastern countries compared to Western nations.
U.S. Economic Inequality: Richard Wolff highlights the increasing income inequality in the U.S., noting that it has become one of the most unequal economies globally, a trend persisting across various administrations.
State Capitalism: The discussion explores the U.S. government's increasing involvement with private enterprises, which some might describe as state capitalism, and its implications for the future of capitalism.
Tariffs and Economic Uncertainty: The podcast examines the impact of tariffs on the global economy and the resulting uncertainty, which affects job security and economic stability in the U.S.
Data Reliability Concerns: There is skepticism about the reliability of government economic data due to potential politicization, raising questions about the accuracy of reported economic growth and employment statistics.
Federal Reserve Independence: Concerns are raised about the potential loss of Federal Reserve independence if political influence increases, which could undermine its ability to manage monetary policy effectively.
Government Investments in Companies: The U.S. government's acquisition of a stake in Intel is discussed as a significant move, raising questions about the merging of corporate and political interests and its implications for economic policy.
Alternative Economic Strategies: The podcast suggests that addressing inequality through direct support to lower-income individuals could stimulate economic growth more effectively than current policies favoring corporations.
Transcript
I got news for the world. The big rich core of the world economy is no longer the west. It is already the east. And that gap is growing. We have shot ahead of all the other European countries to to become one of the most unequal economies in the world. That has been true across republican and democratic presidencies. You can pretend that that hasn't happened, but that didn't make it go away any more than a two-year-old that puts her fingers in front of her face will no longer have to face the scary doggy that's barking a few feet away. I'm pleased to be joined once more by Richard Wolf, Professor Richard Wolf, who is the founder of Democracy at Work, uh, and a well-known economist who has taught at some of the most pre-minent schools in America. He's been regarded as the most prominent Marxist economist in America uh by the media and we'll be talking about his views today on the economy. We'll be examining the ways in which governments particularly the US government is now interacting directly with private enterprises. Some might call it state capitalism. What does this mean for the future of capitalism? will be examining Professor Wolf's uh outlook on the global economy following several rounds of tariffs over the course of the last 8 months since we've had Professor Wolf on the show. And finally, we'll be getting Professor Wolf's outlook on geopolitical situations that are still developing in Ukraine and the Middle East. Professor Wolf, welcome back to the show. It's an honor to host you once more. Thank you for being here. Well, thank you very much for inviting me, David. It's a pleasure to be talking with you. I like to start by talking about the US economy and there are many things that we could talk about but I like to talk I like to start with a subject in which you're very well verssed in which is the wage gap or the income gap. Now, it says here on the website that I'm about to show on my screen here, by Fortune, the gap between higher and lower income households is widening as inequality progresses uh where progress since the pandemic has gone into reverse, says a Bank of America economist. Now, um before we get into the details of this particular article, I'd like to just get your thoughts on the state of inequality across corporate America. not just corporate America but you know America overall um and what your research has shown in terms of progress on equality inequality and what the direction of this trend is given uh the last 7 months of development uh with tariffs policy changes and fiscal policy. Okay, you know, let me begin in by putting it into a certain context. When anyone speaks about the state of an economy, uh you're confronted right at the beginning, if you're honest, with an immense array of statistical information. It's a little bit like going to the doctor and saying you uh you want a overview of how good your health really is. If a doctor is honest, the doctor will tell you, "Well, there's a million uh measurements I could take. Your blood, your your stamina, your your lymph nodes. I mean, it it it's it's an immense array. Um, and you put yourself in the hands of a doctor. Uh, you want the doctor's judgment. What are the key variables to look at? And how do you balance what each one of those variables tells you? At any given moment, the human body has things in it that are going in a direction that is not good. And there are things in it uh which are doing well and are doing fine. And and you need the judgment of the doctor to give you a sense of where it nets out. Well, I'm in the same position. Uh, and I say that because I want you to know that the level of inequality in society is an extremely important and significant variable in the way I look at the economy. But it differs from other economists uh who range from people who give it no importance uh to pe people who give it a little and a little more and so on. But I give it a lot. Therefore, I'm here to say that contrary to the clip you just showed, we weren't making improvements that were then disrupted by the pandemic. Sure, the line is not a straight line. It wobbles around, but the direction has been the same for the last 35 years, namely growing inequality. If you did a look comparing the United States with Western Europe at the end of World War II, you would have seen that the United States was a less unequal economy in terms of the ratio of rich people to the middle to the bottom. And we are now way number one. We have shot ahead of all the other European countries to to become one of the most unequal economies in the world. That has been true across Republican and Democratic presidencies, Republican and Democratic Congresses, uh policy changes of this sort and that. But one of the most stunning constants has been the relentless worsening of the inequality. And I would argue that that reality is deeply affecting or maybe I should use the word infecting the rest of the economy. This is a chart from the Fortune article that I like to show to you, professor. Wage growth for lower inome households dropped to just 1.3% year-over-year in July, while it accelerated to 3.2% for higher income households, according to uh research from the Bank of America. This result is the biggest gap between top and bottom earners wage growth since February 2021. It's a warning sign for the economy despite a strong overall spending picture. Bank of America Institute senior economist David Tinsley told Fortune in an interview in some sense we had an improvement in lower income wage growth since the pandemic and now that's gone into reverse. What can you attribute this trend to professor? Well seems to me that there are the usual candidates uh for this situation. Number one there is the turmoil. There's no other way I can describe it. the turmoil in in the culture. There is no there's no getting away from it. I see it as a professor teaching my classes. My students are very anxious about the future. They do not believe the way I did when I went through the university that I might not get the job of my dreams. But by going to the university and getting my degree, I was sure of a decent job, a decent income. I could get married. I could think about having children. All of that. My students today, and I teach in a perfectly normal average uh university situation here in New York City where I live and work, and my students are light years from that perception. They do not expect to get a very good job at all. They expect to cobble together a little thing over here and a little thing over there to live in a fundamental condition of precarity. And I think what you're seeing is the reflection of the fact that we have a very very insecure job market. uh companies have been outsourcing, relocating jobs out of the country. They have been bringing immigrants in to replace American workers, Americanborn workers, and they've been continuing automation. I mean, the the my students mentality is we're all about to and this is a joke, but you know, you don't have to be a Freudian to understand what the joke is telling you. The joke is AI is eating our future and we are going to have to survive in an environment uh that does that. And I think it's the truth of it is that corporations are investing in AI. Whether that's a reasonable decision, that's another matter. I'm not so sure at all. But they are and they're pumping money into AI. Uh and they are resisting Mr. Trump's efforts to reshape the global economy. The bottom line is the job situation is both fluid and negative in terms of of how people are reacting to it. And I think those statistics reflect all of that. Finally, there's another there's a particular factor, but I don't want to get lost in that. The pandemic, the pandemic was a tremendous shock to the American working class on many levels, but one of them was uh not wanting to have the kind of work life that they had had before, finding that return to their job wasn't really feasible, discovering that their employer had taken the advantage of the pandemic to try very hard to get four people to do what they used to have six people doing that the conditions of their work were different. They then quit their job. They look for something else. They don't find it. And if I really had time, I would talk to you also about the immense explosion of illegal or off the grid, might be a better way to put it, jobs that young people are increasingly taking, which also impact those statistics that you see in the chart. There are cracks showing up in the labor force, which we can talk about in more detail. Fed chair Jerome Powell highlighted some of these concerns at the Jackson Hole Symposium last week. However, if you take a look at what's uh being released this week, uh GDP numbers for uh the latest quarter came out and uh the last quarter increased at 3.3% annualized. Um this is the second estimate from the uh Bureau of Economic Analysis released Thursday, August 28th. uh and the initial uh reported consensus expectation was only 3% and so GDP growth, real GDP actually came in a little bit higher than expected. It it seems to me that there are somewhat conflicting signals. On the one hand, perhaps we've got a slowdown in labor growth. Uh we've got like we've talked about earlier a rising inequality and the lower income households not gaining anything in terms of wage growth. But on the other hand, the economy overall is growing faster than expected. What do you make of this divergence? Well, I have to now say something I would not have said to you in our last conversation. I am a majority of American economists, leftwing, right-wing, and center, who do not know anymore whether we can take seriously the statistics coming from the government. What was what was done to the Bureau of Labor Statistics a few weeks ago when Mr. Trump fired uh the lady who was at the at the head of it uh because he didn't like the revisions to earlier months this year. The very downward revisions in the labor market that you're referring to has led us to wonder as a as a profession whether we are now going to have to develop our own statistical series if we even can do that. uh that we could rely on because the politicization uh that Mr. Trump undertook um really makes all of this very very very questionable. I is it possible that the GDP took a a bit of a turn up as opposed to something else? Yes, that is possible. There may have been some specific events that provoked that. But whether or not that's real, that will be determined under a number of scenarios about whether it continues or whether whistleblowers come forward and let us know what more and more of us are wondering about which is the nature of these data themselves. Data aside, what is your outlook for uh job security for the middle class of America? I think that's the ultimate question that a lot of my viewers want the answers to. Well, I wish I could give you an answer, but the honest answer is more durable uncertainty, if there's anything that Mr. Trump's uh economic policy, and I'm using that word loosely. If there's anything that policy has introduced that is really novel and new, it is radical uncertainty in our economy. We do not know whether we do or do not have a tariff, whether the tariff is higher or lower, whether the tariff will go into effect in 2 days, in 12 days, in 50 days, in 90 days. And therefore we do not know no matter what is done today and no matter what is said about what is done today whether that will apply. So for example the argument that what he's what his goal is is to bring manufacturing back to the United States. Well, then he's the worst enemy of that objective because if there's anything that will prevent a corporation from undertaking the expenditure and the time lost and the profit lost to move a factory from China to America, from Peru to America, from India to America, it will be uncertainty. Why come to the United States of all places if the tariff that protects the American market won't be there in 3 months or 6 months? The herkyjerky up and down of the last 8 months is an object lesson in what you cannot rely on and therefore they're not coming. It's a joke. statements. We will invest over the next 10 years, hundreds of billion. I love that. That's that's useless. No vice president of of a corporation is going to risk his or her corporate future by pushing for a move that could be ridiculous 3 months from now in terms of what has changed. And we are one more point on this. We are at the very beginning of the world's reaction to what is going on. These tariffs are, to put it in simple English, the demand of the United States for tribute. If you're a foreign company or country and you want to sell into the American market, you're going to have to pay tribute at the gate. That's what a tariff is. to get into the US market, a rich market because of our history, you're going to have to pay an entrance fee. And that's what we're going to charge you. Every country, every corporation that had any kind of export market in the United States will now be reacting. They're going to look for alternative export markets, not afflicted by uh tariffs. They're going to look for ways to get around the tariff to move product from their country which has a high tariff through some other country which has a low tariff or no tariff at all. All of these reactions are are the tip of the iceberg. They're going to go into different products depending on where the markets are. No company coming here can figure out all of those variables. There are too many and they're all changing each other. Therefore, you can't predict what market you actually would have coming to the United States if any part of that market is an export. Therefore, the uncertainty is now compounded by all of the reactions that are going to be taken. I recently spent a a little bit of time in Montreal, Canada, and I went there to ask people, which I did, everyone I could find from a you know, somebody I met in an elevator to someone I had a at a restaurant, what are you thinking? And and when when the dust cleared about their feeling, which I can best describe with the English word betrayal, they feel as though they were loyal allies of the United States who have been betrayed. Their word repeated over and over again. Well, they are figuring out I talked to a number of businesses there. They're now figuring out their strategy and they're asking about reorienting their entire economy to Europe, to China, to India, and and on and on and on. They are they don't know exactly where they're going to go. But here's what I can tell you. The American economy, including our job situation and our GDP, will be shaped by how the rest of the world reacts. We have never seen this before. A government that uses tariffs like a cl a club ba b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b bashing this country today. It's Mexico and Canada. Next week it's India. Next week it's China. Next week it's Vietnam. And on what grounds? Here's where me as an economist, David, I got to tell you, it really does blow my mind. I see my president pointing to a deficit. The United States buys more from Vietnam, for example, than we sell to them. Of course, that's true. But Mr. Trump sees that as a sign that we're being cheated. Holy mackerel. We're a rich country. Rich countries buy more than they sell to poor countries. And you know why? Because they're poor. No one put a gun to the head of the Americans who bought all those Vietnamese products. And I just pick Vietnam as an example. but blaming the country and then using that to hit the world with tariffs. We are becoming economically speaking, I'm not talking politics here, but economically we are a rogue nation in the sense that people do not understand what in the world is going on and what is going to happen and they are figuring out ways to disconnect from the United States so that the uncertainty doesn't bite them where it hurts. In terms of the tariffs impact on the labor market and economic growth domestically overall, I remember when Trump uh first announced his plans to implement these tariffs uh back in January after inauguration day and people economists were comparing his plans to smooth Holly tariffs in the 30s which many economists believed to have been the impetus for the great depression. So two-part question, professor. Number one, is that a fair comparison to begin with? And if so, why haven't we seen a great depression already? Uh the answer to the the the last part first. It takes time. It always takes time. Uh a tariff, even one that was imposed, end of story. We don't have that. the the the the analogy with Smooth Holly doesn't work because we weren't in a great depression already and we weren't uh up and downing it and and delaying it uh in in this chaotic way of the last 8 months. So, it it really is a different story. But here's the most important uh uh kind of uh of role. The basic argument of the people who who connect the great depression with smooth holy is not that it caused the great depression but it worsened it. It the great depression needed a tremendous stimulus and what you were doing with Smood Holy was shutting down the world economy having every country turn in on itself. Th this was a very dangerous way to deal with a problem that should have been understood right at the beginning was global in nature. 1929 October when everything falls apart. It falls apart in Britain. It falls apart in Germany. Falls apart in France. Falls apart in United States. Hello. It's an international event. And the logic that people want us to learn from that is if you have an international economic breakdown, you better come up with an international solution. Otherwise, which is what happened in the 30s, every country tries to solve its problem at the expense of the other with the net result of making it worse for everybody. That's what's going on now. That is a similarity. But we are at the early stages. We might be further along if Mr. Trump had imposed a tariff, whatever it was, and declared it a done deal. That would have horrified the rest of the world. But what Mr. Trump has done has horrified the rest of the world. Anyway, this weekend there'll be a meeting in Beijing of the Russians, the Chinese, uh, the Indians, Mr. Modi, Mr. Xi Jinping and and uh Putin will all be there together with their many of their BRICS allies and we're seeing the coming together of the rest of the world and you can bet they will be discussing how they can help each other evade and avoid both the sanctions and the tariffs which by in by the way increasingly resemble one another. In other words, tariffs are being used like sanctions uh to punish the enemy. And I want to remind Americans not to lose sight of the most important statistic of all. The population of the United States is 4 12% of this planet. And the population of India, China, Russia, and the bricks is well over 50% of the people on this planet. It is not a sustainable economic strategy for a mouse to be hitting tariffs against an elephant. The mouse does occupy a large percentage of the global GDP does not. If you Here's the statistic that I teach my students. If you add up the GDP, not just of the United States, but of the entire G7, that's the United States, Japan, Canada, Britain, France, Germany, and Italy. You you add that up, it comes to about 28% of of global GDP. If you do the same thing for the bricks, it's 35%. I got news for the world. The big rich core of the world economy is no longer the West. It is already the east and that gap is growing. You can you you can pretend that that hasn't happened. But that didn't make it go away any more than a 2-year-old that puts her fingers in front of her face will no longer have to face the scary doggy that's barking a few feet away. You you America is caught up in a kind of denial of what's going on. And it comes to this question we began with cherry-picking your statistics to figure out how can I say something to myself that makes me feel better. Okay, look at the stock market. It's doing really well. It is. I'm not going to dispute that. I watch that. That's an index I'm interested in. But when you put it together with the other ones that we're talking about as we converse, you begin to get a picture of a society that is in all kinds of difficulty. And for me, for me, Donald Trump and what he does is a reflection is an effect of a society in trouble kind of desperately reaching out for new ways to try to constrain what is unfolding. Well, speaking of what Donald Trump is doing, I want to bring to your attention two trends that are taking place under his uh under his uh order. Uh the first is his removal of Fed Governor Lisa Cook. Uh Lisa Cook uh is now, as of today, uh the 28th of August, suing uh President Trump for what she called unprecedented and illegal efforts to remove her from the central bank. Uh now just for as a bit of context here, President Trump has claimed that uh Fed Governor Cook has falsified her mortgage documents and uh therefore is unfit to be at uh you know at the Federal Reserve. Uh Miss Cook was appointed a governor of the Federal Reserve in 2022 uh by President Joe Biden. She was the first African-American woman uh to serve in the role actually first African-American period. Uh her term was due to end in 2038. She served previously served under pre President Barack Obama's Council of Economic Advisors and worked at the US Treasury. And like I mentioned, she is now suing Trump for her dismissal. What is going on? What is your reaction to this saga? Well, I think Mr. Trump is uh busy firing huge numbers of people and replacing them with people that are more uh sympathetic to his policies, his viewpoints, his prejudices. And I include that word intentionally. Uh so I I'm not surprised, nor am I surprised that the reason is very trumped up, if I may be allowed the pun. Very trumped up. I have no idea what Miss Cook's problems with her mortgages were, but it is not at all uncommon to fill out mortgage documents with a certain I don't know uh freedom. You're you're trying to get a mortgage and you then stretch things. I you know, she may have done who knows. But that using that as a ground to have the president interfere in an unprecedented way in that agency of the government, that's an incredible stretch. You know, you you wonder, wow, you couldn't come up with something better than that? Wow. And for me, let me interject a parallel. Uh I'm a graduate of Harvard University. Uh were was there at Harvard anti-semitism when I spent my four years there? Yeah, a little. But by my experience, and I'm born and raised and worked in the United States all my life, the amount of anti-semitism I ever noticed at Harvard was much smaller than I noticed at countless other institutions and places in American society. If you were really interested in dealing with anti-semitism, which is by the way much less of a problem now than it was when I was a a college student, I would give you 10 places you could go and look at it. But he didn't do that. He goes to Harvard against whom he has Harvard Harvard grudges for a long time. goes after other universities on the grounds of their inadequate attention to anti-semitism. I mean that these are arguments that are made up. This is childishly transparent. So the answer is he wants as we all know. It's almost as though he wants us to see that the arguments don't matter. We all know he's been screaming at Mr. Powell to lower interest rates. The whole world has been watching that soap opera for months and now he can maybe get around Mr. Powell whom he can replace in a few months anyway because Powell's term is over in May. But he's in a rush. He's so worried about the damage to be done to the American economy by his tariffs that he will be blamed if a recession comes that he needs to preempt it by lowering interest rates. Getting rid of Ms. Cook is simply a a cheap easy way to do it and citing her mortgage. I mean, it's so transparent. It's offensive. if he actually believes the rest of us are so stupid as to take seriously what he's doing. Well, let's just take a step back and look at what is about to happen. What would happen to the Federal Reserve and ultimately monetary policy and the economy if Trump were successful in his attempt to replace Fed governors with those who are more loyal to him and his cause? All that would happen is that the normal activities of the Federal Reserve and let's remember it's in order to their job is to control the quantity of money and the terms upon which money is borrowed and lent and the purpose of that control is to give us uh stable prices and as close to full employment as they can get us. That's their charge. That's what they would continue to do. But with this change, they would now be much more quickly subservient to whatever the president in power wants than they have been. They have tried very hard in the 100 plus years that the Federal Reserve has been with us to function like central banks are supposed to independent of the of the coming and going of political parties. their job. I won't repeat what I just said. Price stability, uh, high employment, uh, and all we're going to see now is that that is going to be compromised by getting a a politician out of a jam. If a if a a rep a recession threatens, well, then get me out of that problem. Mr. Trump seems to have a clear idea. Lord knows where he gets it, but he seems to have a clear idea that a recession is a bigger danger to him than an inflation. Between you and me, I don't agree with that at all, but he thinks so. And so, he's now going to manipulate the Federal Reserve in a way no president before quite dared to do to get his outcome. You here's the irony, David. You and I have this conversation. He, let's assume he succeeds. He gets rid of Cook. He puts in his own people. Then he gets rid of Powell. Puts in more of his own people. Has a majority. Runs the Fed. Lowers the interest rates and it contributes to a runaway inflation. Mr. Trump will be out of office because of the inflation. And the only ironic twist will be his interest rate depression brought about the horrible inflation that drove him out of office. Let's just hypothetically speaking take a look at this anti-establishment narrative here. What if we were to have a non-independent Federal Reserve? In other words, what is wrong fundamentally with having a Fed that is controlled by the White House or Congress? Would it not would it not make the cohesion of fiscal and monetary policies a little bit more streamlined? Would it not make the country's economy uh easier to control and and steer? I don't think so. And and the reason is I I really do know the economics. It's my job. We don't know. And the we I'm including me. We don't know whether the economy at this point is somehow more likely to tilt into a recession or into an inflation or into the stagflation which is the combination of both of them. We don't know. It is therefore very important that different groups of people weigh in with different ideas about how that's working out both before it begins to happen and as it unfolds. Not because one or the other is right or wrong, but because the difference is crucial to coming up with a better decision than you might make if you excluded one voice. We now have a a Congress that debates, do we need to do this? Is a recession coming? Do we do something? They can make a statement. They can make decisions about spending money. They can make decisions about borrowing money. and they act. The Senate does, the president, the executive branch does. Well, we also created an independent central bank called the Federal Reserve in order that it also without the pressures of politics does that. The problem with the Congress is when they discuss interest rates, they are not just discussing it the way the central bank does. what's good for the economy as a whole. The people in Congress are subject to enormous pressure, lobbyists, donations from people who have a private interest in lower interest rates. The real estate industry, of which Mr. Trump is a representative. They always want lower interest rates because it makes it cheaper for people to buy real estate since everybody virtually buys it on time and therefore the mortgage rate will come down. Housing construction will be We don't want that to be the only determinant. We don't want that. We want there to be people weighing in on the conversation not because they have a private profit motive but because they have other considerations. That's the whole logic. Otherwise, we wouldn't need a central bank. Look, there was a part of the 19th century when we didn't have a central bank. President Andrew Jackson got rid of the Bank of America. We had one like they have a Bank of England or a Bank of France or a Bank of Italy, but he got rid of it in the name of libertarian private enterprise. Blah, blah, blah. And for some years, for some decades, we didn't have a central bank. And the level of monetary chaos, that's why we started calling them panics. The panic of 1837, the panic of 1853. And we by after a while of that we brought back in central banking ultimately with the Fed at the beginning of the 20th century because the alternative was too chaotic leaving it to the private profitdriven motivations. We're losing that again. And there is no reason, no evidence that that's a good idea. The evidence is it's convenient for Mr. Trump's idea of what his economic problem is, and he's in a hurry to fix it. That's not a basis on which we ought to allow such decisions to be made. Another development I'd like to get you to comment on is uh the government participating in acquiring shares of companies just last week. Uh the US government has taken a 10% stake in Intel. Uh Intel shares actually rose about 6% on the trading day last Friday. Uh it's it's said that the government will also have a warrant to buy an additional 5% of Intel shares if the company is no longer majority owner uh of its foundry business. Intel said that the US government won't have a board seat or other governance rights. Uh the secretary of commerce Howard Lutnik commented that this is part of the overall government strategy uh to secure uh chips ownership as part of the chips act. Uh Trump has said recently though um this week that uh I will make deals like that for our country all day long. He said on Truth Social, "I will also help those countries that make such lucrative deals with the United States. I love seeing their stock price go up, making the USA richer and richer, more jobs for America. Who would not want to make deals like that?" at Trump added that stupid people are upset with a move that he said will bring more money and jobs to the US. Professor Wolf, are you part of the uh stupid people quote unquote that Trump has said doesn't like this plan? One of us is either Mr. Trump or or the rest of us. In any case, let me let me respond. This is a momentous decision. He may have gotten it out of that sad executive whom he tried to get fired from his job. Uh, as we saw a couple of weeks ago, for those of us who pay attention, uh, he impuged that guy's loyalty. The head the CEO of Intel, the guy had to go and beg to be left alone. He had to go to the White House and all the rest of it. And now we see what it is he he he he agreed to and what may have been the purpose by of impuging his loyalty, namely to get the 10%. There is a definition of fascism that comes out of the experience of Germany and Italy. And here's the definition for those who may never have learned it. It's when the top levels of the corporate capitalist system merge with the top levels of a particular political party. Mussolini's party in Italy, Adolf Hitler's party in Germany. They merged the two step by step, company by company so that the government could be a powerful force shaping what the companies do and vice versa. This was done in the case of Germany. The history I know real well. German is my first language. I speak it. I studied it. Uh my mother was born in Berlin. I mean I was born in the United States but my mother was German. I know this history. The Association of German Industries invited Hitler to become the next chancellor and the leader of Germany invited Hitler to take power in January of 1933. and he proceeded to bring together the peak spitz in German, the peak of German industry together with the leadership of the Nazi party. Anyone who knows that history, and of course here in the United States, we benefit from not knowing it, but anyone who knows that history would think long and hard about what Mr. Trump just did. that he is glad to make such deals tells you only about his ignorance, nothing else. Now, let me tell you why it's a problem. Every other company in distress, particularly if it's a large company, can and will now go to the government to get bailed out. That's what this is. The government is injecting, if you read the details, $9 billion of our tax money is being handed over to the board of directors of Intel to use as they see fit. Wonderful for them. They now have money with which to try to fix that company, which by the way needs fixing. Its stock, its stock price is low. It has had problems, etc., et etc. So now let's try to understand if you're a difficult company you're not going to figure out necessarily how to improve your technology how to get a new market there's another way to solve your problem go to Mr. Trump who has just invited you, come so I can make a deal. Let me give you a second example. When a union strikes, when the union at Intel, it has 100,000 workers. When the union strikes, it will be striking the government. Will Mr. Trump call out the army the way he is against the cities of Chicago, New York, LA, DC? Are we going to see more and less government ownership? Will Mr. Trump start firing people on the board the way he is that the Fed because the share the government has is a dominant share. Whether they have a seat on the board or not is faking irrelevant. They will have the power that goes with it. If you don't do what the government wants, it'll sell those shares and that will depress the price of your stock right into the toilet and you will not be able to function. And you're the CEO. You'll know it. You know what's happening? The fascistic merger of the corporate and the political party top. And we're all watching what is going to be a very dangerous day. You call this fascist, but how is this fundamentally different from what China has been doing for the last many decades? How is this different from, let's say, Canada, for example, which has state-owned pension funds investing large numbers of shares in public companies, for example? It's a very, very good question. If the company is continuing to use the basic capitalist structure, the division of the people in an enterprise between the employers who run it and the employees who do the work, then we call that state capitalism. The government is becoming an employer and the employer is becoming the government. Does that exist in other societies? Absolutely. In some more, in some less. One of the differences though, if you want to look at China, is what is the use or the purpose of doing this in the third world, what we used to call the third world, Asia, Africa, Latin America. The official, the ostensible, the reason they give and that's more or less true is to raise their societies out of the poverty that is their number one goal. So they mobilize their resources. China is a perfect example. They divided their country roughly in half. Half of it is private enterprises and half of it is government enterprises and they all use the employer employee capitalist model. But China's number one boast is it lifted 800 million people out of poverty in the last 25 years. Notice what Mr. Trump says. Is this a way to really help the mass of the American people? Not at all. He says that right away it's going to make us richer. The stocks went up. Yeah, that's the point. It's not that there isn't a similarity. It's what it is used to do here. It is used and we go back to the beginning of our talk today. It's used to deepen the inequality of our society. Otherwise, you wouldn't help Intel with $9 billion. You know what you'd kn use the $9 billion for? To help the people at the bottom. That would lift them up. And by the way, the money you give them that the bottom they would spend. And what would they spend it on? The goods and services capitalists produce. You know what you might call that? Trickle up economics. It's the alternative to trickle down. Fascism is when you organize the economies to make those in charge even richer than they would have been without it. And and you then assert Mr. Trump isn't smart enough to do this. But you then assert it's good that we do it. It'll trickle down. It will mean jobs in America. If you know what Intel is, you will know that it is a highly capitalized enterprise. It will not produce very many jobs. And there are dozens of ways to use the same amount of money to produce way more jobs than giving it to Intel will ever generate. On your trickle up philosophy, how would giving money to the uh to the lowest wage earners help invigorate the economy? Here's how it works. You have your you take your nine billion dollars. you give it to Intel. The first thing Intel does share shareholders is take a number of steps to improve the the salary packages for their top executives. The second thing they do is take a number of steps to improve the dividends they pay to their shareholders to keep them happy. The last thing they do is give money to their employees. You could take the 9 billion. Why don't you short circuit the process? give it directly to the employees. You know what then happens? They spend every nickel because they're poor. They don't have any money to to save. They can't meet their needs as it is. That's why you help them. And you get the benefit which all economics teaches that if you give money to poor people, they spend it. And if you give money to rich people, they don't. If you give money to the poor people, they would quit their jobs. And this is just a theory. they would quit their jobs and Intel wouldn't have any employees to run the business and the business would collapse. How would you respond to that theory? You give them a give them a pay for a for a job. If that's your problem, give them the job that they want. We have 10, you know, 10 million people, conservatively estimated 10 million people without a job. Create 10 million jobs, make them pay well. These people will be beating you. I I'll I'll introduce you to my students. They'll be lined up to get these decent jobs that are secure government jobs. That's what they want. They will come and they will respond and they will spend every nickel. And that'll give much more of a boost to the economy. that trickling up than giving it to the richest people in America, the corporate executives who we know spend their time figuring out how to quote save on labor costs because it's what makes your business more profitable. That's not what we need. What Mr. Trump is doing is giving it to them cuz he's them and they're him. But that's not the solution to our problem. And in the end, the growing problems of this society will undo Mr. Trump long before he will undo them. All right. Thank you, Professor Wolf. We'll end it here for today. We will follow up with Professor Wolf on his views on the current geopolitical hotspots and the rise of militarism and what that means for capitalism and global economies. Uh stay tuned for that in a few weeks. And uh for now, in the meantime, you can follow Professor Wolf's works in the link down below and follow him on social media also in the description. I'm Dave Lin. Thanks for watching. Don't forget to like and subscribe and we'll see you next time.
U.S. Becomes World’s 'Most Unequal' Economy | Richard Wolff
Summary
Transcript
I got news for the world. The big rich core of the world economy is no longer the west. It is already the east. And that gap is growing. We have shot ahead of all the other European countries to to become one of the most unequal economies in the world. That has been true across republican and democratic presidencies. You can pretend that that hasn't happened, but that didn't make it go away any more than a two-year-old that puts her fingers in front of her face will no longer have to face the scary doggy that's barking a few feet away. I'm pleased to be joined once more by Richard Wolf, Professor Richard Wolf, who is the founder of Democracy at Work, uh, and a well-known economist who has taught at some of the most pre-minent schools in America. He's been regarded as the most prominent Marxist economist in America uh by the media and we'll be talking about his views today on the economy. We'll be examining the ways in which governments particularly the US government is now interacting directly with private enterprises. Some might call it state capitalism. What does this mean for the future of capitalism? will be examining Professor Wolf's uh outlook on the global economy following several rounds of tariffs over the course of the last 8 months since we've had Professor Wolf on the show. And finally, we'll be getting Professor Wolf's outlook on geopolitical situations that are still developing in Ukraine and the Middle East. Professor Wolf, welcome back to the show. It's an honor to host you once more. Thank you for being here. Well, thank you very much for inviting me, David. It's a pleasure to be talking with you. I like to start by talking about the US economy and there are many things that we could talk about but I like to talk I like to start with a subject in which you're very well verssed in which is the wage gap or the income gap. Now, it says here on the website that I'm about to show on my screen here, by Fortune, the gap between higher and lower income households is widening as inequality progresses uh where progress since the pandemic has gone into reverse, says a Bank of America economist. Now, um before we get into the details of this particular article, I'd like to just get your thoughts on the state of inequality across corporate America. not just corporate America but you know America overall um and what your research has shown in terms of progress on equality inequality and what the direction of this trend is given uh the last 7 months of development uh with tariffs policy changes and fiscal policy. Okay, you know, let me begin in by putting it into a certain context. When anyone speaks about the state of an economy, uh you're confronted right at the beginning, if you're honest, with an immense array of statistical information. It's a little bit like going to the doctor and saying you uh you want a overview of how good your health really is. If a doctor is honest, the doctor will tell you, "Well, there's a million uh measurements I could take. Your blood, your your stamina, your your lymph nodes. I mean, it it it's it's an immense array. Um, and you put yourself in the hands of a doctor. Uh, you want the doctor's judgment. What are the key variables to look at? And how do you balance what each one of those variables tells you? At any given moment, the human body has things in it that are going in a direction that is not good. And there are things in it uh which are doing well and are doing fine. And and you need the judgment of the doctor to give you a sense of where it nets out. Well, I'm in the same position. Uh, and I say that because I want you to know that the level of inequality in society is an extremely important and significant variable in the way I look at the economy. But it differs from other economists uh who range from people who give it no importance uh to pe people who give it a little and a little more and so on. But I give it a lot. Therefore, I'm here to say that contrary to the clip you just showed, we weren't making improvements that were then disrupted by the pandemic. Sure, the line is not a straight line. It wobbles around, but the direction has been the same for the last 35 years, namely growing inequality. If you did a look comparing the United States with Western Europe at the end of World War II, you would have seen that the United States was a less unequal economy in terms of the ratio of rich people to the middle to the bottom. And we are now way number one. We have shot ahead of all the other European countries to to become one of the most unequal economies in the world. That has been true across Republican and Democratic presidencies, Republican and Democratic Congresses, uh policy changes of this sort and that. But one of the most stunning constants has been the relentless worsening of the inequality. And I would argue that that reality is deeply affecting or maybe I should use the word infecting the rest of the economy. This is a chart from the Fortune article that I like to show to you, professor. Wage growth for lower inome households dropped to just 1.3% year-over-year in July, while it accelerated to 3.2% for higher income households, according to uh research from the Bank of America. This result is the biggest gap between top and bottom earners wage growth since February 2021. It's a warning sign for the economy despite a strong overall spending picture. Bank of America Institute senior economist David Tinsley told Fortune in an interview in some sense we had an improvement in lower income wage growth since the pandemic and now that's gone into reverse. What can you attribute this trend to professor? Well seems to me that there are the usual candidates uh for this situation. Number one there is the turmoil. There's no other way I can describe it. the turmoil in in the culture. There is no there's no getting away from it. I see it as a professor teaching my classes. My students are very anxious about the future. They do not believe the way I did when I went through the university that I might not get the job of my dreams. But by going to the university and getting my degree, I was sure of a decent job, a decent income. I could get married. I could think about having children. All of that. My students today, and I teach in a perfectly normal average uh university situation here in New York City where I live and work, and my students are light years from that perception. They do not expect to get a very good job at all. They expect to cobble together a little thing over here and a little thing over there to live in a fundamental condition of precarity. And I think what you're seeing is the reflection of the fact that we have a very very insecure job market. uh companies have been outsourcing, relocating jobs out of the country. They have been bringing immigrants in to replace American workers, Americanborn workers, and they've been continuing automation. I mean, the the my students mentality is we're all about to and this is a joke, but you know, you don't have to be a Freudian to understand what the joke is telling you. The joke is AI is eating our future and we are going to have to survive in an environment uh that does that. And I think it's the truth of it is that corporations are investing in AI. Whether that's a reasonable decision, that's another matter. I'm not so sure at all. But they are and they're pumping money into AI. Uh and they are resisting Mr. Trump's efforts to reshape the global economy. The bottom line is the job situation is both fluid and negative in terms of of how people are reacting to it. And I think those statistics reflect all of that. Finally, there's another there's a particular factor, but I don't want to get lost in that. The pandemic, the pandemic was a tremendous shock to the American working class on many levels, but one of them was uh not wanting to have the kind of work life that they had had before, finding that return to their job wasn't really feasible, discovering that their employer had taken the advantage of the pandemic to try very hard to get four people to do what they used to have six people doing that the conditions of their work were different. They then quit their job. They look for something else. They don't find it. And if I really had time, I would talk to you also about the immense explosion of illegal or off the grid, might be a better way to put it, jobs that young people are increasingly taking, which also impact those statistics that you see in the chart. There are cracks showing up in the labor force, which we can talk about in more detail. Fed chair Jerome Powell highlighted some of these concerns at the Jackson Hole Symposium last week. However, if you take a look at what's uh being released this week, uh GDP numbers for uh the latest quarter came out and uh the last quarter increased at 3.3% annualized. Um this is the second estimate from the uh Bureau of Economic Analysis released Thursday, August 28th. uh and the initial uh reported consensus expectation was only 3% and so GDP growth, real GDP actually came in a little bit higher than expected. It it seems to me that there are somewhat conflicting signals. On the one hand, perhaps we've got a slowdown in labor growth. Uh we've got like we've talked about earlier a rising inequality and the lower income households not gaining anything in terms of wage growth. But on the other hand, the economy overall is growing faster than expected. What do you make of this divergence? Well, I have to now say something I would not have said to you in our last conversation. I am a majority of American economists, leftwing, right-wing, and center, who do not know anymore whether we can take seriously the statistics coming from the government. What was what was done to the Bureau of Labor Statistics a few weeks ago when Mr. Trump fired uh the lady who was at the at the head of it uh because he didn't like the revisions to earlier months this year. The very downward revisions in the labor market that you're referring to has led us to wonder as a as a profession whether we are now going to have to develop our own statistical series if we even can do that. uh that we could rely on because the politicization uh that Mr. Trump undertook um really makes all of this very very very questionable. I is it possible that the GDP took a a bit of a turn up as opposed to something else? Yes, that is possible. There may have been some specific events that provoked that. But whether or not that's real, that will be determined under a number of scenarios about whether it continues or whether whistleblowers come forward and let us know what more and more of us are wondering about which is the nature of these data themselves. Data aside, what is your outlook for uh job security for the middle class of America? I think that's the ultimate question that a lot of my viewers want the answers to. Well, I wish I could give you an answer, but the honest answer is more durable uncertainty, if there's anything that Mr. Trump's uh economic policy, and I'm using that word loosely. If there's anything that policy has introduced that is really novel and new, it is radical uncertainty in our economy. We do not know whether we do or do not have a tariff, whether the tariff is higher or lower, whether the tariff will go into effect in 2 days, in 12 days, in 50 days, in 90 days. And therefore we do not know no matter what is done today and no matter what is said about what is done today whether that will apply. So for example the argument that what he's what his goal is is to bring manufacturing back to the United States. Well, then he's the worst enemy of that objective because if there's anything that will prevent a corporation from undertaking the expenditure and the time lost and the profit lost to move a factory from China to America, from Peru to America, from India to America, it will be uncertainty. Why come to the United States of all places if the tariff that protects the American market won't be there in 3 months or 6 months? The herkyjerky up and down of the last 8 months is an object lesson in what you cannot rely on and therefore they're not coming. It's a joke. statements. We will invest over the next 10 years, hundreds of billion. I love that. That's that's useless. No vice president of of a corporation is going to risk his or her corporate future by pushing for a move that could be ridiculous 3 months from now in terms of what has changed. And we are one more point on this. We are at the very beginning of the world's reaction to what is going on. These tariffs are, to put it in simple English, the demand of the United States for tribute. If you're a foreign company or country and you want to sell into the American market, you're going to have to pay tribute at the gate. That's what a tariff is. to get into the US market, a rich market because of our history, you're going to have to pay an entrance fee. And that's what we're going to charge you. Every country, every corporation that had any kind of export market in the United States will now be reacting. They're going to look for alternative export markets, not afflicted by uh tariffs. They're going to look for ways to get around the tariff to move product from their country which has a high tariff through some other country which has a low tariff or no tariff at all. All of these reactions are are the tip of the iceberg. They're going to go into different products depending on where the markets are. No company coming here can figure out all of those variables. There are too many and they're all changing each other. Therefore, you can't predict what market you actually would have coming to the United States if any part of that market is an export. Therefore, the uncertainty is now compounded by all of the reactions that are going to be taken. I recently spent a a little bit of time in Montreal, Canada, and I went there to ask people, which I did, everyone I could find from a you know, somebody I met in an elevator to someone I had a at a restaurant, what are you thinking? And and when when the dust cleared about their feeling, which I can best describe with the English word betrayal, they feel as though they were loyal allies of the United States who have been betrayed. Their word repeated over and over again. Well, they are figuring out I talked to a number of businesses there. They're now figuring out their strategy and they're asking about reorienting their entire economy to Europe, to China, to India, and and on and on and on. They are they don't know exactly where they're going to go. But here's what I can tell you. The American economy, including our job situation and our GDP, will be shaped by how the rest of the world reacts. We have never seen this before. A government that uses tariffs like a cl a club ba b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b b bashing this country today. It's Mexico and Canada. Next week it's India. Next week it's China. Next week it's Vietnam. And on what grounds? Here's where me as an economist, David, I got to tell you, it really does blow my mind. I see my president pointing to a deficit. The United States buys more from Vietnam, for example, than we sell to them. Of course, that's true. But Mr. Trump sees that as a sign that we're being cheated. Holy mackerel. We're a rich country. Rich countries buy more than they sell to poor countries. And you know why? Because they're poor. No one put a gun to the head of the Americans who bought all those Vietnamese products. And I just pick Vietnam as an example. but blaming the country and then using that to hit the world with tariffs. We are becoming economically speaking, I'm not talking politics here, but economically we are a rogue nation in the sense that people do not understand what in the world is going on and what is going to happen and they are figuring out ways to disconnect from the United States so that the uncertainty doesn't bite them where it hurts. In terms of the tariffs impact on the labor market and economic growth domestically overall, I remember when Trump uh first announced his plans to implement these tariffs uh back in January after inauguration day and people economists were comparing his plans to smooth Holly tariffs in the 30s which many economists believed to have been the impetus for the great depression. So two-part question, professor. Number one, is that a fair comparison to begin with? And if so, why haven't we seen a great depression already? Uh the answer to the the the last part first. It takes time. It always takes time. Uh a tariff, even one that was imposed, end of story. We don't have that. the the the the analogy with Smooth Holly doesn't work because we weren't in a great depression already and we weren't uh up and downing it and and delaying it uh in in this chaotic way of the last 8 months. So, it it really is a different story. But here's the most important uh uh kind of uh of role. The basic argument of the people who who connect the great depression with smooth holy is not that it caused the great depression but it worsened it. It the great depression needed a tremendous stimulus and what you were doing with Smood Holy was shutting down the world economy having every country turn in on itself. Th this was a very dangerous way to deal with a problem that should have been understood right at the beginning was global in nature. 1929 October when everything falls apart. It falls apart in Britain. It falls apart in Germany. Falls apart in France. Falls apart in United States. Hello. It's an international event. And the logic that people want us to learn from that is if you have an international economic breakdown, you better come up with an international solution. Otherwise, which is what happened in the 30s, every country tries to solve its problem at the expense of the other with the net result of making it worse for everybody. That's what's going on now. That is a similarity. But we are at the early stages. We might be further along if Mr. Trump had imposed a tariff, whatever it was, and declared it a done deal. That would have horrified the rest of the world. But what Mr. Trump has done has horrified the rest of the world. Anyway, this weekend there'll be a meeting in Beijing of the Russians, the Chinese, uh, the Indians, Mr. Modi, Mr. Xi Jinping and and uh Putin will all be there together with their many of their BRICS allies and we're seeing the coming together of the rest of the world and you can bet they will be discussing how they can help each other evade and avoid both the sanctions and the tariffs which by in by the way increasingly resemble one another. In other words, tariffs are being used like sanctions uh to punish the enemy. And I want to remind Americans not to lose sight of the most important statistic of all. The population of the United States is 4 12% of this planet. And the population of India, China, Russia, and the bricks is well over 50% of the people on this planet. It is not a sustainable economic strategy for a mouse to be hitting tariffs against an elephant. The mouse does occupy a large percentage of the global GDP does not. If you Here's the statistic that I teach my students. If you add up the GDP, not just of the United States, but of the entire G7, that's the United States, Japan, Canada, Britain, France, Germany, and Italy. You you add that up, it comes to about 28% of of global GDP. If you do the same thing for the bricks, it's 35%. I got news for the world. The big rich core of the world economy is no longer the West. It is already the east and that gap is growing. You can you you can pretend that that hasn't happened. But that didn't make it go away any more than a 2-year-old that puts her fingers in front of her face will no longer have to face the scary doggy that's barking a few feet away. You you America is caught up in a kind of denial of what's going on. And it comes to this question we began with cherry-picking your statistics to figure out how can I say something to myself that makes me feel better. Okay, look at the stock market. It's doing really well. It is. I'm not going to dispute that. I watch that. That's an index I'm interested in. But when you put it together with the other ones that we're talking about as we converse, you begin to get a picture of a society that is in all kinds of difficulty. And for me, for me, Donald Trump and what he does is a reflection is an effect of a society in trouble kind of desperately reaching out for new ways to try to constrain what is unfolding. Well, speaking of what Donald Trump is doing, I want to bring to your attention two trends that are taking place under his uh under his uh order. Uh the first is his removal of Fed Governor Lisa Cook. Uh Lisa Cook uh is now, as of today, uh the 28th of August, suing uh President Trump for what she called unprecedented and illegal efforts to remove her from the central bank. Uh now just for as a bit of context here, President Trump has claimed that uh Fed Governor Cook has falsified her mortgage documents and uh therefore is unfit to be at uh you know at the Federal Reserve. Uh Miss Cook was appointed a governor of the Federal Reserve in 2022 uh by President Joe Biden. She was the first African-American woman uh to serve in the role actually first African-American period. Uh her term was due to end in 2038. She served previously served under pre President Barack Obama's Council of Economic Advisors and worked at the US Treasury. And like I mentioned, she is now suing Trump for her dismissal. What is going on? What is your reaction to this saga? Well, I think Mr. Trump is uh busy firing huge numbers of people and replacing them with people that are more uh sympathetic to his policies, his viewpoints, his prejudices. And I include that word intentionally. Uh so I I'm not surprised, nor am I surprised that the reason is very trumped up, if I may be allowed the pun. Very trumped up. I have no idea what Miss Cook's problems with her mortgages were, but it is not at all uncommon to fill out mortgage documents with a certain I don't know uh freedom. You're you're trying to get a mortgage and you then stretch things. I you know, she may have done who knows. But that using that as a ground to have the president interfere in an unprecedented way in that agency of the government, that's an incredible stretch. You know, you you wonder, wow, you couldn't come up with something better than that? Wow. And for me, let me interject a parallel. Uh I'm a graduate of Harvard University. Uh were was there at Harvard anti-semitism when I spent my four years there? Yeah, a little. But by my experience, and I'm born and raised and worked in the United States all my life, the amount of anti-semitism I ever noticed at Harvard was much smaller than I noticed at countless other institutions and places in American society. If you were really interested in dealing with anti-semitism, which is by the way much less of a problem now than it was when I was a a college student, I would give you 10 places you could go and look at it. But he didn't do that. He goes to Harvard against whom he has Harvard Harvard grudges for a long time. goes after other universities on the grounds of their inadequate attention to anti-semitism. I mean that these are arguments that are made up. This is childishly transparent. So the answer is he wants as we all know. It's almost as though he wants us to see that the arguments don't matter. We all know he's been screaming at Mr. Powell to lower interest rates. The whole world has been watching that soap opera for months and now he can maybe get around Mr. Powell whom he can replace in a few months anyway because Powell's term is over in May. But he's in a rush. He's so worried about the damage to be done to the American economy by his tariffs that he will be blamed if a recession comes that he needs to preempt it by lowering interest rates. Getting rid of Ms. Cook is simply a a cheap easy way to do it and citing her mortgage. I mean, it's so transparent. It's offensive. if he actually believes the rest of us are so stupid as to take seriously what he's doing. Well, let's just take a step back and look at what is about to happen. What would happen to the Federal Reserve and ultimately monetary policy and the economy if Trump were successful in his attempt to replace Fed governors with those who are more loyal to him and his cause? All that would happen is that the normal activities of the Federal Reserve and let's remember it's in order to their job is to control the quantity of money and the terms upon which money is borrowed and lent and the purpose of that control is to give us uh stable prices and as close to full employment as they can get us. That's their charge. That's what they would continue to do. But with this change, they would now be much more quickly subservient to whatever the president in power wants than they have been. They have tried very hard in the 100 plus years that the Federal Reserve has been with us to function like central banks are supposed to independent of the of the coming and going of political parties. their job. I won't repeat what I just said. Price stability, uh, high employment, uh, and all we're going to see now is that that is going to be compromised by getting a a politician out of a jam. If a if a a rep a recession threatens, well, then get me out of that problem. Mr. Trump seems to have a clear idea. Lord knows where he gets it, but he seems to have a clear idea that a recession is a bigger danger to him than an inflation. Between you and me, I don't agree with that at all, but he thinks so. And so, he's now going to manipulate the Federal Reserve in a way no president before quite dared to do to get his outcome. You here's the irony, David. You and I have this conversation. He, let's assume he succeeds. He gets rid of Cook. He puts in his own people. Then he gets rid of Powell. Puts in more of his own people. Has a majority. Runs the Fed. Lowers the interest rates and it contributes to a runaway inflation. Mr. Trump will be out of office because of the inflation. And the only ironic twist will be his interest rate depression brought about the horrible inflation that drove him out of office. Let's just hypothetically speaking take a look at this anti-establishment narrative here. What if we were to have a non-independent Federal Reserve? In other words, what is wrong fundamentally with having a Fed that is controlled by the White House or Congress? Would it not would it not make the cohesion of fiscal and monetary policies a little bit more streamlined? Would it not make the country's economy uh easier to control and and steer? I don't think so. And and the reason is I I really do know the economics. It's my job. We don't know. And the we I'm including me. We don't know whether the economy at this point is somehow more likely to tilt into a recession or into an inflation or into the stagflation which is the combination of both of them. We don't know. It is therefore very important that different groups of people weigh in with different ideas about how that's working out both before it begins to happen and as it unfolds. Not because one or the other is right or wrong, but because the difference is crucial to coming up with a better decision than you might make if you excluded one voice. We now have a a Congress that debates, do we need to do this? Is a recession coming? Do we do something? They can make a statement. They can make decisions about spending money. They can make decisions about borrowing money. and they act. The Senate does, the president, the executive branch does. Well, we also created an independent central bank called the Federal Reserve in order that it also without the pressures of politics does that. The problem with the Congress is when they discuss interest rates, they are not just discussing it the way the central bank does. what's good for the economy as a whole. The people in Congress are subject to enormous pressure, lobbyists, donations from people who have a private interest in lower interest rates. The real estate industry, of which Mr. Trump is a representative. They always want lower interest rates because it makes it cheaper for people to buy real estate since everybody virtually buys it on time and therefore the mortgage rate will come down. Housing construction will be We don't want that to be the only determinant. We don't want that. We want there to be people weighing in on the conversation not because they have a private profit motive but because they have other considerations. That's the whole logic. Otherwise, we wouldn't need a central bank. Look, there was a part of the 19th century when we didn't have a central bank. President Andrew Jackson got rid of the Bank of America. We had one like they have a Bank of England or a Bank of France or a Bank of Italy, but he got rid of it in the name of libertarian private enterprise. Blah, blah, blah. And for some years, for some decades, we didn't have a central bank. And the level of monetary chaos, that's why we started calling them panics. The panic of 1837, the panic of 1853. And we by after a while of that we brought back in central banking ultimately with the Fed at the beginning of the 20th century because the alternative was too chaotic leaving it to the private profitdriven motivations. We're losing that again. And there is no reason, no evidence that that's a good idea. The evidence is it's convenient for Mr. Trump's idea of what his economic problem is, and he's in a hurry to fix it. That's not a basis on which we ought to allow such decisions to be made. Another development I'd like to get you to comment on is uh the government participating in acquiring shares of companies just last week. Uh the US government has taken a 10% stake in Intel. Uh Intel shares actually rose about 6% on the trading day last Friday. Uh it's it's said that the government will also have a warrant to buy an additional 5% of Intel shares if the company is no longer majority owner uh of its foundry business. Intel said that the US government won't have a board seat or other governance rights. Uh the secretary of commerce Howard Lutnik commented that this is part of the overall government strategy uh to secure uh chips ownership as part of the chips act. Uh Trump has said recently though um this week that uh I will make deals like that for our country all day long. He said on Truth Social, "I will also help those countries that make such lucrative deals with the United States. I love seeing their stock price go up, making the USA richer and richer, more jobs for America. Who would not want to make deals like that?" at Trump added that stupid people are upset with a move that he said will bring more money and jobs to the US. Professor Wolf, are you part of the uh stupid people quote unquote that Trump has said doesn't like this plan? One of us is either Mr. Trump or or the rest of us. In any case, let me let me respond. This is a momentous decision. He may have gotten it out of that sad executive whom he tried to get fired from his job. Uh, as we saw a couple of weeks ago, for those of us who pay attention, uh, he impuged that guy's loyalty. The head the CEO of Intel, the guy had to go and beg to be left alone. He had to go to the White House and all the rest of it. And now we see what it is he he he he agreed to and what may have been the purpose by of impuging his loyalty, namely to get the 10%. There is a definition of fascism that comes out of the experience of Germany and Italy. And here's the definition for those who may never have learned it. It's when the top levels of the corporate capitalist system merge with the top levels of a particular political party. Mussolini's party in Italy, Adolf Hitler's party in Germany. They merged the two step by step, company by company so that the government could be a powerful force shaping what the companies do and vice versa. This was done in the case of Germany. The history I know real well. German is my first language. I speak it. I studied it. Uh my mother was born in Berlin. I mean I was born in the United States but my mother was German. I know this history. The Association of German Industries invited Hitler to become the next chancellor and the leader of Germany invited Hitler to take power in January of 1933. and he proceeded to bring together the peak spitz in German, the peak of German industry together with the leadership of the Nazi party. Anyone who knows that history, and of course here in the United States, we benefit from not knowing it, but anyone who knows that history would think long and hard about what Mr. Trump just did. that he is glad to make such deals tells you only about his ignorance, nothing else. Now, let me tell you why it's a problem. Every other company in distress, particularly if it's a large company, can and will now go to the government to get bailed out. That's what this is. The government is injecting, if you read the details, $9 billion of our tax money is being handed over to the board of directors of Intel to use as they see fit. Wonderful for them. They now have money with which to try to fix that company, which by the way needs fixing. Its stock, its stock price is low. It has had problems, etc., et etc. So now let's try to understand if you're a difficult company you're not going to figure out necessarily how to improve your technology how to get a new market there's another way to solve your problem go to Mr. Trump who has just invited you, come so I can make a deal. Let me give you a second example. When a union strikes, when the union at Intel, it has 100,000 workers. When the union strikes, it will be striking the government. Will Mr. Trump call out the army the way he is against the cities of Chicago, New York, LA, DC? Are we going to see more and less government ownership? Will Mr. Trump start firing people on the board the way he is that the Fed because the share the government has is a dominant share. Whether they have a seat on the board or not is faking irrelevant. They will have the power that goes with it. If you don't do what the government wants, it'll sell those shares and that will depress the price of your stock right into the toilet and you will not be able to function. And you're the CEO. You'll know it. You know what's happening? The fascistic merger of the corporate and the political party top. And we're all watching what is going to be a very dangerous day. You call this fascist, but how is this fundamentally different from what China has been doing for the last many decades? How is this different from, let's say, Canada, for example, which has state-owned pension funds investing large numbers of shares in public companies, for example? It's a very, very good question. If the company is continuing to use the basic capitalist structure, the division of the people in an enterprise between the employers who run it and the employees who do the work, then we call that state capitalism. The government is becoming an employer and the employer is becoming the government. Does that exist in other societies? Absolutely. In some more, in some less. One of the differences though, if you want to look at China, is what is the use or the purpose of doing this in the third world, what we used to call the third world, Asia, Africa, Latin America. The official, the ostensible, the reason they give and that's more or less true is to raise their societies out of the poverty that is their number one goal. So they mobilize their resources. China is a perfect example. They divided their country roughly in half. Half of it is private enterprises and half of it is government enterprises and they all use the employer employee capitalist model. But China's number one boast is it lifted 800 million people out of poverty in the last 25 years. Notice what Mr. Trump says. Is this a way to really help the mass of the American people? Not at all. He says that right away it's going to make us richer. The stocks went up. Yeah, that's the point. It's not that there isn't a similarity. It's what it is used to do here. It is used and we go back to the beginning of our talk today. It's used to deepen the inequality of our society. Otherwise, you wouldn't help Intel with $9 billion. You know what you'd kn use the $9 billion for? To help the people at the bottom. That would lift them up. And by the way, the money you give them that the bottom they would spend. And what would they spend it on? The goods and services capitalists produce. You know what you might call that? Trickle up economics. It's the alternative to trickle down. Fascism is when you organize the economies to make those in charge even richer than they would have been without it. And and you then assert Mr. Trump isn't smart enough to do this. But you then assert it's good that we do it. It'll trickle down. It will mean jobs in America. If you know what Intel is, you will know that it is a highly capitalized enterprise. It will not produce very many jobs. And there are dozens of ways to use the same amount of money to produce way more jobs than giving it to Intel will ever generate. On your trickle up philosophy, how would giving money to the uh to the lowest wage earners help invigorate the economy? Here's how it works. You have your you take your nine billion dollars. you give it to Intel. The first thing Intel does share shareholders is take a number of steps to improve the the salary packages for their top executives. The second thing they do is take a number of steps to improve the dividends they pay to their shareholders to keep them happy. The last thing they do is give money to their employees. You could take the 9 billion. Why don't you short circuit the process? give it directly to the employees. You know what then happens? They spend every nickel because they're poor. They don't have any money to to save. They can't meet their needs as it is. That's why you help them. And you get the benefit which all economics teaches that if you give money to poor people, they spend it. And if you give money to rich people, they don't. If you give money to the poor people, they would quit their jobs. And this is just a theory. they would quit their jobs and Intel wouldn't have any employees to run the business and the business would collapse. How would you respond to that theory? You give them a give them a pay for a for a job. If that's your problem, give them the job that they want. We have 10, you know, 10 million people, conservatively estimated 10 million people without a job. Create 10 million jobs, make them pay well. These people will be beating you. I I'll I'll introduce you to my students. They'll be lined up to get these decent jobs that are secure government jobs. That's what they want. They will come and they will respond and they will spend every nickel. And that'll give much more of a boost to the economy. that trickling up than giving it to the richest people in America, the corporate executives who we know spend their time figuring out how to quote save on labor costs because it's what makes your business more profitable. That's not what we need. What Mr. Trump is doing is giving it to them cuz he's them and they're him. But that's not the solution to our problem. And in the end, the growing problems of this society will undo Mr. Trump long before he will undo them. All right. Thank you, Professor Wolf. We'll end it here for today. We will follow up with Professor Wolf on his views on the current geopolitical hotspots and the rise of militarism and what that means for capitalism and global economies. Uh stay tuned for that in a few weeks. And uh for now, in the meantime, you can follow Professor Wolf's works in the link down below and follow him on social media also in the description. I'm Dave Lin. Thanks for watching. Don't forget to like and subscribe and we'll see you next time.