On contact: Economic & political collapse of USA

CH: The United States has almost six million confirmed cases of the coronavirus and has suffered nearly two-hundred thousand deaths from the pandemic, meaning that the United States with less than five percent of the world's population has a quarter of all cases worldwide.  It is estimated that 300,000 Americans will die from the pandemic by December and 400,000 by January.  The United States, with the largest numbers of COVID-19 cases and deaths of any nation in the world has, at the same time, proved incapable of coping with the economic and social fallout from the virus.  The Republican-controlled US Senate failed to renew the enhanced federal unemployment checks and extend a moratorium on tenant evictions.  With real unemployment probably close to 20%, the official figure of 10% excludes those furloughed or those who have stopped looking for work, as well as some 40 million people who are at risk of being evicted by the end of the year, spells social unrest and chaos.  An estimated 27 million people are expected to lose their health insurance.  Banks which have often halted lending are stockpiling reserves of cash to cope with the expected waves of bankruptcies and defaults on mortgages, student loans, car loans, personal loans, and credit card debt.  All of this exposes a deep and perhaps fatal crisis within the corporate state caused by unregulated and unfettered capitalism that has weakened and hollowed the country out from the inside.  Joining me to discuss this crisis is Richard D. Wolff, Professor of Economics Emeritus at the University of Massachusetts Amherst, and currently a visiting professor in the graduate program in International Affairs at New School University in New York City.  So Rick, we've seen crisis within the capitalist system before, this boom and bust is kind of a hallmark of capitalism.  Why do you think this one is different?

RW: Well, there are two reasons I would bring forward right away.  The first has to do with the fact that we have a cash-cading problem now.  We had a crash in 2000, which we called the dot-com crisis.  We had a crash in 2008 which we called the subprime mortgage crisis, and now we have this one in 2020.  Every seven years, we seem to have the plague of capitalism's instability.  Only they've gotten worse with each iteration.  More money has been spent by the Federal Reserve, created and dumped into the economy.  It doesn't solve the problem.  The instability gets worse.  That alone should have been a big warning sign that something serious is underway.  But beyond that, we've always known that capitalism has these periodic crashes every three or four to seven years.  That has been true for three centuries.  And we've always known that the danger was you'd have one of these downturns, it would be bad, and then it would coincide with some other political or natural disaster and that's what we have, a once-in-a-century pandemic or worse coming from viruses which have plagued the human race for centuries, for as long as we've existed as a species.  We knew it, but we didn't prepare for it, we cannot contain it, because the combination of an accumulating critical periodic breakdown with the virus is too many problems happening too much at the same time, and it overwhelms a system that was already, as you put it, rotting in a sense from inside.

CH: I want to ask about the response, the CARES Act.  So the CARES Act hands trillions in funds or tax breaks and it's who the recipients were, oil companies, the airline industry, which alone, I think about 50 billion in stimulus money.  Even the cruise ship industry, which got a hundred and seventy billion--there was a hundred and seventy billion-dollar windfall for real estate, private equity firms, lobbying groups, authorized four hundred and fifty-four billion for the Treasury Department's Exchange Stabilization Fund, that's just a big slush fund for the Trump White House.  1.5 trillion in loans to Wall Street which nobody expects will be paid back, the American billionaire class has increased their wealth by, I don't know what the figure is now, 500 billion dollars.  Almost all of this money--or the pandemic was used to give almost all this money.  It was sort of a repeat of 2007.  And talk about the response to the pandemic and why that has exacerbated the problem.

RW: Well, think of it as a kind of out-of-control, trickled-down economics program.  You're giving all this money to whom?  When you give money to "An industry."  Or you give money to "An enterprise."  Let's be real.  You're giving it to the tiny group of people who sit at the apex of these institutions.  The board of directors of a corporation, that's 20 people, the major shareholders of a corporation, typically also 20, 30 people.  They're getting together and they're using that money to stabilize their situation within a collapsing capitalism.  They have no incentive and no reason to produce more goods and hire people.  Are you kidding?  In the middle of massive unemployment, you don't produce more goods and services because your major problem is you can't sell what you already have in inventory.  So where does all the money end up going?  Well, the only place to make money in the capitalist system, the driver of the whole thing, is in the stock market, where you can all get together in a kind of lunatic asylum, in which one person uses the government money to buy shares, in the hope that another one just like him or her will buy those shares from him two weeks from now at a higher price then resell them.  And the game of craziness is played with the government's money and the Federal Reserve's money in the stock market, everybody else's situation deteriorates, and what do we have?  We have Jeffrey Bezos and people like that earning billions of dollars more per week by virtue of this stock market craziness, while the massive people suffer unemployment, evictions coming down the pike.  I mean, you could not have a more extreme demonstration of a dysfunctional system than one that had fifty million people filing for unemployment over the same period of time, where  the three hundred richest people become richer by factors of tens of billions of dollars.  It should not take an argument to demonstrate this is a system that doesn't work.

CH: But we know, historically, the consequences of this.  So the American public was already pretty much at the breaking point before the pandemic, you know, real wages have risen by 12% since the '70s, although I think production has risen by 77%, 200,000 people, this is before the pandemic, are un-housed, sleeping under bridges, and in cars.  You have half the country living in poverty or near poverty, at least a quarter or a third of the workforce is working at minimum wage without benefits.  And now the pandemic hits, and the response of the oligarchy, as you correctly pointed out, was so myopic and self-serving.  And the inability to respond even to the most basic needs, housing and extension of unemployment benefits.  What are the--and of course, the stock market, the casino of capitalism running amok.  What are the--what do you think the consequences of all this are going to be?

RW: Well, here's my response to that, and I apologize in advance if this is heavy material for people to hear.  It's a--the whole for me, as an economist, I am the witness to a group of leading capitalists in this society getting together and saying to each other, "Never let a good pandemic go to waste."  In other words, what this pandemic is doing, is in a short amount of time, hothouse fashion, doing to the American working class, what had been done slowly over the previous 30 to 40 years is now accelerated.  It's like taking a normal film and speeding it up.  You--what are you seeing, the conversion of the mass of the American people into the kind of desperately poor hinterland that we now recognize in so many parts of the world.  A wealthy enclave in a few basic cities, surrounded by a sea of desperados living in the slums that had become famous around the big cities of the world, you are--you have gone beyond destroying the middle class.  You are now in the process of waging, really, class war on the mass of the people.  Look at the little signs, the Consumer Protection Board three days ago announced new rules that will allow collection agencies to bother you up to forty times a week, allowing the same collection agencies to now bother you for the debts of your dead relatives, even though in the past you could not be touched for those.  They're enabling all the vultures to gather around and pick at what is left of a working class that not only lost its middle class aspirations, but is now worried about the most basic survival mechanisms.  And there again, you see the parallel between what existed in the countries we used to see on television, on National Geographic specials, now that's coming here, answering that famous old question, it can happen here with the answer, "Oh, yes it can, here it comes."

CH: And that I would argue as--I don't know if you would agree, is why you have militarized police, why we hold twenty-five percent of the world's prison population although we're less than five percent of the world's population, because as the citizenry and particularly the working poor have been stripped of the ability to really live sustainable lives, you have ramped up the mass incarceration system and militarized police as the two primary forms of social control.

RW: Yeah.  You know, the blindness that--I will agree with it, but what has impressed me in recent weeks has been the utter blindness of the people who run this society to what it is.  Or let's put it differently.  Maybe they're not blind, and if they're not, well then they're playing the following game.  Let's pretend.  Let's have presidential conventions which are, you know, exercises and cliche that had nothing to do with the underlying reality, that literally create fantasy worlds of distraction, as if they were designed to get people to not have to face what they know they will be living through the minute they turn off that television.  The Federal Reserve announced a couple of days ago a change in policy.  They're now going to throw so much new money into the economy, they hope, that not only will that give another boost to the stock market, worsening in equality, but as Mr. Powell put it, allowing an inflation to get underway here, allowing prices to rise.  It blew my mind.  It means that the working class, not only looking at everything we've talked about in the last few minutes, will now be able to add a rising cost of living confronting them when they have the least conceivable way of coping with it.  It--again, it throws you into the notion, "What's wrong in this society?"  In the--last time we had unemployment like this, The Great Depression, one of the responses was a mammoth program in government jobs, wasn't the solution to everything, but it was a way to keep millions of people from the disaster of unemployment, doing something socially useful, building our national parks in the west, doing the first ecological efforts in this country.  Why have we not done it?  Why do the Democrats and Republicans don't even discuss a government jobs, you know, it shows you that the disconnect between the rulers and the ruled is now as deep as the disconnect of our inequality economically.  And that creates a political economy that is socially explosive.

CH: Great.  When we come back, we'll continue our conversation with the economist Rick Wolff.  Welcome back to On Contact, we continue our conversation about the collapse of the American economic and political system with economist Rick Wolff.  So, let's go back to the stock market.  Which is--defies any kind of rational economic sense I think we clearly know where it's going.  But talk about what is probably inevitably going to happen to the stock market and the consequences of that.

RW: Well, the stock market as you rightly say is now disconnected from the underlying so called real economy.  This is a stock market completely dependent on the Federal Reserve.  If I could make a side comment we used to have a debate in this country, it wasn't genuine, but it was the dominant debate about whether it was more or less a government intervention that we ought to endorse.  It's important for everyone to understand that one of the signs of the collapse of the empire is that Republicans and Democrats now stumble over one another to make the economy more dependent on the government.  The stock market like the rest of the economy is now completely on life support from the government.  Either from the Treasury or from the Federal Reserve but one or the other is what's keeping you open, alive, functioning, pull those away and it all collapses.  So, the notion that government…

CH: And let me just get--let me interrupt Rick just to explain that's because they are using the money to buy back stock is that correct?

RW: Absolutely the corporations use the money to buy that stocks, corporations are themselves speculators in the stock market.  They buy shares which they're allowed to do and resell them.  The banks do the same.  The insurance companies do the same, the pension funds, the private equity fund, they all play the game and they do it because they know, I know some of them personally.  They know exactly what we're talking about.  They know that the stock market is being kept alive by an endless flow of cheap money.  You can get all the money you want from the Federal Reserve, you pay historically low interest rate, it's like a free money, then you go to the stock market, buy shares, confident that you can resell them later at a higher price.  And why are you confident?  Because your friends are the ones borrowing equivalent sums to play that game with you and the game goes up and up and your portfolio looks better and better.  And you know you become richer and richer and what's the problem for them?  Well, the answer is as they know that this is a bubble, that's what we mean by the word bubble and we know what bubbles do, they burst, they always have, this one will too, why?  Because everyone playing in the game understands that the one who wins is the one who gets out before the bubble.  So, it doesn't take much any hint, any suggestion that something is going to go wrong that some control of the society isn't working and you're going to see a sail-athon of the sort we've never seen before, the burst bubble we will see how it replicates previous bubbles that burst.  This is a very dangerous, desperate kind of activity that goes on where the players themselves know where the endgame is and the whole hope is I will get out before it breaks and so I won't be the one who loses.  To have the whole economy now resting on that gambling casino is a sign of a society that basically has given up.

CH: I want to ask about raising interest rates because monetary policy going back decades I think you know better than I at least with the Reagan administration has--the mantra has been, you know, no inflation, no inflation, no inflation, no inflation.  What changed?

RW: The desperation, the--here's what the Federal Reserve sees through their eye.  They see correctly that the Democrats and Republicans are not even discussing a JOBS Program.  So, there will be no way that the treasury or the President or the Congress is going to solve an unemployment problem that is now, not only as deep as The Great Depression but has no end to the story, it just extends into the future.  So, the Federal Reserve is desperate because it understands it's the only bowl work left to try to do something.  So, the only tool they have interest rates at zero maybe even negative to pump the money in and then they cross their fingers and hope that money some of it will end up in the position of getting some of these people back to work.  It hasn't worked in the 20--2000 crisis, it didn't work in the 2008 crisis and it's not working now.  But you know if you have nothing else to do but that and nobody else is doing anything, you throw that.  It's like a Hail Mary pass you hope that somewhere, somehow it ends up.  But it is--the very process of this kind of desperation gives away just how serious the crisis is.

CH: Let's talk about the economic and the political consequences of that game.

RW: Well, I think that we're seeing people begin to become desperate and when they become desperate, you know, they go in different directions as all desperate groups of people have.  Some go to the left, some go to the right, some quit altogether.  You know, going to the woods and replicate Thoreau or something else like that.  And I think what you're seeing is in poor communities, there is a level of desperation that the police will not be able contain.  It will drive some policemen to the fascistic brutality we have been able to see, they cannot cope with this situation, it was never fair to the police to ask them to put the--to put them in that situation.  Some of them are smart enough to understand it.  Others of them act out the role that has been assigned to them as if they could.  I think you're going to see remarkable, a breaks from political normalcy.  I would commend and I really mean this, the National Basketball Association players, the ones who said, "We're not playing.  We're not going to be the spectacle for you.  There will be no business as usual."  Let me talk about that because I think that's the most positive straw in the wind.  These are people who are saying something very profound, these wonderful athletes.  They're saying that the political parties are not a vehicle for us to express our political goals which is to stop killing Black people in this country.  And the labor movement unfortunately is not functioning in that way either.  So, we are going to begin to find alternative power that we have access to which in our case is the NBA Playoffs and things like that.  This is what a great theorist years ago called the beginnings of dual power.  When the working class looks for its own power institutions because the existing ones have become irrelevant to what the massive people really need in the way of economic reality.  And I think that break is a way of underscoring the fantastic irrelevance of the two political party conventions and of the other political establishments of the past that is in its way more profound than having the Republican establishment give way to a Trump or even the Democratic give way to a Sanders.  This is a more from the base saying, "We will not allow this profit-driven system to earn profit if you don't make a society that's fundamentally decent and livable."

CH: Economically where are we--what's it going to look like if eventually the stock market bursts?  Chronic unemployment, evictions, what is it?  One in five children don't have enough to eat.  What is it--what is it going to look like on the ground for working men and women?

RW: I think they're going to be confronted with a spectacle they never imagined, which is a United States that looks like Brazil with a capitalist class that is literally international, that has the same mobility that the super-rich of India and other places have had for a long time.  An apartment in New York, another one in Paris, those people living in a community which replicates what their individual societies were before but now on an international scale, where the mass of the American people sink down into the status of the mass of the working class around the world.  That that special exceptionalism that allowed the working class in this country to enjoy a rising standard of living over the last 150 years to really live in a different way from the working classes of most of the rest of the world that will disappear.  And the political and cultural fallout from this transformation, from this reentry back into the massive conditions of the working class that is going to be very, very difficult for an American working class that thought that it's situation was exceptional.  The exceptionalism is now being systematically destroyed and that is going to have as I say extraordinary political and cultural ramifications for the whole country.

CH:And this is as true under Biden as it is under Trump isn't it?

RW: Yeah.  The difference will be in nuance, in the pace, but when I heard Mr. Biden say that he was going to devote $300 billion to the program I realized we are living in a total fan--$300 billion would be the equivalent of saying to a person facing unemployment and eviction, "Here's 74 cents I'm going to help you.  Here's 74 cents." Not understanding what the relationship is between the level of problem you have and the absurdity of what you are offering.  So, yeah, they don't have any clue.  They live in another world as most Americans have thought for a while.  What they're not anymore able to escape is you can't blame Mr. Trump or Mr. Biden, it's beyond all that.  These are--these are figureheads, they are the heads of parties that are about the careerism of our politicians and not about the social issues that we face as a nation.  And it's never been clearer than today when you see the stock market versus where we are as a people economically and you see those conventions where we are versus where are as a people with the political absence of a response to the worst economic and public health crisis this nation has had.

CH:We're going to have to stop there.  Thank you very much.  That was economist Rick Wolff.

RW: Thank you Chris.