Chapo Trap House - UNLOCKED 713 - NO MORE BULLSHIT! (Economy Edition) feat. Richard Wolff (3/9/23)

Episode Date: March 17, 2023

Professor Richard Wolff returns to the show for an economic update on inflation, employment, student debt, China, and the U.S.’s future role in the world. For more from Prof Wolff, subscribe to Democracy at Work on YouTube: youtube.com/democracyatwrk And find all the info on Economic Update here: https://www.democracyatwork.info/economicupdate

Greetings, friends. It is Thursday, March 9th. This is your TrapoTrap House. It's me and Matt today, and we are discussing the economy. I know it may sound boring, but the economy is the thing that determines how much stuff there is, how much of that stuff you get to have, and ultimately, who gets all the best stuff. But I don't want to be hopelessly out of my depth for this discussion. So, here to enlighten us on this phenomenon known as the economy is returning guest, Professor Richard Wolff. Professor, welcome back to the show. Well, I'm very, very glad to be here. I have good memories of the first time, so let's

go to it. All right. Well, there's a lot of things that the economy covers, and we'll get to things like the debt ceiling, student loan forgiveness, economic warfare between NATO and Russia. But I want to begin with probably the facet of economic policy and reality that is probably most present in the lives of everyday Americans. And that is inflation. It causes and consequences. We hear about it all the time. But it's pretty simple. It's like when you start to notice that things are more expensive to buy, particularly at the supermarket as of late. I'm sure you've noticed this. That's inflation, and it's considered a problem. But like almost everything else

in the economy, the way inflation is discussed, it's sort of described like it's gravity. It's just some sort of natural, immutable phenomenon. So Professor Wolff, do prices just go up like the tides, or is something else being alighted in this discussion of inflation? Well, as your questions show, you already understand that the simple answer to your question is, oh, yes, elided is the nicest word you could have come up with. And I say this as a person who's been doing economics all my adult life, teaching it, writing about it, the level of bullshit. And I don't know any other way to describe it. That's honest.

It's floating around there now, and I'm used to a lot of it. It's amazing. I really think, and maybe we can go into this later if you're interested, that there are things going on in this country that we ought to be paying attention to because what is being spoken about and the way it's being spoken is so disconnected from what's actually going on that you either have to believe people are terrified by what they see and so have to create an alternative universe or are so befuddled by what's happening to them that they can't think straight or speak straight. And inflation is a wonderful place to start. So let me very briefly explain. And if the things I say strike you as straightforward, good. But if you're

familiar with the way it's discussed in the media, you'll know that I'm doing it quite differently. Here we go. Inflation is a very simple business. You captured it. It's when prices go up. All prices don't go up the same. Some prices don't even go up at all. But if in general, the majority of things go up, that's an inflation. That's all. There's nothing more complicated than they have to be. And the opposite, by the way, when prices go down, is called a deflation. Those are just the words that economics has developed. Number two, who is in charge of prices? If you're going to ask the question, why do we have an inflation? A good way to start is to say, who does that? And here's something might

surprise you. You and I don't. In other words, when we go into a supermarket, we don't get the hackle. That's right. We don't bargain. Come on. 99% of the places we go, we pay what this little sticker on there tells us to pay. So you might be interested to know who puts the sticker on everything. And the answer is very important. It's the employer class. If you've ever been an employee, you will have noticed something. No one ever invites you into a room and asks you to participate in setting the prices of whatever it is you help to produce. Not going to happen. It's not your business. It's not your job. It's employers. So let's get right to the core. How many employers are there in the United

States? Well, estimates vary. But if I say 3% of our population, I'm being really generous. The other 97% of us don't participate. So right off the bat, you know that an inflation is something inflicted on us by an identifiable group of people, the employers. Okay, next question. Just logic. Why would the employers do that? I'm setting aside, for those of you that take democracy seriously, that inflation means a tiny minority is sticking it to a vast majority. And the tiny minority is not accountable to that majority. It wasn't elected. It had nothing to do with that. Well, it seems like, you know, so if companies just like if these decisions are made by a very small group of discrete individuals at private

firms, like, I mean, look, if they were just raising their prices, and then we weren't using the word inflation to discuss the phenomenon, then people would be mad at that. They'd be like, well, they're being greedy. They just want to make more money. They want more profit on each item sold. And if they can charge more for it, they're going to do it, right? But when it's talked about, oh, we're in an inflationary crisis right now, it's sort of like, oh, well, they have to raise prices because it's assumed that the cost of producing these goods has also risen, so that they have to offset that in some way. The people who raise the prices in a capitalist economic system, because that's how it works,

it isn't a democratically elected city council or a democratically elected parliament. No, no, we allow private individuals who stand to gain personal wealth by doing it to make the decision. And you can see the minute you understand it, the problem, they don't want to be hampered in doing this. They, in fact, do it to raise profits. Let me remind you, having taught in business schools in my life, what we teach young people getting an MBA, you want to go on and be hot shots in the business world, is that every decision they make should be geared to improving the bottom line. The profit, not just the pricing, but all decisions are to be governed by that objective. You will get rewarded in your life if profits

go up, and you will not be rewarded if the profits go down. Profit is the measure we use. The honest businessman and woman person will tell you, yes, I make all my decisions by evaluating their likely impact on profit. The problem with the inflation is, if you're going to take advantage, which every employer does, of the position that capitalism gives the employer, you're going to be, and here comes the answer to your question, you're going to be stuck with the responsibility for what you just did. You raised the prices. So how are you going to handle that? You're going to make the public angry at you. You're going to make your customers pissed off at you. This is not good. Solution, come up with

bullshit. Better yet, hire someone like me who specializes in this bullshit and who has a predigree as a professor of economics to come out there and really do a number, and here we go. Here's the number. Number one, not in order of importance, but in order of bullshit. Number one, supply chain disruptions. Up on the screen, we see the Suez Canal and that big freighter you may remember last year. It was stuck sideways and blocking the canal. What a wonderful picture. Look, a ship screwed up in the canal and the Egyptians don't know how to run a canal, whatever, but it's not my fault. I'm just a lawyer. I got stuck with this. Okay, here's the answer. If you're honest, if you're busy pumping the bullshit to get

yourself exonerated, no, but we're not here for that. I presume that's why we talk together, right? Okay, here we go. Every major corporation in America has something called a purchasing manager, usually part of a purchasing department. The job of the purchasing office in GMGE or any other sizeable corporation is to deal with, get ready, supply chain disruptions. That's why they're there. That's why they have an office with computers and secretaries and assistants and deputies. They're supposed to have fallback where you can get your inputs if the regular source is interrupted by weather, by a fire, by a war, by who knows what. You have to have plan B and plan C. That's your job. If you come to the CEO and say, there

are supply chain disruptions, the CEO will smile, roll back in his chair and tell you you're fired because that's your job. That's why we hired you so that you can handle what is normal in every business, which is supply chain disruptions. They happen all the time. Even if they happen to bit more, you're supposed to worry about that, have a plan for that, and I can introduce you, if you'd like, to loads of companies who, in fact, got through the supply chain disruptions perfectly fine because they had a good purchasing manager and they thanked him or her kindly for being. So that's the first bullshit. Here comes the next bullshit. It's all the fault of Mr. Powell and the Federal Reserve. Okay, most Americans

don't know what the Federal Reserve is. It's our central bank. We don't call it the Bank of America because our private company has the name. In other countries, it's called the Bank of England, the Bank of Germany, the Bank of France, the Bank of Italy. I have visited those places. I've given papers that comfort it. Only in this country do we have this odd, weird name, which takes an extra five minutes to explain to people why you would do this. This is a mystery. But in any case, like every central bank, the job of the Federal Reserve, here we go, the job of the Federal Reserve is two things. Prevent a price instability. So that is either an inflation or a deal. Stable prices, that's

your first job. And your second job is to use your ability to manipulate the monetary system to minimize economic downturns and to manage a balanced kind of economic growth. That's your job. So the first thing to notice about inflation is that the Federal Reserve messed up. It didn't do its job. We're not supposed to have these things back a century ago. We created the Federal Reserve to do that, which is the same function central banks have across the world. They don't create the inflation. They, by the way, manipulate the amount of money. So here comes the bullshit section B with the Federal Reserve. You wave your finger and you say, they created an enormous amount of money over the last 20 years. Absolutely

true. But you leave it at that. But you can't do that. You have to ask the question unless you are slow. Why did they do that? And the answer is our capitalist system, which is not yet, now you've got to clue why we don't go there. Our capitalist system crashes every four to seven years. It's been doing it for centuries. We've had three crashes in the first 20 years of this century. The dotcom crash in the spring of 2000, the subprime mortgage crash in 2008 or 2009, and the so-called COVID-19 crisis in 2020. We are very interested in giving each crisis every four to seven years a different name in the hopes that you won't understand that it's endemic to capitalism. You'll link it always to something else like

the dotcom, as if that were the first time that stock prices went crazy, or if it was the subprime mortgage, as if it were the first time our country has had problem with mortgages, or if it were the first time we had a pandemic. That is more bullshit, designed in this case to avoid the complexity of an unstable system. But the Federal Reserve came in and pumped the money to offset the catastrophe of a crash. When the economy crashes, let's remember the big one back in the 1930s lasted 11 years. It hit unemployment rates of 25%, which meant every American family was affected by it. We're terrified of that. And so when the downturns of 2008 and 2020 happened, the Federal Reserve pumped in money, because that's what they've

been taught to do. It's not some failing, some weird odd mistake that they made. It is what they normally do. So if you really want to look at the causes of inflation, you have to look at the way this system works and understand that what businesses do, what employers do always, is look around the environment and decide what is the best way at this moment that I can juice up my profits. That's their job. And sometimes it's by automation. Replace workers with machines. Sometimes it's by moving jobs overseas, where you can pay workers a great deal less than you have to pay here. Sometimes it's by bringing desperate poor immigrants in who might be willing to work for less. And you know what it is sometimes? Jacking up your prices.

And if after 20 years of the government pumping in more money, you know a lot of it is out there, well, that's another reason to think about it. Many businesses didn't make money during the pandemic. And when that pandemic seemed to be over, they were in a big rush to get the profits for the last two or three years that they hadn't been able to collect. And the quickest, fastest way they could figure out how to do that, starting in 2021, was to raise their prices. And that's what they did. And the only thing funnier than that is the use by many of the following explanation for why they raise prices. I'm raising my price because others are doing it. That's what they said. Think about that. That is the most ridiculous effort at an economic explanation

one could descend to. Where are these people's mothers? I mean, I was told if your friends jump off the Brooklyn Bridge, are you going to follow them? I mean, Richard, you brought up the pandemic and an economic rube like me. There's a certain explanatory power to this as it relates to the supply chain. I'm like, oh, well, the whole planet is convulsed with this virus. It sort of makes sense why things would get more expensive for the last couple of years or whatever. But how are we to discern or should we even bother discerning one way or the other, how much the companies are using this, like any disaster, be it a pandemic or a war or whatever, to account for the price increases that they were going to do anyway, perhaps with some

public uproarium. Is it essentially all just like the prices that they want to set and we're going to look, they were just looking for a crisis to provide them with the opportunity to raise the prices to the levels that they want to begin with? No, that would be too simple. It's always many factors. Let's be fair to these employers. Not that I really want to, but for the sake of politeness and honesty, let's be fair to them. It's always complicated what the best route forward is to make a profit. It really is. They hire a lot of people like me and others, give them a lot of advice. Then they decide, what's our best strategy now? And in the 80s and 90s, it had to do with globalization, go abroad, find the right, the very self-same supply chain disruptions

could only be invented by a capitalist class that had spent the previous 20 years extending their supply chains to global lengths, which they hadn't had before. If they had had all their sources here inside the United States, they wouldn't have cared that ships got stuck in the Suez Canal. It's because it was the most profitable thing to do to move abroad that they then can use the excuse of a supply chain disruption as a plausible argument. Look, if you have a disaster, whatever it is, economic, political, public health, the logical thing for a society to do is to organize itself, to mobilize its resources, and come up with the best solution for the society. We don't do that. That's part of the problem of

our system. It's everybody make a buck out of it, if you can. And of course, they do, because that's their job. The more we allow the key decisions, take the pandemic. Do we have enough ventilators? Do we have enough masks? Do we fill it in? Do we have a distribution of these things properly in the country? The answer to all those questions is we didn't have them. Why? Can't we produce them? Of course we can. Don't we have the brains to put it together? Of course we do. But we leave all those things in private profit hands. And those people are busy maximizing profit. They're not going to have warehouses spread around the country with masks, ventilators, and everything. We know what we need for the next pandemic. We're going to have more pandemics.

We still don't have what a national effort. And you can go to many other countries that do. So there's no mystery here. We could have help from a lot of other places. Many of them places we are embarrassed to ask for help for, but we could. We don't do that. We leave it in the hands of people whose number one priority is profit. And one of the results is an inflation. That's the way this system works. Let me switch it slightly. You'll see it maybe in another way. What we're looking at right now is the Federal Reserve. We all know that, right? Raising interest rates. We have been inundated for six to eight months of the federal year. The Federal Reserve is raising interest rates to combat the inflation. The bullshit now gets

thicker. Watch this. If you hadn't seen it before, you'll get it now. I'm watching this. I'm a professor of economics. I teach the very people that are doing this. I'm angry at them because they obviously didn't deserve the B minus I gave them. But let's be clear here. The Federal Reserve behaves as follows. There's an inflation. It's not a good thing. And we're going to raise interest rates. Let's take a look at that. Number one, the inflation hurts most the people with the least money, right? If prices go up, if you're rich, it's an irritation. If you're not, it's a real problem. For a society that just went through one of the worst public health disasters we know of, and the second worst economic crash in 2020 that we've had as a system, you really don't want

to follow up by whacking the working class with an inflation, right? So you would have thought, gee, whoa, and now you're going to hit them again by jacking up the interest rate, which makes a household affordable, which means your monthly payment for your car has to go up, which means your credit card balance is going to be whacking you again. I mean, what? What are you doing? The answer seems to be the way they play it, because these are bullshit artists. Let's be fair, they know how to do this. They act as though it's the only, it's the necessary, it's the absolutely appropriate thing to do, but it isn't, and it never was. What are you talking about? Let me, I'm going to give you now very briefly, I promise, an example from American

history, this country, nobody else, other ways of dealing with an inflation that were used in America, that worked in America, and that magically have been erased as if we had social amnesia in this country. August of 1971, the president of the United States, Richard Nixon, there's a roaring inflation, everybody wants to stop it. On that day, 15th of August 1971, Richard Nixon goes on radio and television speaking to the American people as our president, and he says the following, we have a terrible inflation, we have to do something, it's hurting people, blah, blah, all of that, and here's what we're going to do. As of tomorrow morning, eight o'clock, any business in America that raises the price of anything, we will come for you, we will arrest you,

and you're going to jail. Oh, then he followed up two minutes later, any union, any labor organization that pushes for higher wages, exact same treatment, the inflation stopped on a dime, done, finished, what was originally a plan for 90 days, was extended, because it was so successful. Now, I'm not arguing for it, although I would be happy to do that if you're interested, but I'm telling you, we are in a very strange country where nobody, except if they've interviewed me, nobody talks about this. Everybody acts as though writing interest, right? All we discuss is how much we raise them, how fast we, this is weird, this is really odd. Let me give you the second example. It's early 1940s, President Franklin Roosevelt, I'm being fair, we had Republican

sides, you know, Tweedledum, Tweedledee, Mr. Roosevelt is approached by economists, including my teachers, the ones that I learned from at the university, who told me these stories, that's why I know them. The economists come to Mr. Roosevelt, the president, and they say to him, you're about to go into war, World War II, we were about to enter, and you've been mobilizing the country to produce military equipment to fight the war, guns, planes, bullets, all of that. And that means an enormous amount of resources in this country that used to produce the goods and services everybody wants to find in the neighborhood store, they're not going to be producing those anymore because that's going into war production instead. And that, Mr. President, leads us as

economists to warn you, when you do that, you're going to suddenly collapse the supply of lots of goods in our economy. Meanwhile, the same Americans are going to be looking to buy as we're looking last week, last month, last year, but they're not going to find it. And if you allow the market, the capitalist market, to work, the rich people are going to bid up the price of the scarce stuff and we're going to have a country bitterly divided between those who can't afford a higher price and the rich who can. To fight a war, you want your people unified, not at each other's throats because they can't buy stuff. And you know what Roosevelt did? He said, you know, you're absolutely right. And here's what we're going to, and you'll love this if you have a little bit of

leftism deep in your soul. What the President of the United States did with the approval of the Congress was to say, OK, we clearly cannot allow the market to work because it'll mess us up. It'll divide us into those who bid up the price of scarce goods and bitterly enrage everybody else. Rich people will get scarce milk to feed their pet cat and people will be unable to get this milk because they can't afford it for their babies. You can't do that. You can't do that. So we won't have a market. The government printed and distributed ration books. In each ration book, you tore out a little coupon that got you a quart of milk, a pound of meat, a pound of sugar, a gallon of gasoline. We had what's called rationing. And you know how the government distributed

the ration cards to each according to their need? Oh my goodness, we distributed products of our factories and offices according to people's needs because we got rid of the capitalist market. Always keep that in mind the next time on the 4th of July, a CEO you really like gets up there and babbles about the market. Rationing, wage price freeze, those are alternatives. An honest government would be presenting those to the American people, let us discuss and debate and decide which one of them, which combination of them would be the best. We don't do that. We can't anymore. We're a society in such bad shape that all of its junk has to be dictated and then encapsulated in a level of bullshit that will make even our media hesitate to try to penetrate in there.

Yeah, during World War II, it was set up an inherently unstable system in which only a small amount to the American population, i.e., our servicemen fighting in Europe, had access to things like Hershey bars, Lucky Strikes, and women's nylons. And that would be giving them wildly outsized power in a market where everyone wants cigarettes and chocolate and nylons. But Professor Wolff, in talking about some of the causes or the bullshit explanations for inflation, I mean really what we're talking about here is like everything else in the economy, it is a way in which class domination is managed. But I'd like to talk about some in the supposed solutions for inflation, how we see that same class domination appear. And I'm just wondering when you're talking

about the Fed raising interest rates or whenever you hear people in the business press talk about how bad it is that we have a tight labor market, does it as an economist, because usually unemployment is thought to be like the cardinal sin or like the bad thing that has to be avoided in the economy, does it surprise you as an economist to see the business press more and then even the Federal Reserve more or less talking openly about how it's a problem that too many people have jobs right now and that we need to actually discipline the labor market by creating unemployment. Yeah, wonderful, wonderful. And by the way, when they talk like that, they violate the economics, people like me, taught them. They're so desperate to try to figure out some way to rationalize a

system that can't be rationalized anymore. We're done in the United States, why this is happening. But you know, the normal way you teach it is as follows. If there's a demand for something that's greater than the supply of something, then you bid up the price because that'll dissuade the people who want it from buying as much of it. Meanwhile, it will encourage the people who produce it to produce more of it. So it's a problem that solves itself by having the price go up. The trouble with if you're a capitalist, you can't allow that in the labor market. If the shortage of labor is a problem, the solution is raise the damn wages, you idiot. That's what we taught you. That's the solution. But they don't want that solution. So they come

up with new language. The labor market is tight. We never use that language when what's tight is the availability of eggs. We say, oh, there's a market imbalance. Yeah. And the solution is to let the market do its thing. These are the same people who think that the market is the greatest thing since sliced bread, except when it steps on their toe. Well, an example of that would be, I remember during the height of the pandemic, we saw a lot of businesses, particularly restaurants, be like posting notice that like, hey, we're understaffed because, quote, nobody wants to work anymore. Nobody wants to work anymore. Nobody wants to work anymore. Well, yeah. Well, the market has decided that not for what you're offering, right? So the market has decided for you. But then it

becomes about, it's not about, oh, I just don't want to pay people what their labor is worth in this current market. It's about their individual moral failing as slothful or indolent individuals. Right. You can't have it that I'm not going to let's imagine for a moment, an honest capitalist says, okay, here's the deal. I need workers. But if I pay them the price that I would have to pay to get them to come, then there's not enough profit for me. So screw that. I'm going to contribute to unemployment because I don't want to pay that amount of money because it comes out. Okay, I got it. But then the answer is, all right, then we have an economic system with millions of people who need and want a job with all the tools and equipment we have available for them

to work with. And we have social needs up the wazoo that need to be met. But in our sorry system, we can't put these elements together the way any rational person could and would. Nobody wants to admit any of that. So we come up with this language. Notice, by the way, one of the biggest price increases you may have noticed are eggs. Well, what are we supposed to say? The chickens are tight. What is this? What lunacy is this? You've lost your mind. You're so desperate. I want to keep hammering at this because you and the program you run and the way you run it, the humor, the irony, the sarcasm, that's how this has to be punctured, this balloon. You're the right guys for it. I hope you see that as your, I don't know, moral or social responsibility.

Ridiculous, probably the best tool to get this crazy behavior that's now coming on there. This is a country, by the way, left that in Europe. This is a country that just spent Obama, Trump and Biden deporting millions of desperately poor immigrants. And now we have a labor shortage. Hello, you just threw them out. If you didn't do that, you wouldn't have the shortage. Not only wouldn't you have the shortage, but it would be at the bottom of the economic ladder that those people would be likely getting the jobs because they're the ones who had them before anyway. But you're lurching. We have to know on the border we have to secure. Why? This country built on that. Who needs to secure? What is this? It is a, and when you see that kind

of behavior with otherwise perfectly normal decent people, you're witnessing something happening that makes normally reasonable people start acting crazy. That's why our politics are so crazy. Our divisions are, we're getting scared of ourselves. We're killing each other every day in the street. I mean, look at it. I think you guys are, I don't mean to tell you what your business is. You're obviously very good at it. You've been very good at it. I'm just encouraging you that in a way you sit at a point and you mastered a kind of language, puts you in a good position to do something here and the country badly needs it. Well, I'm doing my best Professor Wolff. I think I met like a B minus so far, but we can see if we can up that by the end of the semester.

Before we get into like a more like a global view of the economy and some of the things there, I just want to, I want to talk about one more thing on the domestic front. And there's a lot of bullshit around this. So I would just like your talk, your take on the idea of student debt and student loan forgiveness or free higher education at the state level. And as you described this, like, it's again, it's another pretty simple problem we have here. We don't pay people enough to afford the education that our economy demands of individuals have had to fit in and have like a decent successful life. But like, okay, there's, and people have to incur more and more with everything, you know, an astonishing amount of debt to get like a bachelor's degree. Now, solutions

for like, you know, like things like student loan, like a debt jubilee for student loans, like that's been discussed. And like it keeps getting more and more and more watered down, like there's some meager loan forgiveness being proposed. But I want to talk about more the counter arguments to this or the people who argue against it. The primary thing I've seen, like arguing against student loan forgiveness is that it represents an upward transfer of wealth and that it is primarily the wealthy who reap the benefits of this loan forgiveness, which on its face kind of just like, you know, as a rich kid myself, like, I didn't take out loans to go to college because my parents could afford it. So like, I mean, like, so who, who are all these

wealthy people going into debt to go to college? I mean, and then what do you mean when you say wealthy? Like, well, how do what do you make of the argument that student loan forgiveness or even free public higher education is some sort of upward wealth redistribution? The technical term I would use for that is grotesque bullshit. Well, I mean, there are other arguments, I wouldn't use that later. It's not that I throw it at everything. But you're giving me really the cuckoo examples. There are people who don't want the forgiveness, I get that. They don't want it, they're against it. Their problem is, however, how to rationalize that. And that's not easy because the logic is all in favor of doing. My parents were refugees. My father was French. My

mother was German. I speak French and German. I have since I've been a kid. So I keep a trap. I was born in Ohio. I'm as American as you want. But I keep contact with Europe. I'm interested, you know, and elements of my family are there. Education in Europe, except England basically, is free. I want you to understand, I'm going to give you the example of Germany. Germany is the most successful economy in Europe. Germany is the biggest economy in Europe. Germany is the powerhouse of the entire EU economically speaking. In Germany, higher education is free, zero, nothing, no fees, no tuition, nothing. Not only for every German, but for anyone who enrolls, there are 30,000 Americans enrolled in German colleges to save the money, to not go into debt.

So clearly a powerhouse capitalist economy, more or less like ours and arguably quite like ours, does it for free. So you've got a problem, even with American media, not telling the people about this. I mean, it's not a secret. You can find it out. People know. So you've got a problem here. You don't want to give to the American people a free higher education system when other countries do. Second problem, if you forgive debts, you are taking a very dangerous step. Why? Because this country is mired in levels of debt we have never imagined, let alone been in before. Corporate debt, off-the-chart, government debt, off-the-chart, household debt, mortgage, car, credit card, and student debt, all off the chart. And guess what? Everybody needs debt forgiveness. The

Jubilee idea is as old as the Judeo-Christian tradition. It's in the Bible or some other holy books because people have been doing this for a long time and there's a simple reason why. If you don't do it, you're creating a divide between the debtor and the creditor which threatens the cohesion of your society. You don't do it out of largesse. You do it because we better do it or else we're going to tear ourselves away. None of that works here. You can't say it. You can't admit it. So what do you have to come up with? Here we go again. Bullshit. So you tell, are there a few people who come from comfortable families who will have some debt and they will be forgiven? Absolutely. Who cares? Why is this? This is complete bullshit. And the way I deal with it,

when I have to confront people and I travel, I mean, before the pandemic, I travel a lot more and gave talks. In December of 2017, under the Trump administration, we passed one of the largest tax cuts in American history. Fantastic for corporations and for the wealthy. Did we say, well, we're going to give a tax cut, but you corporations, you got to show us that you really need it. Otherwise, this is going to contribute to a redistribution of wealth from the little company in Sheboygan to the big. We didn't do any of that. Republicans and Democrats threw the money at the corporations. All of this, do each of you deserve, are there some among you? Stop. This is bullshit. And it's only there because you can't give the reasons.

What you can't give, when I think about the way debt works in this country, and particularly like health insurance and medical debt, but certainly student loan debt as well, is that the thing that can't be said is that we maintain these regimes of sort of entrapping some increasingly more and more people in all kinds of debt because it is a means of social control and discipline. And private health insurance, I think is a great example of that. The fact that it's a pretty situation where you compel everyone to spend upwards of five grand a month on health insurance or get it through an employer back if you're lucky. Well, then that greatly limits your ability to, let's say, leave a job or start a business on your own because of things like,

you know, I just think like keeping everyone in debt is a way to keep everyone in line. And I think that is useful. If you want to talk about social cohesion as it's understood by the people who run the economy, I think that's what they mean by it, making sure everyone knows their place and everyone has some, quote, skin in the game. I agree with you. What I'm about to say is not disagreeing. It's just an adding, you know, and allow for my economist brain. Look, if you have a system with markets and prices and wages, namely capitalism, if you want to provide people with adequate housing, with adequate medical insurance, with adequate education, here's what you got to do. You either have to bring the prices down so that people's incomes will enable them to afford it,

or you've got to lift up their incomes, leave the prices as they are, so they can afford it. This is not rocket science. We have a system that won't do that. And who is it charged? The employers. They set the prices where we can't afford them, and they set the wages where we can't afford it. And then making more profit because they have the wages too low and the prices too high, then they do the final coup de grace, the French would say. They make the extra profit and they turn around to a befuddled American working class and they say, we're going to help you out. We're going to give you a loan of the money we profited because we paid you so little and we charged you so much. The only thing worse than that hustle is that the person you're hustling thinks they're

getting something. You're not, you're being ripped off. If you want, look, after World War II, the United States as a country built a vast amount of public housing. The plan was to put Americans back to work so that after World War II we wouldn't slip back into the Great Depression that had preceded the war. And the way to do that was to give everybody a job, to give returning soldiers a GI bill they could go to school with money if they didn't take a job. And we were going to create the jobs by a massive program of federal highways and a massive program of federal housing. The housing died. The highways were built. Why? Because that was a subsidy to GM Ford and Chrysler. Nobody's going to buy a car if there isn't a road to run it on. And if GM and Ford and Chrysler

had had to pay for the road, there would have been no profit. End of story. So we subsidized the highways and they were built. The housing was a direct competition to the private housing business. They killed it. And so we have a country with more highways than you could imagine. By the way, killing us, because instead of having public transportation, which is cheaper, better for the environment, kills many fewer people, we're not doing that. We're going from one irrational private automobile system based on gasoline to another equally irrelevant one based on electricity. We're celebrating the technological breakthrough. That's not what we needed. We need public transportation and we ain't getting that. This is more of all of that.

You are absolutely right. It is a mechanism of social control. But even before you get to that valid argument, how is it that we don't blame a capitalism that either doesn't provide us with housing at a price we can afford or give us the wages to pay the prices they want to charge? Other countries are not working like this. This is not the way it works in most parts of Europe, the Western Europe. And I'm not celebrating. I've got some problems over there too. It's not that. But there's no excuse here for not dealing with the options that are available with not exploring the alternatives, not even allowing the people to discuss it. That's why I get the way I do about the Federal Reserve. We all have to jack up interest rate. What are you

talking about? Let me be personal. I got my PhD in economics at Yale University. A classmate of mine was a young woman named Janet Yellen. We had the same teachers. We sat in the same room. We read the same assigned articles. Her education, my education, literally the same. I know what she knows. She was a smart student and no problem. She was a nice woman and all that. I know she knows. What I've told you today, she knows all that. I'm sure she knows more than I do about those things. And yet there she is, acting out a scenario that, wow, I don't know quite what to make of the disconnect between what is being said and what anybody who knows this stuff is aware of. There's something seriously wrong here. And you may have a better grasp on it

than I do. For me, it's just an ongoing mystery. To depart now from the domestic sphere to a more global context, like in America as an economic superpower, but then the possibility of adversarial nations, specifically China. Matt, I know you had some questions for the professor about economic competition between the United States and China. Yeah. So we are seeing now, we saw first with Trump this trade war that was sort of fitfully pursued during his term. And now Biden is continuing in a process of trying to decouple the American economy from China, from China's. And I just was wondering where you saw that heading. I mean, if we do, we are mutually reliant on China and they are on us economically. I mean, what could replace that

relationship realistically? Nothing. Nothing could. No, but that's very, very important. And you put your finger on it. They need us. You're right. We need them. You're right. Let me add a little bit and then you'll see where that takes us. Trade between the two countries continues to increase. It did across everything Trump did, and it did across everything Biden has done. Right to this minute, the biggest announcement in the financial press yesterday was Costco's commitment to its third megastore in China. Walmart has 39 megastores in China. Sam's Club is expanding. These are people who are not going to make risky investments. They don't think it's risky. You got to stop and wonder, what does that mean? The answer is, and I'm sorry,

I see it's becoming a theme of today's conversation. But much of the answer has to do with bullshit. It is important. Look, Mr. Trump, where it's easier, right? For folks like you and me, easier to say this of him. I'm going to say it in a minute for Biden too. This was all theater. We can all trade war and you can win trade. Remember, you can win a trade war. Yeah, right. Remember, you can win a tariff. The poor president kept saying that the Chinese have to pay the tariffs, which was embarrassing, because if you know what a tariff is, it's only paid by the one who imports it. China is not input. You put a tariff. It's the American importer who pays the tariff, not the exporter in China. The president will stick around with a tariff. No, you're not.

You're imposing on America an immense tax increase. You big champion of not raising taxes. He did. A tariff is a tax. Just a special name. When you put a tax on an imported item, it's called a tariff. Other than that, the words are synonyms. Okay, so we've had the tariff wars, the trade wars, and now, as you rightly say, the continuation under Biden. Throughout it all, the trade and the investment in China by us and in us by China keeps right on going. There's lots of bullshit. There's lots of, oh, what do we do? We arrested, if I remember. Yeah, the daughter of the CEO of the Huawei Corporation, we got Justin Trudeau in Canada to put her under a house arrest, talk about, pick a yoon, petty, farting around. What is this? It's embarrassing.

It's just the whole world of what? But now let me do some real economics with you, okay? And you'll understand where the bullshit, how deep it runs. I'm going to give you the numbers for the following. The GDP, the gross domestic product, that's a statistic economists use. It simply measures the total output of goods and services in a country in one calendar year. And by comparing the GDP of country A and country B, you'll have a sense of their relative footprint, their relative size in the world. Okay. For the most recent year, the GDP of Russia, big fool, having a fight with Russia, a sanctions war, Russia's GDP, one and a half trillion dollars. The United States in the most recent year, $21 trillion. So first of all, please understand,

this is a momentous war between an elephant and a flea. Russia is not a competitor of the United States economically, and it never was, not during the Cold War, not before World War II, not after it, never, ever, never even close. Russia might have had a military power that was important, yes, that you can say, and political influence, okay, but an economic competitor of the United States, never, ever, ever, ever, not now, not ever. If there's a sanctions war, an economic war, on court, you are present, between the United States and NATO against Russia, well, I've done the work. The GDP of the United States and NATO is $32 trillion, fighting Russia, which is one and a half, okay? This is a war between the United States and the eastern half

of the Cayman Islands. It's a joke. It is a joke. Well, Richard, like, you bring up the GDPs, though, and then, as it relates to what's going on between NATO and Russia, there's very much the real war, the killing fields that are going on in Ukraine right now, but as you mentioned, there's an economic war happening as well. And if you look at, as you said, the tail of the tape between the GDP of US and NATO countries and Russia, you're like, okay, well, obviously, it's clear how this war is going to end up in an economic battle between these two, but why has that not been the case? Like, sanctions have not really slowed down the Russian economy or hindered their war effort in any way. I'm going to answer your question. Here we go.

What is the GDP of the People's Republic of China right now? Answer, about between $16 and $17 trillion. For the last 30 years, the People's Republic of China GDP has grown an average of 6% to 9%. And that of the United States has grown an average of 2% to 2.5%. There is no contest. The world economy is now composed of the United States at one end, the People's Republic of China at the other. That's the major issue. Europe is caught between not knowing which way to go, and we're in for some bad surprises in the next few years about that. And we can come back to that if you want. But the reason you can't defeat Russia is because you have pushed Russia together with China, and they've now added India game over. You're lost. You can't

beat that. Let me remind you, half the world's people live in that other thing led by China. China and India are the two. I think India is actually now a bit larger than China. But there we got, I think, together, I don't know, 30% or 40% right there. But if you add Brazil, South Africa, it becomes unwieldy. But more important, they now have high tech. The Chinese have shown themselves able to replicate everything the United States does and go ahead in a number of airways. That was part of the Huawei problem, that they actually have stuff we haven't figured out how to do yet. And they show the capability of doing that. That's an incredible achievement for a country that was among the poorest 40 years ago. The whole

world is mostly in poor countries whose number one priority is to become rich. China is the model. Let me remind you, economics is a discipline that says our founder was a man named Adam Smith in Britain in the 18th century. Adam Smith is famous for writing the following book, The Wealth of Nations. What was his point? England was richer and had become rich in a way other countries hadn't. And Adam Smith said, I want to figure out why. Long story short, his answer was England made the transition out of feudalism to capitalism first, and therein lies the secret of why The Wealth of Nations is greatest there. So to the rest of the world, you want to get wealthy like England? And they all did. This is what you got to do. You got to be more like us,

which they all did. Right now, that role is being played by the People's Republic of China and the whole world sees it and knows it, except for one country that is mired in a level of mysterious bullshit. So it can't face this. It can't think about it. It can't strategize rationally. It's left to do what? Poke at China. Put your seventh fleet in the South China Sea. Make lots of noise about a little island called Taiwan as if you had any standing there. What are you doing? What is this childish symbolism? Rather than, I won't embarrass Americans by saying, how many of you understood that stuff about the GDP? Because you and I both know the answer. Everybody who's in the position of authority should have that statistic on the tip of their fingers because

it says so much and it's an important starting point, but they don't. You're left to have, you know, chapo trap house and an obscure economist like me to make these kinds of points. I shouldn't say it that way. I'm getting more attention than I ever got in my life. I appreciate it. I have opportunities to speak. I appreciate that. I don't know how long it'll last, but I appreciate it for the time being. But there's a level of denial going on here. My wife's a psychotherapist. Denial is a big issue for psychologists and therapists like her, but I've had to learn. It's a very good way for me to begin to identify that mystery I keep telling you about, which is why we are mired. Let me put it the last way this way. For the first

time in my life, the United and for the first time in a century, I'm not that old, but the first time in my life, the United States has a serious economic competitor. We have to get used to, that's a new world in a hundred different ways, economically, politically, culturally. You name it, it's a new world. And we are not winning that struggle. I don't know if we're losing it, but we are not winning it. We are not. We have had four wars. We've had four wars. Vietnam, Afghanistan, Iraq, pick your pick your next one. It doesn't matter. The United States has lost them all. That's a bad sign for an empire. Very bad sign. Really bad. We've had huge numbers of American troops doing this. We have an enormous covert operation. We have 70 bases. By comparison,

the country beating us economically was involved in none of those wars. No Chinese soldiers are off the Chinese territory. They weren't involved. They're not involved in Ukraine either. Wow. You've got to deal with that. You can't pretend these differences aren't there or don't matter. And yet you will look long and hard in the major media about all these issues to get this perspective even enunciated. I have a colleague at the University of Chicago named John Miersheimer. I don't know if you've come across this. Yeah, definitely. The best global power conflict analyst we have in the country. Everybody knows that. He's got to take on Ukraine, blow you out of the water. Really fine. The best kind of academic work. And he and I don't agree

on most things. But he says it. He doesn't run away and they can't handle him. They don't know what to do with him. You're watching it also with Seymour Hirsch and the story about the Nord Stream and the blowing up of the pipeline. What is this? Every European article been translated. I first read it in German, then I read it in French. I couldn't get the American. Well, I mean, it should be telling that like the EU member states and like their NATO member states most affected by this. Are they calling for some sort of investigation? Is Sweden even going to make the results of their cleanup of the pipeline available to other NATO countries? No, they're not. Why does that tell you? What does that tell you? Does it tell you that some Ukrainian

separatist group blew it up? No, it doesn't. Oh, no, no. Talk about a reach. That last one. You're right. I mean, that is off the chart. But no, no, it's very important. Europe, here's the truth, which is different from what the leadership said. The leaders in Europe have made a decision, at least for the time being, they're going with the United States. Very significant. I don't mean to say that it is. But whether it's Scholz in Germany or Macron in France, the only real dissent is Orban in Hungary and the new woman in Italy, who's the leader in the Italian. And they're coming from the right, as it's different. They've made a decision to go with the United States. You should understand it. I don't dispute.

That's correct. I read their papers. I can see that. But what you may not know is there are very powerful interests in all of those countries that are very unhappy with what's going on. And they're going to be pushing against that leadership. When you hear Scholz or the woman, the foreign minister, Anna Baerbock, when you hear those people talk, they're not talking to you and I. They're talking to their own opposition, because that's their problem. Germany is governed by a coalition that could disappear tomorrow or be there next year. Macron is as popular. Macron is a joke. He's as popular as like a pancreatic cancer is right now in France. I don't know if you've dealt with this. There's a general strike in France this week.

I just saw that some French labor unions are cutting off electricity to Amazon facilities and they're putting them on, quote, I think an energy diet, because they said, that's our money and we want it back. That's right. They blockaded all of the refineries. So within a few days, no gas station will have any gas because they will have emptied the tanks that they have and they're not going to get a replacement. All eight national federations of unions in France have agreed. They don't agree on anything. They've agreed to do this general strike. And remember, before the pandemic, they had the yellow vest movement, which was another mass mobilization. The polls in France, Gallup and the other polls, 60 to 65 percent of the French

people polled support the strike. You're done. Mr. Macron didn't have much chance before. He has less now. And I want to remind you what the issue is. In France, you can retire at age 62 with a full pension. He wants to raise it to 64. Macron wants to raise it to 64. That's the issue. Americans don't say boo and it's now effectively 66 here. So boo. Wow. What a difference. My family, which is French, when you graduate high school and go on the labor force in France, or you graduate college, your employer from the day you start must give you five weeks paid vacation every year. That's the law. It's been the law for decades. When I explain that to my students or to lectures I give, the audience here in the United States, they sit and look at me.

They don't say a word, but they look at me the way a little puppy does. When the puppy has done something on the rug, it shouldn't have. And he's picking up the vibes that you're not happy about. All right. Based on your previous comments, or what we're talking about, if you think about America finally facing a serious economic competitor in China and overall the BRICS nations, as they're referred to, it's clear from your comments that the era of the unipolar world is over. The writing is on the wall in terms of America as the manager of a global economic system. But then I asked back to a theme in this conversation, what would a rationally run country, how would it respond to the economic competition from a nation like China? And then

like in order to rationally address these concerns of anything that we're talking about here, and the example of France that we just talked about is front of my mind, is labor struggle, like the only grounds on which the economic rule of the upper classes can be fought. And like, isn't all of this necessary to have the kind of society that could rationally deal with what a major economic competition from China will look like in the coming century or so? Well, while I am very happy that you bring up the whole labor capital struggle, because that's another absent item on the discourse of this country that shouldn't be absent, because it's going to play a major role. It already is. I would not want to say that's the only or the most

important. I wouldn't say that. There's too many levels here that have to be dealt with. So let me offer a different way to think about how rational an alternative we could construct. I'm going to use American history. The War of Independence, 1776 and all of that, was a war in which the colonial power, Britain, George III, King, is telling Americans what to do, organizing and manipulating the economy, using taxes and so forth, to advantage the British Empire, which is at that point at its height, or nearly so. And the American colonists, mostly British or British and by origin, fight back. And to the surprise of everybody, David beats Goliath. It happens, and it happened then. And we're very proud as a nation that we were able

to pull that off. Britain was pissed off. They didn't understand how this could happen either. It wasn't supposed to. A few years later, in 1812, they tried again, and they were the British, and they were beaten again. At that point, they realized, and I hope I'm not being overly generous here, but I think they realized they couldn't do it. They could not with military force, despite having the greatest navy in the world, despite being a much larger country than the United States, the new country, and despite all that they knew having been the colonial power. Remember, they knew where the harbors were. They know everything. They couldn't do it. And they made a decision, which they worried about. It wasn't like they decided that it was done. I'm

not suggesting that. But they basically made a decision. We can't beat them. So what we're going to have to do is work something out. It has to allow the British economy to flourish, but it has to allow them also. Otherwise, we're going to be having a war every three years, five years, 10 years. Doesn't matter. And they're getting worse and worse. And they did it. I'm condensing a lot of complicated history, but they did it. And for the next 100 years, the colony changed places with the colonizer. Britain, I'm sure you understand, for the last century, the one ending now, has been our colony. It's role reversal, almost to the detail. Not in the imagination. The British are masters at denial. They still think that they matter. It's

amazing. But they've been the colony of the United States. They worked it out. Britain went on to be a fairly successful economic entity in the world. It couldn't hold on to its empire. It had to give that up. And the United States not only didn't help them, the United States undercut them and replaced them. But they held on. That's the model. The United States has to understand it's over. And I don't mean to be dramatic. The drama ain't me. The drama is in the situation. I just, because of my particular role in this country at this time, you know, I'm the messenger. You can shoot me. I ain't going to make the message go away. It's there. It's coming. The Chinese know it. Haven't you noticed? We keep poking them. They don't poke

back. They sit there. They sit there. They kind of take it. They wait a few weeks. They do something half halfway. Probably they send a balloon over here. Yes. Ending a balloon wasn't interested. Shooting it down. No more enthusiasm. That was nuts. You know, anyway, I do think that this is the the task for the United States is to have new leadership, not these old people raised in this in the Cold War, used to that way of thinking. You remember the new the new senator from Alabama, Tommy Tuberville, gave a famous speech right after he was elected. It was a stump speech. He had been giving it all along. And he comes to a point in his speech where he talks about his father and mother and how important, you know, in the way that southern politicians seem to need to do.

And he gets to the point about his father. He loved his father and he was so proud of his father. Here comes this almost a quote of his father's service in the American armed forces fighting communism in World War Two. Got it. I forgot about that. That's better than this is the applause in the audience. No one said or understood anything about that. And Tommy is out there speaking and the racism that comes out of that man's mouth is truly stunning, truly stunning. He gave a speech the other day against reparations. They are coming for your money. Speaking to an audience 100 percent white, the criminals now want your money. Criminals, advocates of reparation, you can see the connection. I mean, whoa, whoa, that's part of denial. Yeah, that's what I mean

is that you talked about denial and how many features of our current political crises or seemingly fractured and pathological behavior that we see and behavior and personalities that we see in this country are in effect like a knock on effect or further down the stream from our inability to cope with the idea that we're no longer number one and we're not going to be in this in this coming century. Yeah, you know, MAGA is exactly, if I were a playwright, I'm not, I don't have the skill, but if I were a playwright and I wanted to make that point that you just said nicely, I would invent red hats with MAGA printed on them because it would summer up. We're going to bring it all back. We're going to make it great again. We're going to look,

I don't know if you noticed, but I actually watched television for 10 minutes. It's the most I could bear. And I watched the funeral of Queen Elizabeth through the streets of London, the golden jewel coach and the horses. And look at this theater, the theater of the vanished empire and the vanished dead queen who's going to take into the grave the little bit that's left, the country that bamboozled itself into imagining that its problems were Europe's fault. And if only they cut off Europe and Brexit, why would they do well? This is self-destruction on a grand scale. It's a lesson to the United States, but a one that the United States can't learn because it is so busy hiding from everything. Costco's management just announced the opening of a multi-million dollar mega store

and they're excited about their future and they're sitting there shaking hands with the Chinese officials that they're working with. Meanwhile, all this junk is floating around the bullshit. But you know, I'm humbled by this. People get into wars through bullshit. It's happened before, it can happen again. I mock it by calling it bullshit. But there are moments when I am very scared. I am very scared. Well, Professor Wolff, I think that's a that note of a slight apprehension of the future and where this is all going. I think we should wrap it up and leave that there for today. But Professor Wolff, if people would like some more of your commentary on current events or more of your economic analysis, where should they go?

I would offer two places and thank you for the opportunity to mention them. Number one, I do a weekly radio and television show called Economic Update. You can find it. It's all over the United States, both on radio and on television, different days and times, depending on where in the country you are. But if you look it up, Economic Update, my name, you can find it. And the other is to go to our website. Economic Update is on half a dozen television networks. The radio is about 100 stations broadcast, the radio show, and it's all on YouTube. But I would also urge you to go to our website, which is democracyatwork.info. If you do that, you will see all of our activity. We publish

books. We do an immense amount of video. And all of that work is sort of summarized in the kinds of conversation we just had. Links to both Democracy at Work and Economic Update will be in the show description of this episode of the show. Once again, Professor Richard Wolfe, thank you so much for your time. That does it for us today on Chappell Trap House. Bye-bye. Bye-bye and thank you.