In the latest installment of Inequality Watch, TRNN investigative reporters Taya Graham and Stephen Janis explore the roots of today’s historic levels of economic inequality and the system that has perpetuated it while devastating the lives and livelihoods of wage earners. To do so, they speak with renowned economist Dr. Richard Wolff about how ideas hatched in the classroom decades ago prompted economic elites to put the US on a treacherous path that would hollow out the middle class, suppress wage growth for working people, and ensure a future where only the wealthiest benefit from America’s economic growth.
Production: Stephen Janis, Taya Graham
Studio: David Hebden, Cameron Granadino
Post-Production: Adam Coley
Transcript
The following is a rushed transcript and may contain errors. A proofread version will be made available as soon as possible.
Taya Graham:
Hello, my name is Taya Graham and welcome to the Inequality Watch. It’s a show that seeks to expose the dangers of extreme wealth inequality and discuss what we can do to fix it and to do so, I’m joined by my reporting partner, Stephen Janis
Stephen Janis:
Taya, thanks for having me. I appreciate it.
Taya Graham:
It’s good to have you. Now, this is a form to examine the facts and figures, consequences, and solutions for our current wealth and balance, which infiltrates every aspect of our civic life. On this show, we won’t just tell you about inequality. We will dig deeper and show you how it works, how it affects your lives, and the political system that has grown inherently hostile to the working class. And to do so, we’ll be joined by a guest who knows more about this topic than anyone I can think of. Dr. Richard Wolfe is an expert economist who’s become YouTube’s foremost public intellectual at the intersection of economics and politics. And his analysis of what is driving America’s progression towards oligarchy has been critical for the movement to fight against it. And I know his historical context has helped me understand how politics can often sit decidedly downstream from economics.
So we’re going to have Dr. Wolff respond not just to the report, but to some recent pronouncements from politicians on Capitol Hill who we interviewed and some recent moves by the Trump administration. But before we get to Dr. Wolff, we want to delve into a new report about the devastating impact of our decades long march towards wealth imbalance, and it’s from the Rand Corporation. And reveal just how profoundly the inequities and unfairness are wired into the American economy. We will dig deep into the consequences of this stunning report and unravel deeper roots of unease. It is generated among Americans and how that lack of confidence in the system has manifested itself in the very tense politics of the present. But first, some of the details of the report itself. Now, as I said, it was released by the RAND Corporation. The premise of this analysis is relatively straightforward.
The authors take a look at working class income as a share of the overall GDP or all the goods and services produced by our economy in a given year. The study looks back 50 years to determine the share of income that went to working people and then compares it to the present. It’s an indicator of how much of the wealth of the largest economy in the world goes to the people who actually make it work. And guess what? It’s done nothing but drop consistently. Believe it or not, in 1975, roughly 75% of the total American economic output went to workers’ wages. That’s three quarters of all economic activity into workers’ pockets. You heard that right? Nearly 50 years ago, workers were the biggest beneficiaries of our country’s increasing wealth. But things have certainly changed. As recently as 2023, the RAND study found that the percentage had dropped dramatically to 46%. Over time, the share of the nation’s income that goes to workers has dropped by roughly 30 percentage points. And where has that income gone? Well, not just to the rich or the very rich or the extremely rich, but to the insanely rich to the top 1%, although, and all they’ve done well, don’t worry. In fact, the biggest bulk of the gain has actually gone to the 0.01%, not even the 1%, the actual
Stephen Janis:
Tip of
Taya Graham:
The iceberg 0.01%,
Stephen Janis:
The
Taya Graham:
Most absurdly wealthy group in America. And that income transfer has led to an astounding amount of loss of wealth for people who actually do the work to keep this country running. The RAM report estimates that since 1975, a jaw dropping $73 trillion of wealth has migrated from the working class to the elites. That’s trillion with a T. That’s twice the total annual output of our economy in any given year. And that trend is accelerating. That’s because in just 2023, a mind boggling, 3 trillion additional dollars would’ve gone to working people if wages had garnered the same share of economic growth as they did in the 1970s. And all of this, of course, brings us back to the most stunning takeaway from these incredible numbers, namely that wealth follows power. And with power accumulating and concentrating in fewer and fewer hands, our democracy becomes unable to solve complex problems. And Steven, this sort of becomes a vicious cycle.
Stephen Janis:
Yeah, I mean, one of the things that I think that this report points out and sort of parallels that you need to bring up to understand just how catastrophic it’s been, is the fact that we have been living in a progressively extractive economy. In other words, as the worker share has diminished the parts of the economy that actually produce things for people that are useful and improved, their lives has diminished. And that economy has come more and more extractive. And just to illustrate that point, to make it very simple, as you think about what share financial services have played in the economy since the 1970s where it was about two to 3% of the economy, meaning hedge funds, investment bankers, hedge funds actually didn’t exist, but investment bankers, people who feed off the froth of the economy, well, it’s tripled since then, tripled to almost eight or 9%.
And at one point, just before 2008, before the great recession, about 40% of corporate profits came from companies that just did nothing but shuffle the deck and make money off of money. And so that illustrates what happens. And that’s when you’re talking about sort the political paralysis that precedes it because the more people are extractive, the more antagonistic relationship they have with the working class, working class doesn’t become a group that you want to lift up and improve their lives. It becomes people that you want to extract money from and make their lives worse. And so I think that’s what evolves in parallel, and that’s where we see these sort of mean billionaires, angry billionaires all the time. They’re always angry. Elon Musk is always angry, and Donald Trump is pretty much always angry. And it has to do with the fact that their relationship with the people who actually make this economy run has become purely antagonistic in the sense that their wealth is based upon extracting from people. So I think that’s a good point, and that’s what comes out in this report.
Taya Graham:
That’s actually such an interesting point, and I really hope Dr. Wolf will respond to it.
Stephen Janis:
Oh, he will.
Taya Graham:
And you’re basically saying that bad policy follows
Stephen Janis:
Wealth
Taya Graham:
In a way that we can’t see
Stephen Janis:
Because good policy requires collective thinking and it requires thinking that is most beneficial to everyone. That’s a hard thing to do in a democracy. We don’t understand that it’s not easy to build a bullet train or to improve housing or to build more affordable housing. It takes concerted effort where people are kind of on the same page where I will benefit from what you will benefit. But when the economy becomes purely extractive and wealth is based on the power of accumulating so much that the people underneath you have no power whatsoever. You can’t think big in that sense. You can think big on individual scale, but not collective scale. And I think that’s what we’re seeing,
Taya Graham:
Steven. I think this imbalance also destabilizes communities and makes them more susceptible to things like over-policing and economic exploitation. I mean, so many of the small towns that we covered
Stephen Janis:
Were
Taya Graham:
Also under economic duress, and they had issues with policing. They were overwhelmed by aggressive ticketing and fines and general overreach and overspending on things like law enforcement.
Absolutely. But these are questions we can put to our guests. Dr. Richard Wolf, I’m sure will have a lot of interesting things to say about all of it, and I’m sure most of you are familiar with him, especially if you’re watching us on YouTube. Dr. Wolf is an esteemed economist and founder of Democracy at Work whose ability to analyze the economics of the present through the history of the past is unparalleled. He’s also the author of multiple books, including his latest capitalism crisis, deepens, and he’s perhaps one of the best people we know to break down the mechanics of how rampant inequality is reflected in the politics of the present. A topic of great importance now more than ever. Dr. Wolf, thank you so much for joining us.
Richard Wolff:
My pleasure. I’m a big admirer of what you do as well, so this is thank an opportunity for me to join you, and that’s worth it for me right there.
Taya Graham:
Thank
Stephen Janis:
You, Dr. Wolf.
Taya Graham:
That’s so wonderful to hear. Thank you, Dr. So first I just wanted to address the Rand report, and to me the numbers were really quite shocking. So I guess my first question would be just taking in the raw numbers and weighing on the methodology, how does the economic share of wages drop so dramatically? I mean, how did the oligarchs pull this off basically? That’s a good question.
Richard Wolff:
Well, first of all, let me reinforce, this is a very historic process. You don’t see this very often. That is, you don’t see changes this big in so relatively short a historical period. So yes, you’re right to focus on it. It is stunning. And in order to explain it, you have to look at certain basic shifts here in the United States and in the global economy that span the last 40 years or so in terms of when this really took off. The 1975 is the right year for the Rand Corporation to have used because it is a crucial, not that particular year, but the 1970s are a crucial time. You should think about it as sort of the end of the very special situation that came out of the end of World War ii, 1945 to 75. Those 30 years were a period that the United States must have known, certainly the leaders knew could not possibly be sustained because all of the potential competitors in the world, Britain, France, Germany, Italy, Japan, were all destroyed.
Russia, if you want to ask them, they were literally destroyed. Immense bombing had wrecked their train systems, their factories, their cities killed enormous numbers and hurt enormous numbers of their people. So they were finished. Whereas in the United States, it was radically other, other than Pearl Harbor, no bombs fell in the United States. Pearl Harbor happened as you know at the very beginning. So for the bulk of the war, the United States was immune as a percentage of our population. We lost many fewer young people in the fighting compared to every other one of those countries. Japan had an atomic bomb dropped twice, we dropped it, but nobody dropped anything comparable on us. So in those years, the world readjusted itself. The war forced it, and suddenly we saw very dramatically the end, the final end, it had been dying, but the final end of the British empire that had dominated the world for the previous two to three centuries, it was completely gone.
The jewel of the empire, India became independent in 1947. It was over and there was no one to fill that void, no one with one exception, the United States. So in a very short time, the global currency went from the British pound sterling to the US dollar from the British Navy being the power force of the world to the American military operation on a global scale with atomic weapons. You cannot overstress this. The only way Japan and the Europe were able to rebuild from the war was because the United States lent them the money to buy the equipment from the US with which to do that. So after the 1970s, all of that was over the 1970s were in fact a watershed. The great fear in the United States, the great fear was to slide back into the economic problems that the United States had had before World War ii.
Let me remind you, 29 to the war or the great depression, the worst collapse of capitalism in the history of that system, even to this day, we have not had anything worse than the 1930s. So there was always a fear then that oh, what would happen if we slid back with that in the back of your mind? Then you get the results that the Rand Corporation, like many other investigations have shown that the response, and this is really important, folks, that the response of the capitalist class and who do I mean by that? I mean the people who are employers, the people who are in the position of hiring other human beings. The United States census tells us that 3% of the American people are employers, the other 97% are not. And what that means, whatever else you think, it puts that 3% in a position to make powerful decisions that the other 97% of us have to adjust to have to live with and basically have to accept unless we make a revolution, which as you both noticed, we have not had.
So here is what that 3% did, and then I’ll stop. The 3% started, particularly in the 1970s, realized that the Europeans in the Japanese had recovered from the war as everyone should have expected them to do. They were still the Germans in the Japanese, hardworking, highly skilled engineer, modern country, all of that. And they understood that their place in the sun could only be achieved if they could outdo the absolutely dominant economy in the world, namely the United States. So they set their goals on producing goods and services that were either better than or cheaper than, or hopefully both what was done in the United States that made the United States great, which is why Americans discovered in the 1970s and eighties, the Volkswagen and the Toyota and the Nissan, and they fill in the blank. They did it. They did what they set out to do. They produced better cars so that even Americans bought them ahead of the Ford, the Chevy, the Chrysler and so on.
And in that moment, the discovery of the American capitalist class was that if they didn’t do something dramatic, they would be sliding downward as their former adversaries. The Europeans in the Japanese made their move, and that move was more and more successful with each passing year. So here’s what they did. Number one, they made the decision to move the manufacturing base of the United States. Out of the United States. The working class in the United States had been so successful in pushing up wages over the previous century, a century in which profits froze faster than wages, but they rose fast enough right up until the seventies that the employer could share with the workers a modest increase every year that the union would negotiate. And when an employer didn’t do it, the unions had the muscle to strike and to get it, and so wages were much higher.
But in the 1970s, the invention of the jet engine and the invention of the internet made it possible to supervise, organize, monitor a manufacturing factory in China pretty much as easily as you used to do it across the street in New Jersey or St. Louis or Chicago or where you were. So they left. The second thing they did was to take advantage of their history and to automate, to really go about systematically focusing on replacing these high cost workers, which they kept seeing as their great problem. Wages were lower in Japan, wages were lower in Europe, significantly so, and so they realized how do we do well? We replace workers with machines and the third action bring cheap workers here when it wasn’t convenient to move production there where the cheap workers live, those three things, export of jobs, automation and immigration of working class people.
That is mostly people in their working ages, 20 to 50 who would come here with or without family. No one really cared but would work for Penny on the dollar compared to what Americans were used to. And I have to tell you that worked, that strategic move of the business class, those 3% who run the businesses work, they all did it. By the way, at the beginning. Many of them were hesitant. They didn’t want to go to China. China don’t speak English and China’s far away and China’s run by a communist party. Very scary, don’t want to do it. But they had to because the first ones who did it made such profits that those who were not willing to go had to overcome their cautionary anxieties and go, but I want to stress here because Americans are being fed real nonsense about all of this.
No one held a gun to their head. The Chinese never had the authority or the power to make that happen. They might’ve wished it, they might’ve wanted it, but they never had it. This is a decision made by Americans and by the way, their counterparts against whom they were competing in Japan and Europe followed suit, also went to China. And exactly for the same reasons, which is one of the reasons Europe is in the trouble. It is in now Japan having difficulties that it is in now. The world has changed. The people’s republic of China is an entity in the world economy, the likes of which we have not seen for a century. I need to explain to people so often, Russia, the Soviet Union, may and I underscore may, may have been an adversary, militarily may have been an adversary ideologically, but economically never.
It was much too poor. It could never hold a candle to the American economy. That was its Achilles heel. And then when it tried to match the arms race with the US, when it tried to control another country, Afghanistan, it discovered that it was simply too poor to pull that off. And having waited too late, it dissolved. It couldn’t survive. No one has missed that lesson, least of all the people’s republic of China. So they’ve been super careful. If you watch them now, they’re still, when they don’t actually need to anymore, be super careful. They don’t impose tariffs on us until and after we do that to them. That’s been their kind of behavior all the way through. But we Americans have to understand, we do not. We are not in position to win. We’re not even in a position to fight another Cold war. China isn’t the Cold War the way the Soviet Union was. The conditions are completely different. And if the United States pursues it, I as a betting person would bet we will lose. Not out of it, not that we aren’t strong, we are not that we aren’t rich, we are, but the world isn’t a place where statements like we’re rich and we’re strong carry the day that
Is over. And I think that is a necessary way to frame or to contextualize all of the other important issues.
Stephen Janis:
Well, Dr. Wolf, thank you so much for laying that out. That is really fascinating. And I guess when we’re talking about the Rand report, so they were at this sort of pivot point, they make this decision, was there an option to be more inclusive with the working class here? I mean, does it have to end up the way it did where wealth is so extremely unequal? I really appreciate the way you rooted that and we now kind of understand the mechanisms, but could they have done this a different way, in a way that would’ve led to less economic dislocation for the working class in this country, or was it just the table was set the way it was? That’s a good
Taya Graham:
Question.
Richard Wolff:
Well, the way I would answer it, which will upset some perhaps, but it’s the only way that makes sense to me. If you allow the system to function in the normal way that a capitalist economic system functions, then I have to give you the answer your own words. That’s the way the world was. That’s the way decisions got made and it isn’t neither surprising nor shocking that they were made in that way. Could you have had a different outcome? Absolutely. But in order to get it, and I’ll describe it to you in a moment, in order to get it, you would have to change the system. And what I mean by that is you would have to stop making the decision based on what is profitable. Look, I’m a professor of economics. I have learned about capitalism as the profit maximizing system. That’s what I learned, and I went to all the fanciest schools. This country has to learn it, and they tried their level best. Half of my professors were Nobel Prize winners and sitting next to me in my class at Yale where I got my PhD, was one of the very few women that took economics courses in those days, and her name is Janet Yellen.
Stephen Janis:
Wow. Oh my god. Wow. So you were there in the room where it happened,
Richard Wolff:
And I know these people personally because we all went through college and university together, et cetera, et cetera. If you make profit the guiding, if profit is the bottom line, which not only I was taught, but I have taught that to generations of students as a professor, then you get these results. If you don’t want these results, you’ve got to deal with the way people are taught to make decisions. I’ll give you the simplest example. If you move your manufacturing out of Pittsburgh and Cincinnati and St. Louis and all the other places, Detroit. I mean I love to use Detroit. In 1975, it had 2 million people. Today it has 700,000 people. I mean, that’s it. End of conversation. That’s called an economic disaster. That’s as bad as having dropped bombs on that place and having killed all those people, obviously that’s not what happened,
But they were driven out by loss of jobs, et cetera, et cetera. So if you move your manufacturing, what is going to happen? Well, we know what happened to the companies that did it. They profited, which is why they did it and keep doing it. But let’s take a look, just you, me and the people participating here. If you produce it in China, it means you’re going to have to bring it back 10,000 miles from Shanghai or any of the in order to sell it to the American public. And you all know you can go buy an electronic device or furniture or kitchenware or a whole lot of other things and it says made in China. Well, what’s the problem here? The problem is you are be fouling the air with all the exhaust from all the freighters that are crisscrossing the ocean. What are you doing to the water? What are you doing to the fish?
Stephen Janis:
What
Richard Wolff:
Doing to the air? Well, here’s the important thing. No one has to worry about it because the companies that profit, even though they cause all of that turmoil, which will cost a fortune if you even can clean it up, they don’t have to pay a nickel. If they had to pay a nickel if they had to, they probably wouldn’t have done it because the profit wouldn’t have shown it as a reasonable thing to
Stephen Janis:
Do. So just so I understand, you’re saying that if the environmental costs were factored into this business decision to move everything to China, if the environmental costs were really factored in, then it wouldn’t be technically profitable to have this kind of transcontinental business or not transcontinental transatlantic. That’s
Richard Wolff:
Amazing.
Stephen Janis:
Wow.
Richard Wolff:
Only amendment I would give you is it’s not just the environmental costs. Let me give you a couple of other examples.
Stephen Janis:
Of course,
Richard Wolff:
When Detroit and I love the city, I’ve been there, I’ve been taken through it, the people treated me one, I have no complaint about the people, but an enormous part of Detroit is empty, burned out neighborhoods, mile after mile. They took me through, I’m talking, I’m not secondhand this, I saw with my own eyes, this is a disaster for these people. They had to pull up stakes, leave their homes, leave their families, leave their churches if they had kids in school, those kids at a very important time in life when they’re making friends and boyfriends and girlfriends, we yanked out of all of those relationships. One of the reasons all due respect that we have Mr. Trump in office is the dislocation of the white, particularly the white manufacturing working class.
It’s been a disaster for our labor movement because our unions were concentrated in manufacturing and you lost them and their member. And then remember all the communities in which those auto workers who lost their jobs lived, the stores in those communities went belly up. The housing market in those communities collapsed. They were unable to maintain their schools. How many children’s educations were interrupted, slowed down, deteriorated. This teach, if you add up all the costs, here’s the irony. Every one of the last eight or nine presidents of the United States have promised in their campaigns to bring manufacturing back. Our current president makes a thing of saying over and over again, he’s doing this to bring back manufacturing. None of them have done it. None of them have delivered on the promise. And we see why because private profit makes it. Well, let me give you an example. In his first presidency, Mr. Trump visited a factory in Harrisburg, Pennsylvania, true temper or temper something, I forget the exact name. The factory made three quarters of all the wheelbarrows in the United States.
Taya Graham:
Wow.
Richard Wolff:
In 2023, I just followed it through 2023, a venture capitalist bought the company out and did what they all do, which is carved it up into pieces, sold each of the pieces and made more money that way than they had to pay to get the factory in the first place. Today, that brand is still the brand of most wheelbarrows in America. But if you look at the label on the wheelbarrow underneath the same brand temper, whatever it was in small letters made in China,
Taya Graham:
Incredible.
Richard Wolff:
That’s how this works. If you leave the profit system in, if your loyalty to capitalism means that, then you’ve got a hard road ahoe because you’ve got to understand that commitment by you and by this society is producing the problems. Its presidents cannot and will not
Stephen Janis:
Solve. So Professor Wolf, this is kind of profound. It’s kind of effective because in Baltimore we have 11,000 vacant houses. I never conceptualized your thought of it that those ideas that were taught in that classroom, when you sat next to Janet Yell, and because we conceptualized profit in a certain way led to this destruction, which you kind of made an analogy to a war on the working class and cities like ours that were Baltimore is another example of postindustrial malaise. Absolutely. So you’re saying how these ideas were conceptualized, how we thought about profit, what profit meant has as much to do with the destruction we see as even any other force. Is that what you’re saying? I just want to understand because it’s pretty
Richard Wolff:
Profound. Yeah, you’ve understood me absolutely perfectly. We live in a society. Look, it’s really bad, you know that. I know that
Stephen Janis:
Absolutely.
Richard Wolff:
That part of that understanding. I know a little bit about the history, that understanding is part of the history of where the Real News network comes from and what it was designed to do by the people who have worked at it all these years. It’s an understanding, but we are now evolved enough in the United States that the taboo I’m about to mention doesn’t have its hold anymore. And you were very kind at the beginning to talk about me being all over the internet. Believe me, I’m as amazed by that as possible because having been a critic of capitalism most of my adult life, I know that people approached me always as a kind of an odd duck. If I didn’t have the credentials of the fancy universities, I wouldn’t be in these auditoriums. I wouldn’t be invited. It’s not me, it’s all the other you all know. You know how America works.
I’m here to tell you. Yeah, we now have to do what we have been afraid to do for 75 years, as I like to say, Americans are good. We question our education system, our transportation system, our hospital healthcare system. My God, we are in the forefront of questioning institutions like marriage, heterosexuality and so on, and good for us that we open up those questions. But when it comes to questioning capitalism, oh, all the old taboo sets in and you’re not supposed to go there. You’re not supposed to. Here’s the problem if you don’t go there, if we don’t go there, we are foregoing the solution to the problems. We say we. We should never have undone our manufacturing system that because there’s anything special about it. But a balanced economy is a diverse one. Yes, we need service industry. Yes, we need, but we also need manufacturing.
Right now, the most troubled part of our population are relatively less educated in the formal sense. Males without jobs and without any prospect forgetting them, those were the people who worked in manufacturing and a manufacturing job doesn’t have to be dirty and dusty and it can be clean and in noling if you want it to be. All of that is within reach. Unless we hold on to the taboo and the only people left for whom that taboo works is the very elite that the Rand Corporation makes so clear to us sits at the top. If it weren’t for them, I would be able to talk to 10 times more people and all the others like me. And I can assure you, I’m not the only one out there ready and willing to go would have the audiences that need to hear that message.
Stephen Janis:
Amazing. You’re asking the question, but I was just going to say Toay and to Dr. Wolf. I remember sitting in my macroeconomic was class and the professor said, all people make rational decisions. That was like the basis of it. Now it’s all falling apart as Dr. Wolf. But go ahead. You had the next question.
Taya Graham:
I was just thinking that criticizing our for-profit system, the way we accrue profits and how
Stephen Janis:
And
Taya Graham:
Conceptualizing even a person who is wonderful at accumulating those profits, how they’re lionized, how they’re
Stephen Janis:
Heroes, right? The ideology. The ideology,
Taya Graham:
It’s such this incredible ideology built around it and tackling that as a last taboo is just so important
And very powerful because I think people do sense the imbalance and that’s why when tariffs were proposed by our president that people have the feeling, well, yes, we do want these jobs back, but instead the way tariffs have been implemented has caused a lot of confusion. And so what I want to know is if you’ve discerned any strategy behind it, but before I have you answer, I actually asked Senator Sanders about Trump’s tariffs and what he was doing and I just want you to hear what Senator Sanders response was. And I just want to ask you a question. President Trump has been describing America as a sick patient and tariffs as secure. Do you think America is sick and what would you say should be the remedy
Senator Bernie Sanders:
In America today? My definition of what is wrong with America is very different than Trump’s. My definition of what’s wrong is that we have three people in America who sat beside Trump in his inauguration who own more wealth than the bottom half of American society. My definition of what’s wrong with America is we’re the only major country on earth not to guarantee healthcare to all people as a human right, that our childcare system is broken, that 60% of the people in this country, as you’ve heard today, are living paycheck to paycheck, struggling to put food on the table. So that’s my analysis, which is very different than Trump’s. I happen not to believe in unfettered free trade. I helped lead the effort against nafta, PMTR, with China. I think we need trade policies that work for workers, not just the CEOs of large corporations. I think selective tariffs in the right time in the right place are exactly right. I think a blanket tariff in terms of what Trump is doing, which number one happens to be illegal, don’t have the power to do that, and second of one will be counterproductive. Okay, thank
Taya Graham:
You so much. So I guess my question for you is what do you think the approach should be with tariffs and what do you think of President Trump’s approach so far?
Richard Wolff:
Okay, I won’t comment on Bernie’s response, although that would be a conversation I think we could profitably all of us have about the tariffs. Here’s the problem. A tariff is a nasty action. It hurts other people. Americans love to imagine that somehow that’s not the case. If you put a tax, let’s take an example of our major trading partner Canada. If you put a tariff on the things that Canada ships into the United States, and remember, we have thousands of miles of unguarded border between our two countries and we are each other’s major trading partner. We more important for Canada than vice versa because it’s a much smaller country than we are in terms of population and activity, but nonetheless, we depend on each other. Okay? If you suddenly say that for every foot of timber Canada grows wood and we need wood for our housing industry and we bring it in from Canada, if every tree stump that we bring in has to now be paid for, so we have to give the Canadian company that cuts and ships the wood, whatever it costs to get it.
But now on top of that, the buyer in America has to give Uncle Sam tax. That’s what the tariff is. The tariff is exactly the same as a sales tax, right? When you go to the local store and you buy a shirt, if you are in a jurisdiction that has a sales tax, you pay for the shirt and then on top of it, the cash register rings for you. The tax, the sales tax that is for you, an extra cost of that shirt or that pot or whatever you bought. A tariff is exactly the same. It’s a sales tax on imported items, okay? This means that Americans will buy fewer of them because they have become more expensive. So a tariff imposes on the seller in this case, notice a American official not elected by any Canadian makes a decision, a tariff that hurts a Canadian lumber company. Same thing. If you put a tax on electricity, which US spies from Canada and from many other things, oil, gas, those are important exports. You are hurting them. You are telling them we here in America have some economic problems and we are going to kick you in the face to relieve ourselves.
You don’t do that unless either you have a sense of entitlement that the whole world will hate you for or you feel you can browbeat and force them to accept it. And then you have the nerve, which by the way, president Trump did today with the visiting new leader of Canada. He told him today, we don’t want to buy Canadian automobiles. We don’t want to buy your steel, your aluminum. He mentioned half a dozen items. Well then only Mr. Trump could say that and seem, because I watched it actually live, seemed not to grasp that he was condemning major industries in Canada to unspeakable decline in a short amount of time. I mean, he’s making Detroit’s out of these places, but he’s not elected by them. Why they are sitting there. These Canadians, you can be sure, and I can tell you this again from personal experience, they are sitting there transforming a really positive attitude towards Americans, which they had into a really deep hatred for Americans.
Yes, they understand Trump is not all American and they’re not not children, but you are putting them and then now multiply this by virtually every other country on earth. Here’s the irony. After World War ii, if you remember, the policy of the United States was containment. George Kennan was a great thinker in American political science. That was a strategy. So the Americans put bases around Russia and we isolated and we constrained Russia, the Soviet Union. Here’s the irony. Today it is the United States pursuing that kind of policy, but with the absurd opposite result. We are isolating us. We are turning the whole world into looking at the United States, and understandably, I wish I could say they were wrong about it, but they’re not.
Mr. Trump is doing unspeakable damage. Now on the economics, if you are going to put a tariff the way we are doing, and you’re going to say as Mr. Trump does, I want automobiles to be built here. I don’t want them to be built in Canada. I don’t want them to be built in Mexico where a lot of them are. Well, okay, then put a tariff and hope cross your fingers that the profit calculations of the car companies will lead them to do what you hope they will do if you impose such a tariff. But here’s the one thing you cannot do. You cannot say, here’s the tariff, and then two days later take it away and then a week and a half later raise it up a bit more. You know why? Because that introduces uncertainty and here’s why that matters. Go to any large company that’s busy in Canada or Mexico or anywhere else. They hear about these tariffs and do they consider moving into the United States? Of course they do. They want to escape the damage that a tariff does to them, but to move back into the United States takes two or three years, costs a ton of money, and is an immense risk. If you have any reason to doubt that this tariff will stay the way it is, you would never do it.
That’s why no one is going to do it. That’s why that such a point policy. Policy is a roaring failure from the get go. Wow. He has economic advisors. I know them. Either they’re intimidated and don’t tell him these things or they tell him and he doesn’t care or doesn’t listen. I don’t know. I’m not privy to that sort of thing, but I can tell you that the whole world watches this look, it was a long shot for him, which he didn’t understand because he’s not going to be president in three and a half years and most of these moves of companies, they take much longer than he will be president. So they have to worry that whoever comes in, Kamala Harris or anybody else will undo all of this, in which case they will have spent a fortune of money and moved and be regretful that they ever did it. They’re not going to move there, they just aren’t.
Stephen Janis:
Well, Dr. Wolf, I’ve been really thinking about some of the things you’ve said, and a lot of us we’re kind of naive. We always look at economics as a science, right, as a science. But from what you’re telling me, economics as a philosophy and it’s a philosophy, kind of turned somewhat as a religion where we’re worshiping at the feet of Milton Freeman or something, and that where prophet has become invaluable, prophet is like the catechism or something. You can’t question it, and I’m kind of profoundly affected by this because I did take micro macro and I feel like, wow, I was misled. I mean, you’re talking profit has become sort of invaluable. You can’t say anything against it, is that
Richard Wolff:
Where we are? But let me correct you about something you said a few minutes ago, and you were very wise. If I heard you correctly. You said you sat in a course and the course began with the teacher saying to you, in this course, we assume that everybody is a rational person, who
Stephen Janis:
That’s what was said.
Richard Wolff:
Yeah, that’s what was said. But you were clever when you said it a few moments ago in this program, I’ve got you here. You said you let us know that you thought that was nuts, what we were being told.
Stephen Janis:
Yes I did. Even at 19 years old I did.
Richard Wolff:
Yes. Here you were 19 years old. You already knew that this was crazy. Well, let me just tell you, I am married. I’ve been married a very long time. I know I’m a dinosaur. I got married at 23. I’m still married to the same lady. Congrats.
Taya Graham:
That’s lovely.
Richard Wolff:
She is a psychotherapist, and when I was a graduate student, we were just sort of getting together. Then when I was a graduate student, I came home one day and I told her that I had heard in my class what you heard, that economics is based on the notion that decisions are rational.
She fell off her chair laughing. She thought I was making it up to pull her leg to say something humorous. I said, no, there was no humor at all. And she said, oh my God. My whole field of psychology is an attempt to understand the very difficult combination of drives and urges and fears, half of which we’re not even conscious of that determine RB, the notion we are all rational calculators of costs and benefits. She could finish the sentence. She started laughing again at the thought of mature men and women sitting around talking like that. It struck her as incredible,
Stephen Janis:
But why do we worship the notion of prophet if it’s irrationally derived? Do you know what I mean? That’s what I’m just thinking about. What you said was so profound because these were conscious decisions, but they really were also exclusive decisions. That’s right. We are going to exclude the working class because of this idea of profit. How come we’ve come to worship at this idea of the science of it when it really is more like a philosophy, I guess is what I’m asking, because you’re there
Richard Wolff:
When I teach it. Now, in order to get at this, when I teach it now, I say to the students, profits are part of the revenue when you sell, if you make shoes or you make software programs, when you sell your product, you get a revenue and part of that revenue stream comes into the pocket of the worker, and we have a name for that. That’s wages and salaries, and another part of the revenue stream goes into the hands of the employer, and we call that profits. Now, if you want to make a economic system, have an objective, a goal, if you make it to profits, then you say the whole system is supposed to work to maximize what goes to a tiny minority of the people involved. Why wouldn’t you say more democratic for sure that it is the wages that we are most interested in securing because that’s where most of the people’s needs lie with the wages and the salaries, not with the, and when I explain it that way, everybody nods. It makes sense if you don’t explain it that way. If you explain it the way most universities and colleges do, and I still teach. I’m sitting here in New York City, I teach at something called the New School University,
But that’s a recognized American university. But most of my colleagues, they continue to teach profit maximization as the royal road to efficiency it.
Stephen Janis:
Yeah, I mean, inequality is not efficient, right? That’s right. Can you explain that a little bit? How inequality is not efficient economic
Richard Wolff:
Principle, you should have stayed with economics. You’re getting perfectly well,
Stephen Janis:
I blew it. I was an economics minor, English major as you can imagine, but never too late, right? But yeah, so inequality is inefficient, right? Professor?
Richard Wolff:
Yeah, it’s a terrible inefficiency. And again, you can see because nobody has to calculate it in a profit system. If inequality means that inner city schools across America can barely hold it together as disciplinary institutions, let alone chances to motivate, educate, and inspire young people who need it, then you are going to pay a cost in those kids’ lives not being anywhere near the contributions that they’re actually capable of not being able to earn the income that they need for their fear. The social cost of this is enormous to tell me that private profit doesn’t see its way clear to deal with this is to tell me that we got a system that doesn’t work well. It’s making profit driven decisions that are outweighed by the social costs that these private profit calculators never have to take into account. And that’s cuckoo. That’s the distill way of organizing yourself, right? Yeah.
Taya Graham:
Professor Wolf, you were mentioning how tariffs work, and I remember Peter Navarro, who’s the White House senior counselor for trade. He said that the administration intends to raise 6 trillion over the next decade via these reciprocal tariffs and that this would actually shrink the annual trade deficit, which is about $1.2 trillion. So I would have a two-part question for you. So would the US government actually directly raise trillions of dollars via tariffs? And my second question, is a trade deficit really a bad thing?
Richard Wolff:
Yes. It’s a very, very old question. Okay,
Let me make a parenthetical remark just to set the context. Tariffs are not, new. Tariffs have been used by many countries over centuries. I tell you this only because there is a vast literature that has developed in all modern languages about tariffs because they have been used so often and we have lots of empirical studies. Under what conditions did they achieve the goals they set? Under what conditions did they fail to achieve? I’ve taught courses in international trade, and there’s a segment of the semester when you talk about tariffs. That’s how established they are. So having said that and wanting to remain very polite, I would tell you that Mr. Navarro is considered even in the economics profession, to be, I’m searching for the polite word, difficult to take seriously. I’ll leave it at that.
Taya Graham:
That’s very diplomatic.
Richard Wolff:
Yes. So the notion of the trillions, there is no way to know how much money a tariff will raise. That’s what the literature shows. Mr. Navarro should know that because it depends always on how people react. So for example, if the tariff, let me give you an example that’s real. The best and cheapest electric vehicles in the world are currently made in China by Chinese companies, the most famous of which the BYD three letters, which stands by the way for the English words, build your dream. That’s the name. The Chinese company took BYD. Let’s say you wanted to get one of those cars, which by the way, you’ll see on the roads of Asia, Africa, Latin America, and Europe. The only place you don’t see him is here. Why? Because of the tariff. The tariff now stands right now at a hundred percent. It was raised from 27.5%.
That’s what Mr. Trump put on it in his first presidency, and Mr. Biden raised it to a hundred percent. So if you want a $30,000 BYD car or truck, you have to come up with 30 grand that goes to China to pay for the vehicle, and another 30%, another 30 grand, a hundred percent tariff go to Uncle Sam. So you would have to pay, or I would have to pay $60,000 for that $30,000 car. Now hear me out. Every competitor of the United States, every company in the world that uses electric trucks to get its inputs to ship its outputs, they are all able to buy the best and the cheapest truck for $30,000. But the American company that has to compete against them would have to pay 60,000 for the same truck. You know what that means? That America is shooting itself in the foot by what it’s doing.
It’s not going to make more jobs. And what are Americans going to do as a result? They’re not going to pay the tariff. They’re going to settle for a cheaper electric vehicle made by Ford or General Motors or Tesla or Toyota because it’s not as good as the Chinese, but it isn’t 60 grand. And so guess what? No tariff will be paid because Americans will get out of paying the tariff by buying the cheap car, buying the cheap truck with the end result. That step-by-step Americans will isolate themselves in a walled off tariff universe, which makes them progressively incapable of competing. Let me put it to you this way. I look at all of this as a professional economist, and my image is I’m watching one of those proverbial movie scenes where you see a train crowded with people having a good time, but from where you sit, you can see the train is heading for a stone wall. Oh, wow, Jesus. And you want to yell loudly, get off the train, but they’re having such a good time telling each other’s stories and drinking their cocktails that they simply can’t
Stephen Janis:
Hear me. Wow, it’s
Taya Graham:
A nightmare.
Stephen Janis:
I’m just thinking about what you’re saying. And so we have, as we discussed before, we have a irrational system that sort of presents itself with science, comes up to an irrational conclusion to create tremendous wealth inequality, which creates the conditions for a political class now that is making totally irrational decisions. And so are we looking at a point where capitalism is turning in on itself in America, because the elite said profit above all else, profit above people, and now people are pushing back. But what they’re getting is actually not a good solution, but really irrational decisions that are kind of based on that irrational idea in the first place. Not to be too circular, but
Richard Wolff:
Because of my time constraint, I have to get off, but let me end by breaking another taboo.
Stephen Janis:
Okay, great.
Richard Wolff:
Here it is. The way this system is going, the way it is acting, it is doing exactly what you said, holding on to the taboo and building the conditions, which I know we haven’t got there yet, but building the conditions where the next concept we will be discussing is revolution. You cannot do this to the mass of people. Our people are already showing many signs of extreme stress. Mr. Trump is an exemplar of where that stress can lead. It can go to the right, of course it can, but if it goes to the right, which it’s doing now, and if the right proves itself unable to solve these problems, which it’s clear to me it will, then the next step for the American people is to try to go to the left, which after all they did in the 1930s, there is no reason they can’t or won’t do it again. That’s a wonderful
Taya Graham:
Thing. Professor Wolf, I know you have a time constraint, but I was hoping I could just ask you one quick question.
Richard Wolff:
Okay. Quick.
Taya Graham:
Okay. The question is, I think this is really our most important question for you is what do you see on the horizon? What advice do you have for your average worker out there who’s paying off their car or their home or their credit card, who doesn’t have a whole bunch in their savings account, who doesn’t make over $70,000 a year? What should we be looking out for on the horizon? I mean, we’ve talked about the macro economics. What can we do on the micro to protect our wallets? What do we need to look out for?
Richard Wolff:
Well, the first part of the answer is to be honest. If people say to me, which they do, is it possible by some mixture of good luck that this all works out for Mr. Trump? The answer is yes, that could happen. It’s not a zero probability it could, but if you want me to tell you what I think is going to happen, I think it’s going to be a disaster. And therefore, I would say to every working man or woman, any person, you must now be extremely careful about your financial situation. Don’t make major expenditures if you don’t have to. Hold on. Find ways of accommodating and economizing because there are risks now of a recession, which by the way, most of Wall Street expects later this year or early next year, there are serious risks of an inflation. There are serious probabilities of a combination of both of those things, which we call stagflation. And all of those are terrible news for the working class. And I’ll add one more. Having told the working class for the last 70 years that there is this thing called the American Dream, and that if they work hard and study hard, they will have an entitled chance to get it, an nice home, a car, a vacation, a dog, a station wagon, all the rest of it.
You’re not providing that now to millions of people. And if we have an economic crisis, and remember the last two were immense. The 2008 and oh nine crisis was very, very bad. And the 2020 so-called pandemic crisis. Also, if we have another one on those scales on top of the receding American dream, you are putting your working class under X extraordinary stress, and it would be naive not to expect extraordinary political ideological outgrowths from that situation.
Taya Graham:
Wow.
Richard Wolff:
Well,
Stephen Janis:
Dr. Wolf, thank you.
Taya Graham:
We appreciate you so much. So can
Richard Wolff:
We take your class?
Taya Graham:
I would like to sign up, please.
Richard Wolff:
Okay. Send me an email. I’m sure we can work it out.
Taya Graham:
That would be wonderful. I’m going to take you up on that. Yes, thank you very much. Thank you. Thank you so much,
Stephen Janis:
Dr. Wolf.
Taya Graham:
We really appreciate you Professor Wolf.
Stephen Janis:
We take care. Bye.
Taya Graham:
Wow. We learned something new from
Stephen Janis:
Him.
Taya Graham:
Every time we ask a question,
Stephen Janis:
I mean the discussion of economics, it always sort of presents itself with a science. Maybe that’s one of the reasons I didn’t pursue it because it felt scientific to me. But the way he unpacks it, you understand. You see, you, Vince, the philosophy that defines it, which is so profound. We don’t even think about it. We accept it. Well, profit motive is the only thing. And look, I sound a little pollyannaish, but still to think about it in that context where he kind of turns it into a philosophy that you can kind of wrestle with and see the underlying assumptions is pretty powerful. And I really appreciate the way he does that, because we need to think of it that way. If we’re going to survive the next decade, we need to think of it as something that comes with conscious decisions, not made from scientific analysis, but someone’s preference. Preference of having inequality. And that’s the preference you’re expressing, right?
Taya Graham:
Yeah.
Stephen Janis:
That’s what Milton Freedom Express is, absolute inequality, because there can only be so many capitalists. So when he equated, and I thought about Baltimore does look like a war zone. I mean, our own city looks like a war zone, right?
Taya Graham:
Oh, absolutely. I mean, we have 11,000 vacant buildings. A lot of them are burned out. We were just in Santown Winchester where Freddie Gray was killed in police custody. It doesn’t look any different. Someone’s living in a house that’s connected to a burned out building with part of the roof
Stephen Janis:
Missing.
Taya Graham:
I mean, how can you have hope to have any value in your home? How can you hope to have any wealth to pass on to your children when you have a home attached to a burned out building?
Stephen Janis:
And I used to think of it like Baltimore. I would look a war zone like post drug war, but the way Dr. Wolf said it, it was really post economic malaise. It really was affecting me profoundly. But anyway,
Taya Graham:
What’s interesting is the idea of interrogating the very base assumptions. I mean, for years he’s been speaking about interrogating those base assumptions. Exactly the way we run. That’s a better way our economy.
Stephen Janis:
Yeah,
Taya Graham:
It is for profit. Is that the direction it should be? It should be for profit, or should it be for people? And he’s asking us to really take a look at that, and I think people are finally now ready to at least ask these questions. It’s no longer so taboo to even ask the question, which
Stephen Janis:
It was. It’s interesting you called it taboo, because it really is.
Taya Graham:
Oh, absolutely. It really is. Absolutely.
Stephen Janis:
But thank you.
Taya Graham:
Well, as we discussed, the Rand report is shocking and sort of makes a point about the uncertain times we’re living in now. I mean, regardless of your partisan preference, it is undeniable that the curtain era is both turbulent and unpredictable, which is why the Rand Report meets such a deep impression for me, because along with the truisms, it revealed about how wealth inequality breeds more wealth inequality. I couldn’t help but think of something else, a special type of influence that accompanies this kind of economic dislocation. And that’s chaos. I mean, utter chaos. Just think about it, that shrinking piece of the pie for workers harms, people’s lives, real lives, people with family, with loved ones, with children, with elders, people who watched as their incomes technically shrank, who could nothing as fewer and fewer of the benefits of the wealthiest country in the world, were not shared with them. I don’t even think shared iss the right word here. Maybe denied or withheld. You know what? How about stolen? You know what? Pick your adjective. Pick your verb. But the effect is the same. But let’s use the word stolen in this case.
I mean, when you look at the numbers, I want you to imagine the lives that impacted and then imagine the chaos it created. All of us, no matter where we are in our lives, have experienced the trauma of losing a job or having trouble paying off a student loan or getting squeezed by your landlord or trying to figure out how you can pay for a car or fund your kid’s education or take care of your grandma. All of us have confronted these choices and often ask a question, how can anyone afford this? And what the heck are we going to do? And don’t even get me started about surprise medical bills. A fact that Bernie Sanders shared during his press conference pushing for Medicare for all. He said, think about this. 60% of cancer patients go through their entire life savings two years after their diagnosis, cancer patients and their families left destitute.
And add to that, the even more disturbing reality that roughly 500,000 people a year are pushed into bankruptcy by medical debt. That’s right, due to being in an accident or getting sick. How’s that for the wealthiest country on earth? But it’s also why this Rand report hit so hard, because it’s not just about 50 years of a declining share of income. It’s also about 50 years of chaos for working people. It’s about five decades of shrinking paychecks, fewer opportunities, insane student loans and unaffordable housing. It’s about the time we spend worrying about a utility bill or keeping a cell phone on or paying for an ailing parent that needs around the clock care. And even worse, it’s often about keeping a job we don’t even like just for the health benefits or working two jobs or even three, or working for a way to offers just enough to get by, but not enough to build a future.
Meanwhile, the horizon and opportunities for the 1% keeps expanding. The future for them gets brighter and brighter and brighter while ours, the working people of this country gets dimmer and dimmer. In fact, today’s conversation isn’t just about numbers or charts or percentages on a page. It’s about the lives of everyday Americans who have been systemically deprived of dignity, stability, and justice. By extreme wealth inequality, $73 trillion didn’t just disappear. It was taken. It was taken from working families, from communities and from our collective future and handed over to a tiny elite whose power and influence grow more unchecked each day. This isn’t an accident. It’s a choice, a political and economic decision made by those who benefit the most from the imbalance. But here’s our choice. We can stay informed, we can stay vigilant, and we can demand accountability, and we can refuse to accept a rig system is normal. This type of inequality thrives in silence, and I guess you can tell we won’t be silent. Isn’t that right, Steven?
Stephen Janis:
Absolutely. Clearly.
Taya Graham:
Well, I just want to again, thank our guest economist, Dr. Richard Wolfe, for helping us make sense of the dismal science and our current fiscal ups and downs. And of course, I have to thank you my cohost, reporters, Steven and Janice. Great. Thank you. I appreciate your insights in helping make this show
Stephen Janis:
Possible. Absolutely.
Taya Graham:
And of course, I have to thank our friends in the studio, Kayla Cameron, and Dave, thank you all for your support and I want to thank you out there watching. Thank you for watching us. Thank you for caring, and thank you for fighting the good fight. My name is Taya Graham. I’m your inequality watchdog. See you next time.
This content originally appeared on The Real News Network and was authored by Taya Graham and Stephen Janis.