Welcome friends to another edition of Economic Update, a weekly program devoted
to the economic dimensions of our lives, incomes, jobs, debts, the future for our
kids, all of that. I'm your host Richard Wolff. I've been a
professor of economics all my adult life and so, I hope I've learned something
also about how to present it, that can make sense of the economic events we
depend on, and live through week to week, year to year. I want to begin by a
closing chapter if you like on something we've been discussing for a while on
this program this has to do with the initiative taken by the people of
California which reached the peak this last week when Governor Jerry Brown
signed into law a B 249 a new law goes into effect on January 1st 2018 it will
require that all paid advertisements for political candidates for parties for
ballot measures have to will identify who the major donors were that made
those paid advertisements possible the whole logic of it is that the people who
vote should know who's paying for the advertisements that flood our airwaves
in the weeks before our elections it's a basic piece of information the other 49
states are behind California on this and is the hope of all of us who've watched
this struggle over the years that it took to recognize that the rest of the
country should follow and to recognize that this is only the first step there
should be many more constraints on and exposures of the enormous influence that
money has in the politics of the United States and that too little has been
known about it so this is an important step
several of the updates I'm gonna be talking with you about today have to do
with corporate misdeeds why am I talking about them
well there are three reasons first there's more of them than I remember
seeing crammed into short periods of time number two they're really big they
affect millions of people in dangerous ways but the third reason is the one I'm
most concerned about we take for granted that the things we need and depend on
are going to be managed in an honorable safe and useful way by the entity we
call the capitalist corporation and in recent weeks and months we have been
given evidence after evidence that putting trust in those institutions is a
mistake they are not trustworthy not all of them of course but enough of them to
raise a fundamental question about whether we ought to organize the
production of goods and services in the capitalist form small groups of people
major shareholders boards of directors making all the key decisions being
driven by profit maximization as the famous bottom line are they making
decisions about profits that also happen to be good for the rest of us or are
they making decisions about profits even when they are bad for the rest of us I'm
now going to give you in the course of the next few minutes several examples
that ought to make all of us stop and think about the economic system we live
in I'm going to begin with an obscure example but an important one this has to
do with something called monarch Airlines a British airline company that
abruptly announced a couple of weeks ago then it was bankrupt did the executives
did the Board of Directors know that they were
in financial trouble of course did they make that clear to the public of course
not if they had done so the hundred thousand people stranded when they
simply stopped running their airplanes would of course gone elsewhere for their
air travel so they didn't do that that was good for them to profit another few
months and weeks but of course it wasn't good for the stranded travelers hundreds
of thousands of people inconvenience stranded separated from God knows what
kind of family emergencies and business requirements for the convenience of the
profits of an airline company and that means its major shareholders and its top
executives 300,000 people were holders of tickets on Monarch Airlines in the
months ahead on top of the hundred thousand that were stranded where's the
capitalist efficiency in this story there isn't any this is an example of
the dangers that we face as a people if we allow something like air travel to be
operated by a private company seeking to make money and if then when that company
can't or won't take the steps we need because they conflict with what's good
for them it's clear which way they go let me offer you another example this
one in the United States one of the most important credit companies in the
country, a company whose job it is to keep track of how creditworthy you and I
are, do we pay our debts, do we pay on time, what is the record of our payments
and so forth, and that's very useful to the business community because it lets
them know to whom they should issue a credit card to whom they should not how
much credit to allow the person, how much not, you get the picture. The name of the
company Equifax, very important to put names on this.
It's one of the big three credit card companies in the world well here's what
they did they found out earlier this year that
they had a problem with their system of record-keeping their computer files
there was a way for a hacker to get into them they could have and they should
have patched that problem to avoid a hacker getting in there were at least
some weeks or months between the time they found out and the time they did
anything about it and in that interval when it wasn't yet a profit-driven
decision to fix things a hacker got in what did the hacker or
hackers get ready a hundred and fifty three in that neighborhood million of
our accounts our names our social security numbers our credit histories
are now public knowledge 153 million ladies and gentlemen that's half the
population of the United States has been compromised by what by a private
capitalist corporation whose Board of Directors, 15 - 20 people, didn't see fit to
fix the problem immediately maybe it's expensive maybe they were
looking for a cheaper offer I really don't care and neither should you
private profit companies did something that compromised the credit to privacy
the very identity of half the people in the United States leaving our business
leaving our affairs in the hands of private companies not a good idea then
that reminds me of another company, Yahoo. Yahoo, they admitted that their records
were hacked when they first admitted it some time ago they said
1 billion people accounts had been hacked in other words Yahoo didn't spend
the money hire the people to make sure this didn't happen would have cost them
a bundle so they didn't do it and they announced over the last few weeks that
they had been in error it wasn't 1 billion it was 3 billion.
There's nothing I can say other than to remind you leaving important issues in
the hands of private profit driven capitalists is not the best idea for how
to proceed. But I don't mind pushing the envelope a little with you, so let's
continue and talk about more examples. The next one is Johnson & Johnson, one of
the largest pharmaceutical and medical device companies in the world. It
produced something a while ago, or rather its subsidiary, with a wonderful name
Ethicon, playing on the word ethical, which is real close. Ethicon, a
subsidiary, produce something called a vaginal mesh implant. It turns out
that this device was a more modern and newer version of older devices that were
really working pretty well but the advertisement was that here's a new
product that works better than the old one even though the evidence now
suggests it doesn't but it is very common for pharmaceutical companies to
come up every few years with a better version because everyone goes out and
buys that and they can price it accordingly and make more money the
problem here was that the newer version hurt people hurt women because it was
made for women and one of them went to court and there was a trial and when
there's a trial there's a record and I can bring you the results of the record
first the plaintiff woman hurt by this profit-driven
maneuver one a fifty-seven million dollar award because the jury and the
judge found that the damage was severe and that I'm quoting now from one of the
news reports the product was less effective at a higher failure rate than
earlier products Wow they could have they should have known you're supposed
to test these things you're supposed to be honest and test them widely before
you introduce them because this sort of story can happen Johnson & Johnson is a
very profitable big pharmaceutical company and it proved to be an
untrustworthy producer of these devices let's go back to England for yet another
example the largest supplier of supermarket chicken in Britain is called
the 2 Sisters Food Group and they were unfortunately the object of an effort by
newspaper and media reporters to film what goes on inside the chicken
processing plants operated by the 2 Sisters Food Group and there they made
video recordings of two things one pieces of chicken falling off the
assembly line onto the dirty floor being lifted up by the workers and put right
back on the assembly line the second I found even more distressing they have
videos of workers changing what are called the kill dates the dates upon
which the chickens in question were what's the polite way to say this killed
that's why it's called a kill they'd they made the kill dates later so that
they could sell to the public older chickens and that's why of course
kill dates are mandated by law okay what does this story tell us two sisters food
group is a capitalist corporation seeking to maximize profits that's what
all these corporations do that's what they learned how to do at business
school the top executives that's what they're paid to do that's what they get
bonuses for doing so that's what they do they maximize profits
it would hurt profits if the piece of chicken that fell on the floor was
thrown out it would hurt profits if they couldn't sell parts of chickens or hold
chickens because they were too old too much time had elapsed since they were
killed so they fixed it it's good for profits not good for your tummy last
example I want to stress today has to do with a literal epidemic this one is the
epidemic of people overdosing on opioids it's very famous it's getting a lot of
attention now even from our president. 64,000 people last year died in America
in one year of overdoses of these drugs. Most of these people get these drugs
through prescriptions in other words there are drug companies that are
producing these drugs and then through intermediaries distributing them to
pharmacies to doctors to clinics and so on in the normal way this business is
done but this isn't a normal problem the drugs in question oxycontin is a
famous example and the other variations on that drug these drugs are the ones
being used by people to overdose wounding themselves damaging their
brains killing themselves the state of Washington has been so affected by this
crisis as have many states that the state of washing
a little bit further and over the last couple of weeks initiated publicly a
lawsuit against a number of pharmaceutical companies in particular
Purdue Pharma one of the largest ones that produces and distributes this is
not the only lawsuit I'm gonna read you a list of other states that have also
initiated lawsuits against pharmaceutical companies: Louisiana, West
Virginia, New Mexico, Oklahoma, Mississippi, Ohio, Missouri, New Hampshire, and South
Carolina ,and I might add several cities and counties have also initiated
lawsuits. And the lawsuits all have variations on the following assertion:
one, that the pharmaceutical companies under reported under advertised the
addictive nature of what was marketed as a painkiller it's one thing to want to
kill your pain understandable it's another thing not to be told that the
mechanism the medicine you're using to kill the pain risks giving you a bigger
problem than the pain was that you were trying to kill; number two, it was
asserted in various ones of these law cases that these companies were clearly
aware when a particular doctor or a particular clinic or a particular
drugstore suddenly went from ordering 5,000 pills per month to distribute to
their customers to doing five times that or ten times that or some other
explosive that should have been a red flag it would be for any normal
reasonably honest human being it's a sign somebody should be checking in to
making sure that this is not becoming an illegal way of distributing these drugs
and the argument in these lawsuits is these companies therefore knew
that they were being selling these drugs in ways that would be damaging to people
did they do what they could have been should've no that's why they're being
sued by all these states and cities and counties well why didn't they well let's
be honest they were selling at a profit pills that's what they do and they
didn't want to hurt their profits their profits were exploding as millions and
millions of Americans in difficulty for the very reasons of the economic crisis
we talked about on this program trying to cope with poor wages with jobs that
are insecure with jobs that don't have the benefits they once have trying to
manage that they become dependent on these drugs that are highly addictive
well it was profitable to sell the drugs it may have killed a lot of people but
it was profit there's no nice way of saying this when you weigh killing
people on the one hand and the profits of your own company on the other these
companies made a choice the City of Seattle is suing and it's not just suing
Perdue it is suing Teva Pharmaceuticals, Johnson & Johnson again, Endo
International, and Allergan. it's important that you know the names
because every one of those is a large capitalist corporation making money off
of something that isn't only not so good for the rest of us it's deadly and if
there's a clash between profits and deadly do we really want to leave the
decision in the hands of those who earn their profits off of this know what
other answer could we have. I'm still not done and if it's taking all of our time
today the point is important enough. Over this last week a Japanese steel
company one of the largest steel producers in the world been around for
many decades it's called Kobe steel KOBE they have
now revealed and admitted that they falsified information about a number of
the metals that they produce and sell now here comes the part that should
scare you to whom did coal-based steel sell the steel and the copper and the
other metals to railroad companies two airline companies and two automobile
companies among others raising the question which is a very hot topic in
Japan right now are we riding in cars and trains and airplanes whose metal
isn't up to snuff because what the kobe steel company has admitted to doing is
falsifying the data about the strength and quality and components of the medals
they were selling Wow New York Times last week we made a
report that Nissan Motors also falsified data about its cars and had to recall
1.2 million vehicles these stories never stop friends and therefore there's a
larger message here something is wrong putting our confidence and faith in
capitalist enterprises driven by profits as their bottom line is a really bad
idea and the time has come to face it before I complete today's first half of
our program I want to remind you we maintain two websites that I invite you
to make use of to partner with us to use as a way of talking with other folks
about what this program teaches and what this program hopefully means to you
the first RDWOLFF with two Fs dot com and the second one is democracy at work
dot info that's all one word democracyatwork.info
to my listeners let me also remind you that you can see a televised
version of this program simply by going to patreon.com
P A T R E O N patreon.com/economicupdate let me urge you to make use of our websites
of our program as a way to partner with us to spread the word to make more
people aware of the very things we're trying to articulate and clarify on this
program so let me go back with a couple more examples to drive the point home
Edward Lampert a former Goldman Sachs banker became the owner a few years ago
of what was left of the Sears Roebuck Company, a company which has been iconic
in the American countryside for many many decades it has come upon hard times
and Mr. Lampert an ex-banker saw an opportunity he bought it cheaply and
quickly thereafter merged it with another giant retailer that has had
trouble Kmart, the former Kresge if you go back far
enough. This last couple of weeks he announced he's closing all the
remainings Sears stores in Canada making 12,000 people unemployed in Canada the
shares of stock went from a high of a hundred and seventy dollars a share to
the current price which is below $8 a share it is a disaster Mr. Lampert has
made all kinds of money along the way because Sears was owner of land where it
was located that had become valuable it had other properties it could be
dismantled in a profitable way along the way of course tens of thousands of Sears
employees lose their jobs the 12,000 in Canada just the latest installment but
there's worse many Sears Roebuck were the anchor of a downtown shopping center
they were the anchor of a mall located
somewhere they were the reason people went to the mall and then they were
customers of the little restaurant in the little card shop and the other
things that were in the mall if you lose the Sears if the Sears goes down it
takes the other stores and it takes the whole community down with it should this
decision to destroy this enterprise have been made by a few individuals with mr.
Lampert profitable for them a disaster for others this is not the way to
organize matters leaving empty malls leaving destroyed communities this could
have and should have been handled in a better way maybe not so profitable but
better for the mass of people that were injured again it's the same story my
last example that I'll have time for this has to do with the endowments of
rich universities this time of year they announce how well their endowment is let
me be clear that you all know what an endowment is fancy word for wealth
it's the stocks and bonds and real estate a university accumulates over
years that it exists donations from alumni fundraising efforts they have and
so on they accumulate wealth and that makes income which they use to run the
university over the last year here's how well these endowment funds did they pay
huge bucks to professionals to make money with the money they've accumulated
Dartmouth College leads the pack this last year their endowment went up
fourteen point six percent Yale was disappointed it's only went up
eleven point three percent and Harvard did the worst even though it's the got
the biggest endowment it only went up 8.1% why do I tell you this because this
is money making money the people of this country who work did not enjoy increases
in their wages and salaries over the last year
anything like 14% or 11% or 8% you only got that kind
of return if you have enough money to make investments which the vast majority
of Americans don't have so we have to face the reality over the last year when
we were told there's a great recovery the people who were the richest the
institutions that were the richest like those universities I just named they
became much richer than the rest of us the gap between rich and poor is getting
much larger no one is preventing that nothing is stopping it a capitalist
system that works as untrustworthy a set of results as I've reported to you and
that we conclude is making inequality worse is a system that could be
questioned challenged and debated it's long past time that we do that and make
that part of the national conversation about our present and even more about
our future. We've come to the end of the first half of Economic Update for today.
Please stay with us, after a short interlude we will be back.
and we will have an interview that I think you will find very interesting and
important
you
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