The real looting in America is the looting of the wages and savings of the bottom 90% by the wealthiest 1%. And although it’s not in the news nearly as much as other types of looting recently, our rigged economic system causes far more harm to our society. Former Secretary of Labor Robert Reich joins Nick and Jessyn to explain who rigged the system, and what it will take to stop the real looting.
To contact your elected leaders about the transfer of $50 trillion over the past 45 years from working Americans to the top 1%, text RAND to 67076 or go to www.civicaction.com/rand.
Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. He has written 18 books, the latest of which is “THE SYSTEM: Who Rigged It, and How To Fix It.” He is a founding editor of the American Prospect magazine, founder of Inequality Media, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentaries “Inequality for All” and “Saving Capitalism,” both now streaming on Netflix.
Twitter: @RBReich
Show us some love by leaving a rating or a review! RateThisPodcast.com/pitchforkeconomics
Further reading:
Protesters criticized for looting businesses without forming private equity firms first:
https://www.theonion.com/protestors-criticized-for-looting-businesses-without-fo-1843735351
Banks gave richest clients ‘concierge treatment’ for pandemic aid: https://www.nytimes.com/2020/04/22/business/sba-loans-ppp-coronavirus.html
Who is really “looting” America? https://www.refinery29.com/en-us/2020/06/9852642/billionaires-rich-looting-america-tax-law-money
The top 1% have taken $50 trillion from the bottom 90%, and that’s made the U.S. less secure: https://time.com/5888024/50-trillion-income-inequality-america/
The golden age of white collar crime: https://www.huffpost.com/highline/article/white-collar-crime/
Some companies seeking bailouts had piles of cash, then spent it: https://www.nytimes.com/2020/04/24/business/coronavirus-bailouts-buybacks-cash.html
U.S. billionaires got $845 billion richer since the start of the pandemic: https://www.fastcompany.com/90551712/u-s-billionaires-got-845-billion-richer-since-the-start-of-the-pandemic
The rich really do pay lower taxes than you: https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html
What is private equity, and why is it killing everything you love? https://www.vox.com/the-goods/2020/1/6/21024740/private-equity-taylor-swift-toys-r-us-elizabeth-warren
When Wall Street is your landlord: https://www.theatlantic.com/technology/archive/2019/02/single-family-landlords-wall-street/582394/
Many companies pay nothing in taxes. The public has a right to know how they pull it off: https://www.washingtonpost.com/opinions/2020/10/22/many-companies-pay-nothing-taxes-public-has-right-know-how-they-pull-it-off/
Purdue Pharma admits to crimes for its OxyContin marketing. But no one is going to prison: https://www.vox.com/2020/10/21/21526868/purdue-pharma-oxycontin-opioid-epidemic-department-of-justice
Website: https://pitchforkeconomics.com/
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Nick Hanauer:
Who’s doing the real looting in America?
Robert Reich:
Those who are very wealthy and have the power to change the rules of the game to increase their wealth.
Jessyn Farrell:
The real looters are the ones who have grossly benefited from this rig system around our economy.
Nick Hanauer:
The fundamental problem here is that when the powerful exploiting powerless under the cover of essentially capitalism over making a profit, we don’t consider it looting even though it is.
Speaker 1:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the only economics podcast that tells the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
Jessyn Farrell:
I’m Jessyn Farrell, and I’m senior vice president at Civic Ventures and a former state legislator.
Nick Hanauer:
So Jessyn, we don’t often start an episode of Pitchfork Economics by quoting the onion. But in this episode on looting, I just don’t think there’s any way around it because in their terrific piece from, I think it was May or June. They had this fantastic headline, which was protesters criticized for looting businesses without forming private equity firm first, which I think pretty much sums up the entire neoliberal enterprise.
Jessyn Farrell:
Exactly, that is flat tire as truth. The mainstream corporate media has really used the word looting quite a bit and has conflated that word with peaceful protests that have been around police violence and advocating for black lives and black lives matter. But at the end of the day in this country, the real looters are the ones who have grossly benefited from this rig system around our economy, and that is what we’re going to talk about today, isn’t it?
Nick Hanauer:
Yeah. Looting is a broad word and includes many, many things. What’s super striking about it again is that few folks go into a Walmart and steal the TVs. Okay, you can call that looting. But what the TV stations rarely do is follow around the private equity executives that will strip all of the assets out of a pretty high-functioning company, lay off a bunch of the workers, steal effectively the value of the enterprise for themselves, and then bankrupt it and make it a public problem. We call that capitalism.
Jessyn Farrell:
Yeah, exactly. We call that private equity.
Nick Hanauer:
Yeah, whatever.
Jessyn Farrell:
Those two words or whatever it is, right? Yet we have this set up where on the one hand we have some things that are actually illegal, like certain kinds of wage theft, but then we have actions that you just described that are also a kind of wage theft that aren’t even illegal.
Nick Hanauer:
Right.
Jessyn Farrell:
So there’s this whole piece around embedded in this question of looting and who it benefits, this idea of what we choose to criminalize and then what we choose to enforce beyond that.
Nick Hanauer:
That’s right. So steal a hamburger from McDonald’s or a burger joint as an employee, you can get fired and charge with a crime. Refuse to pay somebody for the hours they worked and steal their wages, well, I mean, maybe there’s a civil penalty if someone should ever deign to enforce it, but you’re certainly not going to go to jail, right?
Jessyn Farrell:
Yeah.
Nick Hanauer:
The imbalance is just striking, which theft to me is a really big deal. It’s about a $70 billion thing, and one of the things we should do is just criminalize it.
Jessyn Farrell:
Exactly, criminalize it plus enforcement, right? So we have this system that’s really been set up to allow the mega rich to loot and then to protect them when they do.
Nick Hanauer:
Yeah. It is really quite striking, and obviously we talk about a lot of these issues on the podcast. We have dissected a lot of these policies and the narratives and everything else, but we wanted to devote at least one episode to the word looting. Because it was so in the news during the protests and it was a way to sort of pejoratively frame the black lives matter protests that were going on across the country. It made all of us on the team really, really mad, not to say that it’s a good thing for people to smash windows and take stuff or to pour into Walmart and steal TVs. We don’t support that. It’s just there is so much looting going on day to day in the economy that we either have legalized, or the cases where it’s not legal we don’t criminalize, or where we do criminalize it we don’t enforce the statutes, right? It just is really shocking and abhorrent.
For instance, the fantastic drop in the number of audits the IRS is doing on very, very rich people, right? I used to be continually in fear of an audit from the IRS as a younger person. I mean, my accountants were always like, “Well, we’ve got to watch out for that audit. It’s coming.” Nobody worries about it anymore. It just never comes up anymore. Why? Because they fired all the people who do the audits. Why? So rich people can cheat on their taxes easier.
Jessyn Farrell:
That’s right. So we can turn the other, just turn the other way. I mean, that’s the interesting nexus around this question of what looting is and who is criminalized in our society and who then pay has ostensibly stealing money from people through wage theft or through private equity firms, stripping a struggling company and offloading all of the pension debt for example. That’s ostensibly a kind of theft, but we are not choosing to instead criminalize it or then enforce it to the extent it already is a crime.
Nick Hanauer:
Right.
Jessyn Farrell:
Today we are talking to Robert Reich, who is the former US Secretary of Labor and a professor of Public Policy at UC Berkeley, and has been talking a long time about how our system is fixed and who has rigged it, and in fact has a book on this topic.
Nick Hanauer:
Yeah. It’s always so fun to talk to Bob Reich, who’s an old friend of mine and one of my heroes, really an extraordinary guy fighting for economic justice, and by the way smarter economic policies and theories, too. It’ll be fun to talk.
Robert Reich:
My name is Robert Reich. I teach at University of California, Berkeley. I was once upon a time Secretary of Labor, and my latest book is The System: Who Rigged It, How We Fix It.
Nick Hanauer:
It is indeed rigged, isn’t it? There’s been a lot of discussion in the press around looting. So who’s doing the real looting in America?
Robert Reich:
The people at the top, those who are very wealthy and have the power to change the rules of the game to increase their wealth.
Nick Hanauer:
Yeah. So can you dimensionalize that? I mean, what forms does this looting take?
Robert Reich:
It takes many, many different forms, Nick. For example, the death of anti-trust is one form. We used to have anti-monopoly laws in this country, which made it very difficult to aggregate the kind of economic power we see in many companies, mostly in high-tech and in the banking sector right now. Also, we allow CEOs to manipulate stock prices through stock buybacks. They were illegal before 1983, which has given them giant wooden falls. Also, we have permitted corporations to bust unions resulting in membership of unions plummeting from 35% of private sector workers in the 1950s to just 6.2%, now thereby radically reducing workers’ bargaining power relative to big corporations. We bailed out the biggest banks, making them too big to fail, and we are now bailing out the largest corporations through the Federal Reserve Board. We’ve allowed changes in bankruptcy laws, making it impossible for households to reorganize their mortgage debt, or former students to reorganize their student debts. We permitted extensions of intellectual property, the durations of patents and copyrights, which drive up prices and squelch innovation, especially in big pharma and big tech. I could go on and on and on.
Taxes on billionaires and on corporations have been dropped considerably. The minimum wage has eroded. The overtime threshold has dropped. We’ve deregulated the financial sector, and this has really resulted in major, major looting. The bottom 90% have been looted.
Jessyn Farrell:
Yeah. You just listed off such a comprehensive and obviously probably not even long enough list of all of the different ways the system has been rigged to hurt people and take their economic productivity from them. How did this happen? What happened over the last 50 years?
Robert Reich:
Well, it’s a really a vicious cycle because as wealth began concentrating at the top so did political power, because wealth and power are inextricably related. So as the wealthy got more powerful in terms of their ability to essentially bribe legislators, corrupt legislators, through campaign donations and through lobbying, through all sorts of really backdoor deals. I unfortunately in and out of government, I’ve seen some of that. The wealthy have also been able to hire platoons of lawyers to contest any kind of legislation they don’t like or any kind of regulatory outcomes they don’t like. They’ve been able to mount public relations campaigns to persuade the public that their view of what is in the public interest is in fact in the public interest. In other words, money, big money has dominated increasingly over the past 50 years and as that money dominates, the wealthy become even wealthier.
Nick Hanauer:
Yeah. What’s super striking is how much social and economic energy we put into our criminal justice system that punishes people who do relatively small things, but virtually no energy in punishing big things like transferring $2.5 trillion per year from the bottom 90% of the top 1%.
Robert Reich:
Not only has white collar crime been basically accepted.
Nick Hanauer:
Yes.
Robert Reich:
I mean, you have big banks. JP Morgan Chase just recently signed a settlement agreement. They’d pay almost a billion dollars for manipulating stocks, and that’s a cost to business, to a company that’s as big as JP Morgan. Not a single executive went to jail. Look at what happened in 2008. You have the entire system of manipulation and law breaking. Really was a lot of it law breaking that resulted in what a major bailout of the banks by taxpayers. Not a single major player went to jail. You have looting of big corporations, looting of Americans in terms of consumers and labor breaking laws, not only changing laws, but even breaking the laws that are on the books and a slap on the wrist.
What’s the penalty for, right now, if you are an employer and you want to bust a union and you fire somebody? You’re like Elon Musk. Let’s take Elon Musk for example. You fire somebody for trying to form a union. The worst that can happen is your case winds its way through the National Labor Relations Board and then at the end of it, if you are unlucky, if your well-paid lawyers don’t actually win, the National Labor Relations Board says, “Well, you are a loser. What you’ve got to do is restate this one employee and pay back wages to this one employee.” I mean, talk about a cost of doing business, it’s rarely, it’s basically a rounding error.
Jessyn Farrell:
Yeah. That’s a really profoundly unfair way of… It’s a little tap on somebody on a big corporation’s wrist. The thing that’s on my mind is then what are the impacts to everyday people with all of these systems that are really rigged against them? What has happened to the economy and to people over these last decades of these kinds of rules and regulations that so impact the powerful?
Robert Reich:
Well, Jessyn, really there are two big changes. One is economic and the other is political. On the economic side, if America’s distribution of income had remained the same as it did in the three decades following World War II, the bottom 90% of Americans would now be $50 trillion richer. But instead nearly all of the benefits of growth these past 45 years have gone to the very, very top. Now that’s the economic reality and that’s a rigged system.
The political reality is that more and more people are angry and frustrated and desperate. They say to themselves, “Look, I’m working harder than ever. I’m not getting ahead. My kids are not getting ahead. The game is rigged and therefore I’m going to support somebody who’s going to shake things up, whether their name is Bernie Sanders or Donald Trump.” When people get that desperate, a demagogue like Trump can come along and convince them that their real enemies are not the people who were doing the rigging at the top, but are people whose skin color is black or Brown or foreigners or Muslims. It’s not new in history that economic frustrations are channeled by a demagogue into hate.
Nick Hanauer:
Yeah, and it’s very, very scary and it’s sort of astonishing when you consider that. If you work for a company and steal a widget from that company, you can absolutely go to jail. But wage theft is about a $70 billion a year thing in the United States. If I refuse to pay you the thousand dollars in overtime I may owe you for a month, nothing will happen to me even if I get caught, right? Worst, worst, worst case, I will have to pay you, but no one is going to jail for wage theft in America today.
Robert Reich:
Let’s be clear about this, because wage theft refers to breaking of the current laws, ways that hurt employees. But if you’re also rich enough to make the laws or change the laws, you won’t have to even have to worry about breaking them.
Nick Hanauer:
Right.
Jessyn Farrell:
That’s right. So much theft without even it actually being a legal definition of theft.
Robert Reich:
On overtime, for example. The Trump administration doing the bidding of very, very wealthy individuals and very big companies change the overtime rules so that the threshold of who is eligible for overtime was put up substantially higher. Now that was a change that was engineered and demanded by big corporations and wealthy individuals and that is a form of wage theft. But nobody is ever going to be caught because there’s no longer any violation of the law.
Nick Hanauer:
Yeah, it’s really quite incredible.
Hey gang, we’re going to take a quick break from this really interesting conversation to try something a little bit different today. This is where other podcasts would usually play an ad and we don’t have ads, but we are going to ask you for your help today in another way.
Like Bob mentioned, one of the most insidious instances of looting in our country has been the transfer of $50 trillion over the past 45 years from working Americans, the top 1%. The only way we’re going to start to make the economy work for everyone is by changing the trickle-down policies that allowed that to happen, and here’s where you come in.
A lot of you ask us what you can do to help, and so I hope this will be an instance where you can. We built a little tool that will make it super easy for you to contact your elected representatives and send them the RAND study. Let them know that if they are not actively seeking to reverse this trend, if they are not deliberately trying to raise the median income from 50,000 to 100,000 dollars, they are not doing their jobs. So we even wrote this message for you when we promised by the way that we won’t sell your information, because we don’t need that money.
So here’s what you have to do. We have two options. One, text RAND to 67076 and follow the prompts. Two, go to civicaction.com/rand and fill out the form. We’ll put all that information in the show notes of this episode so don’t worry about writing it down, just make sure you remember to do it.
Look, it’s so important that everyone holds their elected leaders accountable. We think it would be really cool if we could mobilize everyone who listens to this show, and there are a lot of you by the way, to get this study into the hands of elected leaders around the country. Okay, let’s get back to the conversation, and thank you.
So Bob, what are we going to do? How do we root this out? What’s it going to take to stop all of this?
Robert Reich:
I think two things, Nick. One, we have allowed big money to inundate our democracy, a big money coming from a small group at the top that’s been raking in almost all the gains from growth for 40 years. With this money, we allowed them to make all of the other changes I’ve mentioned, which have entrenched and enlarged their wealth and power even further. We’ve got to get big money out of politics. Now we can have a three-hour discussion about how to do that.
Nick Hanauer:
Yeah.
Robert Reich:
I don’t think it needs a three-hour depression, but I think that needs to be one of the biggest things we do.
Now the second thing we need to do. Because if you have highly concentrated income and wealth at the top, the more concentrated it is the harder it is, even if you erect all sorts of barriers to keep big money from infecting and undermining democracy.
As the great Jewish Louis Brandeis said in the 1920s, “We have a choice. We can either have great deal of money, huge fortunes in the hands of a few, or we can have a democracy, but we can’t have both.” What he said then is as true then. In fact, it’s truer now than it was then. He was speaking at the end of the first Gilded Age, just before the Great Depression and the Second World War, which was Great Leveler. Hopefully, we don’t have to go through another depression and war-
Nick Hanauer:
Yeah, that would be nice.
Robert Reich:
… but the wealthy would be wise to understand the dangers of an economy that is too out of whack.
Nick Hanauer:
I agree completely, but I will say, I mean, at the risk of heaping scorn on your chosen profession that the other thing we have to change is people’s minds. Because to be clear and honest, a lot of the worst regulations, the things that we changed for the worst, we did with the collaboration of both Republicans and Democrats mostly because both sides subscribed to a bunch of nonsense neoliberal economic theories. Like for instance if you raise wages, it’ll kill jobs. If you give tax cuts to rich people, it will increase growth.
I take some solace in the fact that those, that there are certainly, the good people at the American Enterprise Institute are still busy promulgating those lies. But in more and more places in the country, people are just rolling their eyes at that stuff today. I mean, you can’t get away with saying that stuff anymore without someone pushing back. I think that’s why we do this podcast frankly, and that’s why you do your work. Because we have to teach people that what they were told for so long about how the economy worked was mostly a lot.
Robert Reich:
The trouble is that mainstream economic still adheres to this lie and has worked. It’s like a false religion. It’s like the divine right of kings, talk about a belief system that is actually enforced, developed, created, and maintained in order to maintain the status quo and in order to maintain the divine right of kings in terms of who the kings are today. A lot of work has gone into over the last, since the 1890s, developing this theory, macro and micro economic set of theories, which on paper look very nice. They get PhDs minted because they can do a lot of mathematics around them, but actually have nothing to do, nothing to do with the real world and are worse than nothing. Because they are insidious ways of protecting the rich from the realities that actually have enabled them to be rich and stay rich.
Nick Hanauer:
Yup, and so a lot of work has to be done in the academy as well. But I do think that we’re… I do think Bob we’re gaining on them a bit.
Robert Reich:
I think we are, but you can’t have a free market without government. The government sets the rules of the game and the real issue is who is influencing government in terms of making those rules. Well, I would think that by now that’s pretty widely understood and pretty basic. But just yesterday I was listening to somebody on public radio, not an economist, but somebody who was just talking about how we talk about the economy and said, “Well, we do need government intervention in the market for that purpose.”
Now the word government intervention, the words government intervention in the market imply that the market is somehow a natural order of things. It’s found in nature, and government chooses to intervene or not intervene as the case may be. There is no government intervention in the market. Without the government, you couldn’t have a market to begin with.
Nick Hanauer:
Right, right.
Jessyn Farrell:
That’s exactly right.
Nick Hanauer:
Right. You can’t have a farm without farmers, right? You can’t produce things without intention, and all of those rules and structures and norms are what society and government are. As our friend, the philosopher Elizabeth Anderson quite rightly points out, there is no such thing as more or less regulation. All you’re talking about is who the arrangements benefit.
Robert Reich:
Exactly. We saw that in terms of new regulation of financial markets and then leading to what, to a blowup in 2008 and then a re-regulation in the form of both Dodd-Frank but also the bailouts of Wall Street. So there’s no condition that is regulation or deregulation. It’s all about what kind of regulation, what kind of structure do you want for the market.
Jessyn Farrell:
And for whom.
Nick Hanauer:
And for whom, and for whom.
Robert Reich:
Exactly right.
Nick Hanauer:
Yeah.
Robert Reich:
I think it’s important to point out that when we talk about inequality, it’s not just due to globalization. The $50 trillion transfer wealth has occurred entirely within the American economy. It’s not between it and its trading partners. This upward redistribution of income, wealth and power was not inevitable. It was really a choice, a direct result of trickle-down policies that we chose to implement since 1975, and we’ve got to understand that we can choose differently.
Nick Hanauer:
Yeah, and we can rearrange the rules in ways that benefit both more people broadly. But I think what’s even more important to understand is that the entire economy will grow faster as a consequence of that. I mean, I think that the whole neoliberal enterprise rested on this claim that by enriching the few, you made the economy more efficient and grow faster, and that turned out to be not just wrong but the opposite of true. That in fact, if you want the economy in general to grow faster, the more money the typical person has the better that will go.
Robert Reich:
Exactly. In other words, the rich, the typical rich person today would be better off with a smaller share of a rapidly growing economy.
Nick Hanauer:
Exactly.
Robert Reich:
Growing rapidly because more people had more money.
Nick Hanauer:
That’s right.
Robert Reich:
Then he or she is today with a huge share of an economy that is in deep trouble.
Nick Hanauer:
That’s right, and actually a fraction of its potential. I mean, it’s hard to really reckon with what a tiny fraction of our economy is of its potential. Because if you just imagined a counterfactual where instead of earning $50,000 a year, the median full-time worker earned $100,000 a year and women were not paid 70 cents on the dollar, right, where everyone was doing better, demand for products would be on the order of twice as high.
Robert Reich:
Also, part of that counterfactual is think about an economy in which we really did understand the importance and the priority we should be given to climate change, [inaudible 00:27:49] climate change, and think of how much better off we would all be, how much less we would have to be spending on air filters and everything else we’re spending money on. The idea that somehow this is an externality, bad air and climate change is an externality. It’s not an externality, it’s built into the structure of our market. We can change that structure. We must change the structure of the market.
Nick Hanauer:
If we did, virtually everyone would be better off maybe save the largest shareholders of Exxon.
Jessyn Farrell:
There you go.
Nick Hanauer:
Well, Bob, thank you so much for joining us.
Robert Reich:
Oh, it’s been a pleasure.
Nick Hanauer:
Talk soon.
Jessyn Farrell:
Goodbye.
Nick Hanauer:
Yeah. Well, that was a fantastic conversation with Bob, as it always is. Heck, Jessyn, we haven’t even gone into the predatory practices like payday loans.
Jessyn Farrell:
Right, exactly.
Nick Hanauer:
Which would be another concern, another form alluding or 10,000 other things. But the fundamental problem here is that when the powerful exploiting powerless under the cover of essentially capitalism over making a profit, we don’t consider it looting even though it is.
Jessyn Farrell:
Absolutely, and we see all of these images of property damage related to protests and that’s what the news plays over and over and over again. But just because the kind of looting that we just spoke about with Bob Reich doesn’t make it into the news, doesn’t mean that it’s not causing more harm. In fact, it is causing multitudes more harm and this harm is so much worse than property damage.
Nick Hanauer:
Exactly.
Jessyn Farrell:
The fragility of the economy going into COVID and the deep economic dislocation and crisis that we’re facing right now are absolutely a consequence of this regime of economic looting that we’ve tolerated for all these decades.
Nick Hanauer:
The list of things that we need to do to get the economy back on track is so long that it’s just not worth going through right now in the podcast. But I just really think that folks need to hold their political leaders accountable to a set of rules that are more fairly applied that if we’re going to criminalize theft, we have to criminalize it at the top and bottom. We have to find a way to get people, to see that when a private equity firm buys a company with levered money and then sucks all the value out of it and bankrupts it, that’s not okay. The partners of that private equity firm should be held economically liable for those losses in that damage.
That we have to find a way to bring some more accountability into the economic system so that the folks at the top who take either a lot out or take a lot of risks with other people’s money are connected to those things and are liable for the damage that they cause. Of course, rich people will squawk like hell over that, but we got to do it if we’re going to get the country back on track.
Jessyn Farrell:
That’s right.
Speaker 1:
Pitchfork Economics is produced by Civic Ventures. If you liked the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer, follow our writing on Medium at Civic Skunk Works, and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.