Economic Update
Economic Update: Puerto Rico Crises and Left Political Unity
This week's Economic Updates focuses on CA Gov Newsom signs law banning "legacy and donor" favoritism in private college admissions to foster a "merit system," as well as analyzes the Milei regime in Argentina imposing austerity on Argentina: masses suffer to pay off debts that enriched the few in classic ways. Interview with economics Professor Ian Seda-Irizarry, City University of New York on conditions provoking rise of political left and left unity in Puerto Rico.
Support from the production of Economic Update comes in part from Democracy at Work. A non-profit 501(c)(3) organization and publisher of books by Richard Wolff, who is a professor of economics emeritus at UMass Amherst and a visiting professor at the New School University, has authored numerous books on the subject of social economics, including Greek thinking Marxism, Understanding Capitalism, and Democracy at Work, a cure for capitalism. Further information is available at democracy@work.info and rdwolf.com. Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host, Richard Wolff. Before starting today, and as usual, I want to remind you that Charlie is available, charlie.info438@gmail.com for your suggestions and so on to help us plan future programs. Today, we're going to be talking about a decision about favoring rich people to get them into college, as happened in California and, of course, in many other places, a little bit about the remarkable Malay regime in Argentina, and then something about Russia and the aircrafts Russia seized in retaliation to the sanctions imposed on Russia. It'll give us an insight into the sanction warfare that the United States pursues without explaining to its people as we ought to have it explained what the costs of it all might be. Here we go. Recently, Gavin Newsom, the current governor of California, signed a law banning legacy and donor favoritism in private schools, like the University of Southern California and Stanford, and so on. Let me be sure we all understand what this is about. A legacy is a fancy word applied when colleges give a favorable nod to applicants from families who went to that school and who have donated money to that school one way or another. And donor, well, that's obvious what that means. Dual colleges and universities favor the children who apply from families that have given them money. The answer to that question is you bet. I have seen it when I was a student. I have seen it when I was a faculty member, no secret at all. Anyone who's ever paid attention and any research and there's plenty of research out there shows it over and over again. So in other words, you're favoring people who need at least the richest amongst us. Those whose wealth is so big that they've been able to give gifts to colleges and universities. And I don't mean $50 and I don't mean $200. I mean big gifts. Thereby, as the Bible once was removed, rumored to have said, to them that have shall be given and to those who have not, yay, even from them, something will be taken. Okay. Is this a valuable act? Governor Newsom tells us it is, but then again, he wants the political capital flowing his way. So he said it's going to enable merit to govern who gets the California dream, his phrase, now mine. Is it really going to give us a merit system? The answer is sorry, Governor Newsom, you're not even close. The inequality that enables some people to give large gifts to universities and other people not to is not changed when you don't allow them to get favoritism for their kids because of the donation. Here's a short list of what rich people can do that gives their kids a leg up on all the rest of us who don't come from rich families. Rich families give their kids tutors along the way starting when, starting in kindergarten in some cases. They provide their children with costly educational or learning experiences. They buy whatever educational toys come on the market, the more the merrier. They pay for their children to have travel to gain the benefit, to learn a foreign language, to become excellent in a sport. They have the funds to do all of that and they do. The children of the wealthy often go to private schools where even more special opportunities are loaded up on them. I remember as a public school graduate all my life, arriving at Harvard as an undergraduate, which is where I went to college, to discover that most of my dorm mates, most of the other young men and women I met had gone to exit or end over or pump fret or all these other private schools I knew nothing about. Where they enjoyed supports and programs I hadn't even heard of in public school. No, no, no, Mr. Newsom. You're not making merit count. And then here's another little detail you forgot. Poor people have to borrow money to go to college, tens of thousands of dollars and they have to worry about the interest and they have to worry about the jobs they train for and they get because so much of their income will have to go back to service alone that they had to get to go to college. Rich people don't have any of those worries. No distraction, no job to take you away from the books you need to read or the lectures you want to attend. No, no, no, merit. No, no, no. It's all about the money and you have done nothing substantial about that. You've paraded around, you've pretended, you've taken away the legacy and donor favoritism that college admissions gave to the children of the rich. You haven't done anything to make merit the issue you claim to be in favor of. I want to turn next to Argentina. Why? Because the story of Argentina is the story of many, many countries in Asia, Africa, Latin America, Eastern Europe and beyond. Here's how it goes. A small and I mean small. One, two, three percent of the population very wealthy owns an enormous amount of the industrial infrastructure and foundation are powerful enough to control the politics so that they don't get taxed. They have the government do all kinds of things for them to maintain the gross inequality and you can see it. If you go to Sao Paulo in Brazil or if you go to Buenos Aires in Argentina and then you take a trip into the countryside, the gap between where the rich play and where the poor live is overwhelming. And to maintain that system, the government controls the society. It doesn't tax the rich. It taxes the mass of people to control them. And the mass of people allow it out of fear, out of confusion, out of belief. Maybe it'll get better out of belief. Maybe it'll get better after they die. There's a variety of ways you hold on. In these countries, they have another option. They can also borrow money abroad, which they do. Get them through the difficulty because that allows you to give lots of money to the rich. They take a big chunk of whatever is borrowed from abroad, but let a little of it trickle down, keeping everybody happy, or at least not so unhappy as to make a revolution. But you know, you keep borrowing and the lenders, banks in New York or London or Paris or Rome, governments in the same places, they begin to look at you and say, "Whoa, they may never be able to pay any of this back." So now they demand higher interest if they're going to give you a loan. You say, "Sure." And you use some of the money you borrow to pay off a high interest of other money you borrow. And you can get away for that for a few years. And then you get to the point where you can't. And the only way you can keep going is to stop spending money on social programs. You've now borrowed so much you have to take all the taxes you get from the middle class and the poor and use it to pay off the lenders that you borrowed from all those years. And so you cut back on your school programs and your road programs and your welfare programs and your hospital system and on and on and on. You know what that's called? Austerity. It's a much nicer word than admitting what you're doing. And it got so bad in Argentina where it has happened over and over again that a right-wing demagogue got up and said, "This is awful. We are suffering. You are suffering. Let me come in with my fixate mentality." A kind of Trump, Mr. Millet in Argentina, patterns himself after Trump. Bit of a wild guy, bit of a unusual character. Even has funny hair like Mr. Trump. Different from Mr. Trump's. He's a younger man. What did he promise? I'll fix it. It'll be an austerity and I'll fix it. The word austerity frightened people but they were so desperate for a fixate they went. They gave him enough votes he got in and he's hitting them. Argentina now has get ready. A 50% poverty rate and it's getting worse each, literally each day. He's only been in office a short time and he's crashing down and cutting back on pensions, on supports for people, everything you can. Why to pay off the lenders that they borrowed from? And why do they have to borrow? Because they will not tax the corporations and the rich who sit on the wealth of Argentina and Argentina is one of the wealthiest countries in all of Latin America. It's right up there with Mexico and Brazil. You don't tax the people who have the money, then you squeeze everybody else sooner or later with or without borrowing. It's horrible to watch the suffering that these countries go through and the revolution against Mr. Malay is building literally every day. Well, it was necessary to take a bit of extra time to deal with this question. So I'm going to hold the story of how Russia retaliates against sanctions for our next visit next week. Thank you for your attention. Stay with us. We'll be right back with a fascinating interview on the political changes. Very interesting, very positive in Puerto Rico and that will ramify in the United States as well. Stay with us. We will be right back. Welcome back, friends, to the second half of today's economic update. I'm very glad to bring back to our microphones and our cameras, Professor Ian Ceda Irazari. He's been here before, and we've had good conversations. And now that there are some important changes in the situation in Puerto Rico, I wanted to have him come back and talk about them with us. Ian is an associate professor and graduate program director at the economics department of John J. College, which is part of the City University of New York. His work focuses on the current socio-economic crisis of Puerto Rico and its relation to the island's first fiscal crisis in the mid 1970s. So first of all, Ian and I've known Ian a long time. That's why I'm calling him Ian, not just Professor Ceda Irazari. Welcome to the program and thank you for sharing your time with us. Thank you, Rick, for the invitation and for your viewers and listeners for tuning in. Good. So tell us, how has the political situation in Puerto Rico changed? And I'm particularly interested, as you can imagine on this program, with the fact that there's been a kind of unification, at least in part, of groups on the left of the political spectrum. Yeah, well, in Puerto Rico for decades now, politics has been usually defined in terms of the political status of the island, specifically what type of relationship do Puerto Ricans want with the United States? Puerto Rico being a colonial possession of the United States? And the political parties, the electoral political parties, have usually been organized around precisely the status preference in that relationship. So the three main historical parties have been the new progressive party, which pushes for statehood for Puerto Rico. The popular democratic party, which supports what they call the Commonwealth or what I would call the perpetuation of the colony. And then you had a Puerto Rican independence party, which its name already says what it pushes for Puerto Rico to be independent and requires over anything. So the ideological spectrum, the political spectrum, has usually been defined in terms of those options. Like, if you're a leftist, supposedly it's because you believe in independence, if you're a conservative, it's supposedly because you believe in states with Puerto Rico. And of course, the popular democratic party, the personalized party, some sort of middle way. So politics in Puerto Rico has been understood for decades, specifically since 1968, when the new progressive party won its first election. But things have changed, things have changed in the island. And the evidence for this is probably the crisis that the two main parties, the pro-statehood and the pro-communal party, have had in the last elections. When you look at their numbers, the votes that they have received throughout the elections, you see a significant downfall of tens and thousands of votes, while other alternatives have grown up, have developed. And the pro-independence party support also has grown up. So for example, in the the pro-independence party usually gets 3% of the vote. In the last election, they got around 14% of the vote. Another new party, the citizens victory movement, a newly situated party in the last election also got 14% of the vote. So the crisis is basically measured in terms of that outcome, where if you add what now becomes the base of this new alliance, which is the pro-independence party and the citizens movement victory, they combined got 28% of the vote, whereas the winner got 32% of the vote. And the second place got 31% of the vote. So at least at the electoral level, you have a registry of that crisis. A crisis that of course is tied to the socioeconomic problems of Puerto Rico that both administrations under the popular democratic party and under the new progressive party have failed to address for the benefit of the suffering masses. In a country where over 40% of the population is living under the poverty level. If people want a comparison in the United States, the poverty level, my understanding is that in the poorest state in Mississippi, it's 20%. So we're double of that. So that should give you a sense of how we are doing right now in Puerto Rico, regarding how the electoral coordinates have been redefined, where now this new alliance is seeking to push forward policies that are progressive, that deal with local and foreign capital, that deal with the corruption of the administration, that try to address problems associated with the fiscal control board that was imposed on us to manage our budget and so on. So again, this is a new situation in Puerto Rico that has a history type. For example, with the Hurricane Maria in 2017, the failure in the reconstruction efforts of that, the imposition of the fiscal control board and its policies of austerity that have led Puerto Rico to pay an insurmountable amount of money in terms of its debts. So people are tired. They're tired of seeing the state being used by the main parties and the main actors behind those parties, like the organized local capitalist class to their own benefits. So this is again a reflection of the crisis that has evolved in Puerto Rico for the past 15 years. Is there any effort of the current government? How are they dealing with this? So with you've been in terms of the crisis or the electoral moment for them? I think I mean both of them. In other words, how this must be a shock to the establishment to discover that they have lost a third of the population here, if I understand you correctly. So how have they managed it right now in terms of that crisis? They have focused their efforts on a very old strategy, which is to accuse anything that looks progressive or leftist as being communist. So right now, if you listen to the radio waves, any radio program in Puerto Rico, you will hear either in political program analysis programs or in advertisements. All this discourse focused on the ghost of communism. Can you believe that? And the ghost of Puerto Rico being independent, if this alliance wins the election. An alliance whose purpose is not to define a new political status, but in terms of that problem of Puerto Rico, the colonial problem, to actually push forward a mechanism to solve the problem. That's why for them, their bets is that people will unite under the flag of this alliance between the independence part and this movement victory on the basis of progressive economic policies and also pushing forward a real binding process with the United States to decolonize the island. What were the conditions? How would you explain to us the conditions that brought this all about? Well, what happened in Puerto Rico? I mean, you've alluded to the hurricane, you've alluded to, but sort of give us an overview of how this crisis came to be. Yeah, so we officially entered the global depression two decades ago in 2005, and since then, over 200,000 jobs have been lost. The immigration towards the United States has increased. Actually, a very interesting study now in October came out with a very important piece of information, which is that between 2010 and 2020, the proportion of the population above the age of 65 has doubled from 13% to 21%. Of course, that's evidence of this huge massive influential immigration waves to the United States. Also, you have the after effects of Hurricane Maria, in which the public electrical utility, this company was privatized and was brought in under very sketchy conditions, this private term to administer the electrical grid from that had no experience with the scale of operations required in the island of Puerto Rico. We don't need a hurricane to experience power outages or blackouts, as they call it. It's something of a daily experience for most in the island, and imagine a population that, relatively speaking, is aging the importance of medical services, the function of medical equipment, and of course, need for continuous electricity provision for those things to keep running. So again, the prospects of the coming, the present and coming generations are not to have a better standard of life than their parents or their grandparents as before on the contrary. The people who are right now entering the working age are ones that have never seen a year with any bit of positive prospects for their future. Let me ask your opinion about something, Ian. There are those of us who look upon the position of the United States now as an empire that has entered the decline phase. It had a century of rise, and now, if you look at the wars in Vietnam or Afghanistan or Iraq, these are all wars that are lost. The one in Ukraine is being lost and so on, and there's a historical truism that when empires decline, the people at the top, the rich and the powerful, are the ones best able to hold on to the wealth they acquired in the empire, and they offload the costs onto the mass of the people below them. If that's true, then the mass of the people below them might start with Puerto Rico. It might be the place where one saves money, first of all, to hold on, and so one might impose on these American citizens regular blackouts, even if there isn't a hurricane, because there is no funding a left to be allocated to provide something as basic as electricity. Does that make any sense to you as you think about the situation in Puerto Rico? Well, I guess that there's many ways of approaching this. For starters, Puerto Rico does receive, under the Federal Emergency Management Agency, a substantial amount of funds, for example, for the reconstruction after Maria, FEMA, funds that have been misappropriated, mismanaged by the current administration. So there hasn't been any, for example, reconstruction of the electrical grid. So let's call them breadcrumbs that the empire gives us are still there, but interestingly enough, right now from the perspective of the United States knowing what role Puerto Rico played in the Cold War, it's difficult to see what importance it might have apart from providing a tax haven for its corporations. We do not possess the same military strategic importance that once we had, which implied a lot of investment coming to Puerto Rico for the sake of military infrastructure, but we still provide places for firms to hide and misreport their profits. So Puerto Rico is one of those countries that appears every year in those global reports on countries where you have transferred pricing from firms misreporting their profits for not paying taxes. So that's something that is there. Those firms are looking for more profitable places to go, and usually the cost of labor has been the main bargaining tool, which the local elites also push for. That's, it's not a coincidence that every time that we have a labor reform law, it's those elites and their organization representatives that want to stand behind the governors, irrespective of the administration, to push for lower wages, less benefits, etc. So that's a continuation of what we have experienced for decades now, and of course, in a new situation, and hopefully Puerto Rico contrary to many movements in the US will break from the Democratic Party, which as the saying says, the Democratic Party is the tomb of progressive and revolutionary movement. So I think we see it right now with what's happening with gas and Palestine and the genocide happening over there. We saw it, we see it with the silence of the United Auto Workers in relationship to the ceasefire that once upon a time, some months ago they were calling for, I haven't heard anything about that since they aligned with Kamala Harris. So here in Puerto Rico, hopefully political go beyond this idea that voting for the Democrats are supporting Democrats in the United States, Puerto Ricans in the US supporting Democrats for the sake of the benefit of Puerto Ricans in the US, and hopefully we're transcending that moment of being stuck in terms of our imagination regarding politics. I wish we had more time in, but thank you very, very much for giving us this insight. I find myself very excited with the unification that that people on the left who have so often felt compelled to split into God knows how many different subdivisions are going in the opposite direction in Puerto Rico and trying to come together to make a political difference is a very hopeful sign, not just for Puerto Rico, but for all those who might be inspired to move in that same direction. Absolutely. Thank you again, Ian, and I will bring you back soon so we can keep abreast of what's happening in Puerto Rico. Thank you, Rick. Thank you very much. To all my audience, I hope you learned about something important happening in Puerto Rico now, and as always, I look forward to speaking with you again next week. Support from the production of Economic Update comes in part from Democracy at Work, a nonprofit 501(c)(3) organization and publisher of Books by Richard Wolf, who is a professor of economics emeritus at UMass Amherst, and a visiting professor at the New School University has authored numerous books on the subject of social economics, including rethinking Marxism, understanding capitalism, and democracy at work, a cure for capitalism. Further information is available at democracy@work.info and rdwolf.com. [Music]