 This is a story about bread. No, not really. It is a story about the price of bread which once caused a revolution. Let them eat cake. That is most probably a completely untrue story. Marie Antoinette never really said that if they don't have bread why don't they eat cake? That's such nonsense. I would never say that. What she actually said was if they don't have bread why don't they eat brioche which is a sweet rich dense cake like bread which the nobility ate in France and Marie Antoinette probably only knew that after all she was the queen. What the story about the French Revolution actually tells us is that if rulers lose track of the price of bread the people can chop their heads off. Okay, that's why governments are so scared of that word inflation. So wait a minute are people really worried about the price of bread or that they can't afford it anymore? If their incomes grew faster than the rate of inflation would they really care? Think of America for instance. There was World War II, shortage of everything, cars of the road because petrol was either missing or available only in the black market or at exorbitant rates. Now all western governments had made a kind of pledge to their people that fight for your nation right now and once it's over you will be rewarded and that happened. After the war welfare systems were set up social security systems were set up across Europe and in the U.S. and the workers actually did very well. No it was not because the U.S. government was extremely kind or it believed in some kind of socialism it was also because labor had unionized. Was that big day when I joined our auto workers union the UAW United Auto Workers. This graph tells you what happened. In 1945 the bottom 50 percent of Americans earned less than 16 percent of the country's national income. In 1969 less than 25 years later it had risen to more than 21 percent. The great American working class dream was to have a home of one's own with a car parked in the garage and all kinds of gadgets to make life easier. At the center of the family activity area an efficient kitchen saves countless steps a needless effort in the preparation and serving of meals. So workers were getting a larger share of the national income pie someone was losing out right. Yes the richest one percent the capitalists. Now look at this graph as the share of the bottom 50 percent rose the richest one percent lost out heavily between 1941 and 1976 which is just 35 years their share in national income dropped from 22 percent to less than half to just 10 percent. Now capitalism has always been a system that's been owned by the super rich but the new deal made it very difficult to make super normal profits. It was a crisis of capitalism. Imagine that you're a capitalist in the 1960s and you're watching your margins shrink every year. This kind of capitalism doesn't sound like music to you anymore. In fact for you the music has stopped. So now that we know the music has stopped what can we do about it. What was done about it from the mid 1960s big corporates big business started to organize like never before making it their mission to fight unions and to fight any kind of welfare or anything that's melt of socialism. You can read about it in this remarkable book called The Invisible Hands by Kim Phillips Fine but it was going to listen to some rich old men so they needed three things a turning point that would turn people against welfareism and government spending messages especially economic theories which would promote the view of the capitalist class and they needed popular messenger who would be able to sell this message to the people. The first opportunity came in 1965 the American invasion of Vietnam. The war would cause the American government spending to balloon for it to divert resources from welfare and for things to become scarce and for inflation to start creeping up gradually and then this happened. That was a fight. This was a war. Egypt and Syria are at war with Israel today. Arab countries cut off all oil shipments to the United States. We are heading for the most acute shortages of energy since World War II. The oil embargo caused an oil price crisis in the US which sent inflation shooting up into the double digits in the 1970s something that Americans had not seen since the war. There was a perfect chance for big business to seize power back something that they lost in the 1950s but they still needed a way to convince people that it's government spending which was causing inflation and that is where the economists came. It is well documented now that big business and big business controlled media promoted economists who pushed their point of view who were opposed to government spending who were opposed to any kind of welfare who were opposed to taxes who were opposed to anything that's melt of socialism as I've said earlier. A new orthodoxy was created which said that unemployment is actually good for the economy that's setting a floor or minimum wage is actually bad for workers and taxing the super rich can destroy the economy. But once of course you make it more attractive to play unemployment compensation than to work even young people who kind of expect to earn more than little when they begin was a temptation to remain unemployment to earn unemployment compensation is very large. The minimum wage laws as clear a case as you could want the special interest are of course the trade unions the monopolistic craft trade unions in particular that do gooders believe that by passing a law saying that nobody shall get less than two dollars an hour or two fifty an hour or whatever the minimum wage is you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed. But to understand what these economists were arguing against we have to rewind a bit. Okay before I proceed let me take this opportunity to ask you to subscribe to our channel to like this video and also to press on the bell icon there so that you are notified each time news click puts out a new video you're going to like them so don't miss out on them and also do check out the subscription options for news clicks channel where you get special extra content because you pay a minimal amount and support us all right over with that message let's get back to our story throughout the 1950s and 1960s economists believed that inflation was an inevitable side effect of full employment why would that be let's think of a business person wanting to start a new factory they would have to hire workers but since everyone is employed they would need to poach them from somewhere else and their gain would be someone else's loss and also if a worker was to be attracted to switch to another company they would have to be paid higher wages and that would set off a wage competition and everyone would have higher wage bills now capitalists would want to maintain their profit margins right so what would they do they would in pass on their increased wage cost to consumers and that would push up prices causing overall inflation another thing would happen workers would have more money in their hands so they would want to buy more so demand would increase relative to supply and again prices would increase now very soon the workers would realize that okay we've got more wages but we're still buying the same number of things because the prices have increased so they would want more wages till a point would come that business people would not be able to sustain it economists said that this can be solved by two ways by government spending telling business people to invest more create more employment and keeping the wheels moving and also easy money which would allow the government to borrow and spend and also people to borrow and spend and this is exactly what the neoliberal economists were opposed to that's what makes it so dangerous but all you have to do is to increase expenditure and that of course leads to the use of inflation to secure full employment but this is only a short term relief which in the long term makes things worse we would all like to get something for nothing and so the political process has been leading to congress increasing spending not increasing taxes and financing the difference by the hidden tax of inflation i think we are unwise so here were the new prescriptions stop government spending central backs should tighten money supply to slow down the economy don't tax the rich reduce unemployment benefit and don't fix a minimum wage these are everything that the capitalist class wanted and there's a soul to the people as something that would rein in inflation increase employment and make everyone prosperous well these economists did have a certain gravitas and they also added a certain respectability and credibility to these ideas but after all they were still stodgy old academics who didn't have much reach so big business needed someone popular someone charming to wield their gun starring ronald reagan as frame johnson you've been riding pretty high marshal it's about time somebody cuts you down to size i'm kind of looking forward to it ronald wilson reagan an actor turned politician who was groomed by big business for more than two decades would take over as america's 40th president in 1918 and as soon as he became president he started pushing the neoliberal agenda of big business but punitive tax policies and excessive and unnecessary regulations plus government borrowing has stifled our ability to update plant and equipment increase productivity that means making it possible for industry to modernize and make use of the technology which we ourselves invented that means putting americans back to work and that means above all bringing government spending back within government revenues we don't have to choose between inflation and unemployment they go hand in hand it's time to try something different i've already placed a freeze on hiring replacements for those who retire or leave government service i put a freeze on pending regulations and set up a task force under vice president bush to review regulations with an eye toward getting rid of as many as possible reagan was so successful that this entire economic agenda is today called reaganomics and it was sold to the rest of the world as well from the 1980s indira gandhi brought it to india in 1982 with operation forward which was baby steps taken towards liberalization and later rajiv gandhi would accelerate that process and then came the watershed event of 1991 the ra manmohan Singh reforms which were taken forward by every government since then india under watch by manmohan Singh in upa and now the modi government the policies involved allowing the corporate sector to make as much profit as they want withdrawal of the government from the economy and also reduction of welfare spending by governments higher and fire rules and weakening labor unions wherever possible and if there was inflation what would you do central banks would step in increase interest rates curtail the money supply and reduce and cool down the economy and if in that process people lost jobs then workers would have to in the words of hike swallow the bitter pill of unemployment the consequence is that we must go through a very bitter period of unemployment in which people are induced to shift their occupation this is what neoliberal economists have been telling us for the last 40 years even though they don't know that there's no evidence to back their theories and these theories are being taken as gospel across the world even in india every time inflation increases the rvi steps to increase the interest rate and that it's doing even in a country where there's a massive demand shortage and already huge unemployment all that these policies have done is to make the rich richer and the poor poorer and you can see that in the data from america look what has happened since the 1980s this graph tells you the share of the richest one percent has almost doubled between 1975 and now that of the poorest 50% has dropped from over 20% to less than 14% and we in india have mirrored this trend almost exactly in 1982 the poorest 50% of indians earned 21% of our national income the top 1% cornered a little over 6% now the richest 1% earned 22% of the national income while the share of the poorest 50% has dropped to just 13% and the sad part is that despite the fact that people know that these policies don't work their lies they only make the rich richer this is what is taught in textbooks today and will be taught to our children as well because no one wants to speak up against it and those who do are not heard at all that's the show today keep watching news click do subscribe to our channel and also subscribe to news clicks packages and share this 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