Friday, May 28, 2021

Economic Update - Labor and Capitalism's Rise and Fall [feedly]

Economic Update - Labor and Capitalism's Rise and Fall
https://economicupdate.podbean.com/e/economic-update-labor-and-capitalisms-rise-and-fall/

On this week's show, Prof. Wolff discusses Congress Bills H.R.51 giving statehood to Washington, DC, and H.R.1 countering GOP efforts to restrict voting; and Biden's tax reforms to help pay for new and expanded government programs. In the second half of the program, Wolff interviews Prof. Michael Hillard on the role of labor in the dramatic rise and fall of Maine's paper industry, a parable for the economic difficulties facing the US today.

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Thursday, May 27, 2021

There is no justification for cutting federal unemployment benefits: The latest state jobs data show the economy has not fully recovered [feedly]

There is no justification for cutting federal unemployment benefits: The latest state jobs data show the economy has not fully recovered
https://www.epi.org/blog/there-is-no-justification-for-cutting-federal-unemployment-benefits-the-latest-state-jobs-data-show-the-economy-has-not-fully-recovered/

Key takeaways:

  • There are still nearly 10 million people actively looking for work and unable to find it. April state jobs and unemployment data released last Friday show that in many of the 24 states—led by Republican governors—that are cutting federal unemployment insurance (UI) programs, labor market conditions look similar to the national picture.
  • The data likely understate the weakness of these labor markets, as labor force participation has fallen since the pre-pandemic level. And nearly all the states cutting UI still have significantly fewer jobs than before the pandemic.
  • Those still filing for these benefits are the workers that need them the most, due to care responsibilities, health concerns, or other factors. Governors cutting off these key supports for these workers are not acting in the long-term best interest of any state's workers or businesses.

Republican governors in 24 states—including Florida and Nebraska just this week—have indicated they will pull out from the federal unemployment insurance (UI) programs created at the start of the pandemic. Some states are ending participation in all federal pandemic UI programs, others only some of the federal supports. These actions are dangerously shortsighted.

UI provides a lifeline to workers unable to find suitable jobs, giving them time to find work that matches their skills and pays a decent wage. Moreover, the money provided through these entirely federally funded programs bolsters consumer demand and business activity in local economies, helping to speed the recovery. In many states, these federal UI programs are providing the bulk of all unemployment benefits to jobless workers. By cutting off these programs—which currently provide an extra $300 in weekly benefits, allow workers who have exhausted traditional UI to continue receiving benefits, and expand eligibility to workers typically not included in existing UI programs—governors are weakening their states' potential economic growth.

Further, the most recent national jobs and unemployment data show that the country has not yet recovered from the COVID-19 recession. In April, the country was still down 8.2 million jobs from before the pandemic, and down between 9 and 11 million jobs since then if you factor in the jobs the economy should have added to keep up with growth in the working-age population over the past year.

With an official unemployment rate of 6.1%, there are nearly 10 million people actively looking for work and unable to find it. These estimates understate the true level of weakness in the labor market as many people have exited the labor force since the COVID-19 shock began, but would likely rejoin if jobs were available, and others are still awaiting recall from "temporary" layoffs. The country is simply not at a place yet where states should be cutting off supports to unemployed workers.

April state jobs and unemployment data released last Friday show that in many of the states that are cutting unemployment programs, labor market conditions are not much stronger than the national picture. Figure A shows the states that have indicated they will be cutting support for jobless workers. In four of these states, the unemployment rate in April was higher than the national average: Arizona (6.7%), Alaska (6.7%), Texas (6.7%), and Mississippi (6.2%). In another four states, the official unemployment rate was still 5% or above: West Virginia (5.8%), Wyoming (5.4%), South Carolina (5.0%), and Tennessee (5.0%).

However, these estimates likely understate the true weakness in these states' labor markets. In seven of the eight states mentioned above, and in 20 of the 24 states cutting UI, labor force participation has fallen since before the pandemic—in some cases, dramatically. The labor force participation rate has fallen by an average of 1.1 percentage points among the states cutting UI, with declines as large as 3.8% in Iowa, 2.1% in Montana, 2.0% in Florida, 1.9% in Nebraska, and 1.8% in Texas. Some of these declines may be the result of jobless workers opting for early retirement, but it is likely that most have given up looking for work in the face of few suitable options, valid concerns about health risks, or a need to provide care to a child or family member.

Figure A

Nearly all the states cutting UI still have significantly fewer jobs than before the pandemic. Employment is down by an average of 3.5% since February 2020 in these states. Factoring in the jobs that these states would have needed to keep up with working-age population growth, employment is 4.8% lower, on average, than where we might expect it to be had there been no recession.1 Data for individual states are available in Figure B. In states cutting UI, the jobs deficit—the difference between the current level of employment in the state and the level we would expect had job growth kept pace with population grown since February 2020—ranges from a low of 12,000 jobs in South Dakota (or 2.8% of April 2021 employment) to 678,000 jobs in Texas (or 5.4% of April 2021 employment).

Figure B

The most recent decisions by Texas and Florida to cut unemployment benefits are particularly egregious. Texas's unemployment rate is still three percentage points above its pre-pandemic unemployment rate. The state has nearly one million people that are officially unemployed—people actively looking for jobs, but unable to find work. Florida's unemployment rate is 1.5 percentage points above its pre-pandemic rate, with nearly half a million people officially unemployed. Since February 2020, 150,000 people have left the labor force in Texas and nearly 220,000 have exited in Florida.

Claims that the federal UI programs are preventing businesses from finding staff are unsubstantiated by the evidence. Multiple empirical studies have found that expanded unemployment benefits have not meaningfully constrained job growth. In fact, the sectors where generous UI benefits would be most likely to encourage workers to stay out of the workforce would be low-wage sectors, like leisure and hospitality. Yet, that is the sector that experienced the fastest growth in April. The central problem remains a lack of sufficient jobs for everyone that is out of work.

There may be areas where some employers are struggling to staff positions, but the likely obstacle is not overly generous UI benefits—instead it is wage offerings that are too low to make these jobs attractive. As my colleagues Heidi Shierholz and Josh Bivens note:

"Many face-to-face service-sector jobs have become unambiguously worse places to work over the past year. This has in no way been fully restored to the pre-COVID normal, as the coronavirus remains far from fully suppressed. Well-functioning labor markets should account for this degraded quality of jobs by offering higher wages to induce workers back. If enhanced UI benefits and a demand-increasing dose of fiscal stimulus are allowing these higher wages to be quickly offered in the face of supply constraints, then it seems like they're improving labor market efficiency in this regard."

In other words, if some workers are opting to pass on low-paying, potentially dangerous, or otherwise undesirable jobs while they look for something better suited for their skills or circumstances, that's a positive, economy-enhancing feature of a strong UI system.

As the threat from the pandemic fades and businesses resume regular operations, more workers are returning to work and fewer will need to rely on unemployment programs. In every state, the volume of weekly unemployment claims filed has fallen significantly from peaks earlier this year. On average, the total number of initial claims for both regular UI and pandemic unemployment assistance (PUA) have fallen 30% and 38%, respectively, since the beginning of February.2 Continued claims for both programs have fallen similarly.

But those that are still relying on these programs are likely those that need them most—the people having the hardest time finding suitable work or facing significant constraints on their ability to resume working due to care responsibilities, health concerns, or other factors. Cutting off adequate supports to these workers to try to force them to take whatever job might be available—even if it is low-paying, high-risk, not suited to their skills, or incompatible with their responsibilities at home—is cruel and not in the long-term best interest of any state's workers or businesses.

1. Author's calculation using Local Area Unemployment Statistics from the Bureau of Labor Statistics.

2. Author's analysis of unemployment insurance data from the U.S. Department of Labor. Values describe the change in the six-month rolling average of claims since the first week of February. Reporting of UI claims for some states is highly volatile, and subject to delays and errant reporting. This range reflects averages having removed a handful of clear outlying values, such as spells of reporting zero claims followed by enormous increases that are likely delayed reporting.



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Tuesday, May 25, 2021

Summers: The inflation risk is real [feedly]


This is an easy argument for a Marxist to defeat, since from a Marxist perspective, practically any version, any program to address a crisis of capitalism that starts with a war on working class incomes after a half century of austerity is full of shit from the git.

Were we to have lunch, I would say to Larry: "Yes, Larry, there is a risk of inflation. There is also a risk of starvation, of no child care, of unlivable wages, of uncovered pandemic medical and income losses, of police murders every week, of assault on voting rights, of breaking unions, of mass incarceration and addiction,...AND, Larry, I really appreciate, I do, your concern for the impact of inflation on wages.. indeed,  I thought this paragraph in your op-ed was a true 'Beauty':

" How much does it matter whether inflation accelerates? In general, increases in inflation disproportionately hurt the poor and are associated with reductions in trust in government. Progressives might consider the role that inflation played in electing Richard M. Nixon in 1968 and Ronald Reagan in 1980. "

Larry -- they 'disproportionately' hurt the poor ---- but they obliterate bank profits! Odd you did not mention that one.
The inflation risk is real

Larry Summers

The covid-19 chapter in U.S. economic history is coming to a close more rapidly than almost anyone expected, including me. Within weeks, gross domestic product will reach a new peak, and it is likely to exceed its pre-covid trend line before year's end, as the economy enjoys its fastest year of growth in decades. Job openings are at record levels, and unemployment may well fall below 4 percent in the next 12 months. Wages and productivity growth are increasing.

This is both very good news and a tribute to the aggressive covid-19 containment policies of recent months, as well as to strong fiscal and monetary policies since the onset of the pandemic. Our economy has outperformed those of other industrial countries. U.S. policymakers can take satisfaction from that.

But new conditions require new approaches. Now, the primary risk to the U.S. economy is overheating — and inflation.

Even six months ago, it was reasonable to regard slow growth, high unemployment and deflationary pressures as the predominant risk to the economy. Today, while continuing relief efforts are essential, the focus of our macroeconomic policy needs to change.

Inflationary pressures are mounting from the boost in demand created by the $2 trillion-plus in savings that Americans have accumulated during the pandemic; from large-scale Federal Reserve debt purchases, along with Fed forecasts of essentially zero interest rates into 2024; from roughly $3 trillion in fiscal stimulus passed by Congress; and from soaring stock and real estate prices.

This is not just conjecture. The consumer price index rose at a 7.5 percent annual rate in the first quarter, and inflation expectations jumped at the fastest rate since inflation indexed bonds were introduced a generation ago. Already, consumer prices have risen almost as much as the Fed predicted for the whole year.

"We are seeing very substantial inflation," Warren Buffett recently observed in remarks typical of business leaders throughout the country. "We are raising prices. People are raising prices to us, and it's being accepted."

Fed and Biden administration officials are entirely correct in pointing out that some of that inflation, such as last month's run-up in used-car prices, is transitory. But not everything we are seeing is likely to be temporary. A variety of factors suggests that inflation may yet accelerate — including further price pressures as demand growth outstrips supply growth; rising materials costs and diminished inventories; higher home prices that have so far not been reflected at all in official price indexes; and the impact of inflation expectations on purchasing behavior.

Higher minimum wages, strengthened unions, increased employee benefits and strengthened regulation are all desirable, but they, too, all push up business costs and prices.

It is possible that the Fed could contain inflationary pressures by raising interest rates without damaging the economy. But in the current environment, where markets around the world have been primed to believe that rates will remain very low for the foreseeable future, that will be very difficult, especially given the Fed's new commitment to wait until sustained inflation is apparent before acting. The history here is not encouraging. Every time the Fed has hit the brakes hard enough to slow growth meaningfully, the economy has gone into recession.

How much does it matter whether inflation accelerates? In general, increases in inflation disproportionately hurt the poor and are associated with reductions in trust in government. Progressives might consider the role that inflation played in electing Richard M. Nixon in 1968 and Ronald Reagan in 1980.

Jason Furman, chairman of President Barack Obama's Council of Economic Advisers, recently said that the American Rescue Plan is definitely "too big for the moment," stating: "I don't know of any economist that was recommending something the size of what was done." Excessive stimulus driven by political considerations was a consequential policy error that would be tragically compounded if valid concerns about the economy overheating prevented Congress from making the types of necessary public investments that are the focus of President Biden's Jobs and Families Plans.

So how best can we contain overheating risks and promote sustainable growth while also making necessary investments in infrastructure, greening the economy and helping low- and middle-income families?

First, starting at the Fed, policymakers need to help contain inflation expectations and reduce the risk of a major contractionary shock by explicitly recognizing that overheating, and not excessive slack, is the predominant near-term risk for the economy. Tightening is likely to be necessary, and it is critical to set the stage for that delicate process. Meanwhile, the administration needs to continue to respect the independence of the Fed as it changes course. Clear statements that the United States desires a strong dollar will also be helpful in anchoring inflation expectations.

Second, policies toward workers should be aimed at the labor shortage that is our current reality. Unemployment benefits enabling workers to earn more by not working than working should surely be allowed to run out in September; in some parts of the country they should end sooner. Re-employment bonuses should be considered, and a major focus should be on promoting mobility and training workers for occupations where labor is short. Where "made-in-America" requirements exacerbate labor shortages and raise prices, they should be reconsidered.

Third, it is essential to make long-term public investments to increase productivity and enable more people to work. It would be a grave error to cut back excessively on public-investment ambitions out of inflation concerns. That is not because of the immediate jobs they create, but because of the long-term increases they generate in productive potential, sustainability and inclusivity. But where possible, infrastructure investments should be financed by reprogramming of Rescue Plan funds, such as those now being used by some states to finance tax cuts. Additionally, current spending financed by future taxes might further stimulate an already overheated economy. The opposite — revenue increases ahead of spending, or at least parallel to spending — can ensure more sustainable growth.

The winding down of the covid-19 crisis provides a historic opportunity for taking the next step toward providing for all Americans in an ever more effective and inclusive way. But to avoid squandering the opportunity, policymakers need to accept economic reality. The moment has come to move past emergency policies and fight for our country's long-term future.


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Thursday, May 20, 2021

The Morning: The myth of labor shortages

Raise the pay. People will come. Elementary, Watson. Now we know why the bosses go to fascism when the consequences of capitalism become costs.


By David Leonhardt


Good morning. Is the U.S. suffering from a labor shortage? If so, capitalism has an answer.
A McDonald's in Pennsylvania offering a hiring bonus.Keith Srakocic/Associated Press

The baguette solution

The chief executive of Domino's Pizza has complained that the company can't hire enough drivers. Lyft and Uber claim to have a similar problem. A McDonald's franchise in Florida offered $50 to anybody willing to show up for an interview. And some fast-food outlets have hung signs in their windows saying, "No one wants to work anymore."

The idea that the United States suffers from a labor shortage is fast becoming conventional wisdom. But before you accept the idea, it's worth taking a few minutes to think it through.

Once you do, you may realize that the labor shortage is more myth than reality.

Econ 101

Let's start with some basic economics. The U.S. is a capitalist country, and one of the beauties of capitalism is its mechanism for dealing with shortages. In a communist system, people must wait in long lines when there is more demand than supply for an item. That's an actual shortage. In a capitalist economy, however, there is a ready solution.

The company or person providing the item raises its price. Doing so causes other providers to see an opportunity for profit and enter the market, increasing supply. To take a hypothetical example, a shortage of baguettes in a town will lead to higher prices, which will in turn cause more local bakeries to begin making their own baguettes (and also cause some families to choose other forms of starch). Suddenly, the baguette shortage is no more.

Human labor is not the same thing as a baguette, but the fundamental idea is similar: In a market economy, both labor and baguettes are products with fluctuating prices.

When a company is struggling to find enough labor, it can solve the problem by offering to pay a higher price for that labor — also known as higher wages. More workers will then enter the labor market. Suddenly, the labor shortage will be no more.

A job fair in Orlando, Fla., this month.Paul Hennessy/SOPA Images/LightRocket, via Getty Images

One of the few ways to have a true labor shortage in a capitalist economy is for workers to be demanding wages so high that businesses cannot stay afloat while paying those wages. But there is a lot of evidence to suggest that the U.S. economy does not suffer from that problem.

If anything, wages today are historically low. They have been growing slowly for decades for every income group other than the affluent. As a share of gross domestic product, worker compensation is lower than at any point in the second half of the 20th century. Two main causes are corporate consolidation and shrinking labor unions, which together have given employers more workplace power and employees less of it.

Just as telling as the wage data, the share of working-age Americans who are in fact working has declined in recent decades. The country now has the equivalent of a large group of bakeries that are not making baguettes but would do so if it were more lucrative — a pool of would-be workers, sitting on the sidelines of the labor market.

Corporate profits, on the other hand, have been rising rapidly and now make up a larger share of G.D.P. than in previous decades. As a result, most companies can afford to respond to a growing economy by raising wages and continuing to make profits, albeit perhaps not the unusually generous profits they have been enjoying.

By The New York Times | Source: Federal Reserve Bank of St. Louis

Sure enough, some companies have responded to the alleged labor shortage by doing exactly this. Bank of America announced Tuesday that it would raise its minimum hourly wage to $25 and insist that contractors pay at least $15 an hour. Other companies that have recently announced pay increases include Amazon, Chipotle, Costco, McDonald's, Walmart, J.P. Morgan Chase and Sheetz convenience stores.

Low wages seem normal

Why the continuing complaints about a labor shortage, then?

They are not totally misguided. For one thing, some Americans appear to have temporarily dropped out of the labor force because of Covid-19. Some high-skill industries may also be suffering from a true lack of qualified workers, and some small businesses may not be able to absorb higher wages. Finally, there is a rollicking partisan debate about whether expanded jobless benefits during the pandemic have caused workers to opt out.

For now, some combination of these forces — together with a rebounding economy — has created the impression of labor shortages. But companies have an easy way to solve the problem: Pay more.

That so many are complaining about the situation is not a sign that something is wrong with the American economy. It is a sign that corporate executives have grown so accustomed to a low-wage economy that many believe anything else is unnatural.

In the Times Magazine: Ben Casselman asks whether the post-pandemic economy could be "one in which jobs are plentiful, wages are rising and prosperity is widely shared."


The New York Times Company. 620 Eighth Avenue New York, NY 10018



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Wall Street Skittish as Stocks Face Fourth Day of Losses: Live Updates [feedly]

Wall Street Skittish as Stocks Face Fourth Day of Losses: Live Updates
https://www.nytimes.com/live/2021/05/20/business/economy-stock-market-news/


Stocks are expected to fall for a fourth day.



A steel plant in Hefei, China. In recent weeks expectations of a global economic rebound have pushed up the price of iron ore, a key ingredient, although futures slipped lower Thursday.Credit...Jianan Yu/Reuters

U.S. stocks were expected to fall when trading begins on Thursday as investors continue to worry about inflation. The S&P 500 was set to open 0.5 percent lower, futures indicated, which would extend losses for the U.S. benchmark index into a fourth day.

Concerns about rapid economic growth fueling inflation, as well as rising coronavirus cases in some parts of the world, have undermined recent optimism about the global economic recovery from the pandemic.

On Wednesday, minutes of the latest Federal Reserve policy meeting showed several officials thought that "at some point in upcoming meetings" they could begin to discuss tapering the bank's bond-buying program. Investors have speculated the central bank would have to do so as price increases accelerated. The same day, data showed Britain's annual inflation rate doubled to 1.5 percent in April.

The latest weekly data on new state unemployment benefit claims will be released on Thursday. Economists surveyed by Bloomberg expect 450,000 claims, which would be the third consecutive weekly drop and further evidence that the labor market is slowly recovering. Until April, claims regularly exceeded 700,000 each week.

European stock indexes were mixed on Thursday. The Stoxx Europe 600 rose 0.4 percent as gains in health care and industrial stocks outweighed a fall in energy company shares. The CAC 40 in France rose 0.5 percent and the DAX in Germany rose 0.4 percent. The FTSE 100 in Britain was little changed.
Cryptocurrencies


Bitcoin was trading just below $40,000 on Thursday morning after a volatile day on Wednesday when the price plunged to below $32,000.


Ethereum, another major cryptocurrency, also recovered some of its losses from Wednesday, when it fell about 20 percent.
Elsewhere in markets


Oatly, the oat-based milk substitute, priced its shares at $17 each for its initial public offering, the company said on Wednesday, valuing it at about $10 billion. Oatly is expected to begin trading on Thursday with the ticker symbol"OTLY."


Oil prices dropped. Futures on West Texas Intermediate, the U.S. benchmark, fell 1.7 percent to $62.28 a barrel.


Metal prices have fallen after reaching record highs on expectations of a strong global recovery that would increase demand for industrial materials. Iron ore futures were down more than 6 percent on Thursday and copper prices dropped nearly 4 percent on Wednesday.


In China, officials have warned against "unreasonable" increases in commodity prices, Bloomberg reported. Officials said they would increase the supply of commodities domestically in a bid to reduce prices, and bolster the oversight of trading in those markets.


Eshe Nelson


Unemployment claims fell again last week.

Initial claims for state jobless benefits fell again last week, continuing a fairly steady decline since the start of the year, the Labor Department reported Thursday.

The weekly figure was slightly under 455,000, a decline of 37,000 from the previous week and the lowest weekly total since before the pandemic. New claims for Pandemic Unemployment Assistance, a federally funded program for jobless freelancers, gig workers and others who do not ordinarily qualify for state benefits, totaled 95,000. The figures are not seasonally adjusted.

New state claims remain high by historical levels but are less than half the level recorded as recently as early January. The benefit filings, something of a proxy for layoffs, have receded as business return to fuller operations, particularly in hard-hit industries like leisure and hospitality.

More than 20 Republican-led states have said they will abandon federally funded emergency benefit programs in June or early July, saying the income is deterring recipients from seeking work as some employers complain of trouble filling jobs. Those programs include not only Pandemic Unemployment Assistance but also extended benefits for the long-term unemployed.


— Kevin McKenna
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$180 Billion of K-12 COVID Relief Funds Are Still Unspent [feedly]

$180 Billion of K-12 COVID Relief Funds Are Still Unspent
https://freopp.org/have-states-spent-emergency-k-12-education-funds-during-the-pandemic-838b8a5b5d7f?source=rss----cf55bde5fc55---4

Many school districts remain closed despite an avalanche of Congressional aid.

More than one year into the pandemic, state departments of education have spent just a fraction of the nearly $190 billion in emergency K-12 education aid provided by Congress.

As of March 31st, states had only spent $6 billion of the $65.7 billion in Elementary and Secondary School Emergency Relief (ESSER) funds provided by Congress in 2020, according to U.S. Department of Education data. This includes $12.8 billion through the CARES Act and $52.8 billion from the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, which became law in December. The below table provides a breakdown of state expenditures.

The 2021 American Rescue Plan included another $122.8 billion for ESSER funds. The Department of Education announced state allocations of this new funding in March. Based on what has been spent as of March 31st and the additional spending included in the American Rescue Plan, state departments of education have more than $180 billion in emergency funds available. The Department of Education has not begun tracking whether states have spent these funds.

Will Congress spend $100 billion more on K-12 education while $180 billion is still available?

President Joe Biden has proposed additional spending increases for K-12 public education. The American Jobs Plan calls for $100 billion to "upgrade and build new public schools," through direct federal grants and bonds. The American Families Plan proposes $9 billion in funding for American teachers to address shortages, improve training, and increase diversity, $17 billion to expand the national free and reduced school lunch program, and a $1 billion healthy food demonstration project for participating schools.

But experience over the last year suggests that state public education systems are unlikely to spend additional funds in the short run to help children. For example, the nonpartisan Congressional Budget Office analyzed the American Rescue Plan and projected that $90 billion of the emergency ESSER funds would be spent between 2023 and 2028. The Department of Education data tracking state expenditures of ESSER funds through March 31st shows that, on average, state departments of education have spent less than half of the funds Congress appropriated in March 2020.

Rather than providing more than $100 billion in new funding to state departments of education that already have at least $180 billion in ESSER funds still available, Congress and state policymakers should be focused on using available funds to immediately help students recover from pandemic related learning losses and improve their learning opportunities moving forward. A promising strategy to address both needs is to provide funding directly to disadvantaged students through government-funded education savings account (ESA) programs to help parents pay for school tuition, tutoring, summer school and other educational enrichment services for their children. Seven states currently have active state-funded ESA programs.


$180 Billion of K-12 COVID Relief Funds Are Still Unspent was originally published in FREOPP.org on Medium, where people are continuing the conversation by highlighting and responding to this story.


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Friday, May 14, 2021

Enlighten Radio:Talkin Socialism: The Return to Amazon: defining social unionism

The Red Caboose has sent you a link to a blog:



Blog: Enlighten Radio
Post: Talkin Socialism: The Return to Amazon: defining social unionism
Link: https://www.enlightenradio.org/2021/05/talkin-socialism-return-to-amazon.html

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