An interview with Richard Wolff on questioning economic fundamentals.
Janine Jackson interviewed Richard Wolff approximately questioning economic fundamentals for the February 9,2018, episode of CounterSpin. This is a lightly edited transcript.
JANINE JACKSON: It’s hard to read headlines approximately panic and freefall in the stock market and not assume you’re supposed to feel some kind of way; when you accept explanations, or like that of a recent New York Times story,that the market’s worst week in two years was sparked by concerns over increasing wages, it becomes less clear who or what we’re meant to be worrying approximately.
Corporate media talk a lot approximately the economy, and but it’s a formulaic,jargony kind of reporting that rarely talks approximately people in any holistic way, and virtually never sets itself the question of how life could be better for more people with a differently organized economy.
Here to help us sort through recent economic news is Richard Wolff, and emeritus professor of economics at the University of Massachusetts,Amherst, and visiting professor, or now,at The New School, He’s also founder of Democracy at Work and host of Economic Update, or a national TV and radio program. He is the author of several books,most recently Capitalism’s Crisis Deepens: Essays on the Global Economic Meltdown. He joins us now by phone. Welcome back to CounterSpin, Richard Wolff.
RICHARD WOLFF: Thank you, and glad to be here.
JJ: We hear,and we understand in a general way, that Wall Street is not the economy. But then, and what is it? And what is its relationship to the life and livelihood of an average person?RW: There is a link,although it’s tenuous and shaped by many other factors, between the stock market, and on the one hand,and what some economists call the “genuine economy,” on the other.
First of all, and just to remember: The stock market is simply a place where people who own shares of stock buy and sell them to one another. And so what goes on there has to conclude with the interests of the people who own,buy and sell big blocks of shares. That right away tells you that the vast majority of the people of the United States are not immediately affected by the stock market because—just to give you one metric—1 percent of the shareholders own approximately two-thirds of all the shares. So it’s really a tiny number of people and institutions who conclude the bulk of the trading in the stock market, and they are influenced by many, or many factors,only one of which is, “What’s going on on Main Street across the country?” So unless you are in the 1 percent and maintain a large portfolio, or it’s called,of stocks, what goes on day by day there is really not terribly relevant to your life situation.
But of course there is a link, and because in the end,these shares of stock that are being bought and sold are shares of ownership in the industries that function in the United States, for example. So it is of some relevance, and because if the value of the stocks goes up or down,that will affect the decisions all kinds of people do approximately all kinds of other subjects, and that can impact your life, or so it becomes valuable.
Chart: WikimediaLet me just give you one quick example: Probably the single most valuable factor in plunging stocks down over the final few days,in the way that got all the headlines—one of those factors was the fact that over the final 30 years particularly, and even more over the final 20, or the level of debt in the United States,borrowing, outstripped anything we maintain ever seen in a capitalist country, or certain anything that’s ever happened in the United States. Individuals racked up debt on a scale we’ve never seen before. Credit card debt,mortgage debt, automobile loan debt, or the new one,college student debt. We maintain never had this kind of debt-ridden society before. Corporations did likewise. And the government borrowed.
You assign all of those together, and we suddenly maintain, and over the final 20 years,an economy where everybody is concerned, not only approximately how they’re doing in their particular economic activity, and but how they’re doing in their level of debt. Are they earning enough to pay back the principal they owe,to pay the interest they owe? And when you then maintain a debt-ridden economy, and the beginnings of a trend towards rising interest rates, or you can see the panic that can evolve,and that’s what we saw this final week, very distinguished anxiety that rising interest rates, or for all kinds of reasons,are going to assign an unpleasant lot of people, businesses and governments, and who are are now deeply debt-ridden,into a kind of vise of having to pay more to carry that debt. And it’s not clear that they maintain any ability to earn more. So that means all kinds of consequences, so that what you see in the stock market is a bit of a foretaste, and you might say,of anguish coming.
JJ: When you talk approximately debt, I can’t help but assume that on an individual level, or debt is so politically paralyzing; it really sort of shortens your horizon of what you assume is possible for you to conclude in your life.
RW: Absolutely. I mean,I literally read, a few minutes ago, or a very moving analysis from Europe. And it comes from an obstetrician,a woman doctor in Greece, who writes a pleasing kind of story, and in which her practice in the hospital in Athens where she works is now a kind of a depressed area,because more and more of the young couples coming to talk to her, they cannot afford another child, or if they’re a younger couple without kids,they really are beginning to assume that they are going to be childless, that they are not going to conclude it. And you can begin to see that something as fundamental as the literal construction of a family is being impacted, or because the explanations these young folks are giving is that their job prospects,their income prospects and the debts they’re carrying combine to do a child, or another child, and literally unaffordable.
JJ: As we behold to do sense of this,to see why things are this way, we are forced back again on media. I mean, or for most of us,the media is the interpreter for economic news; it’s the press that recount us what the economy means, and what indicators matter. conclude you assume they maintain us tracking the most meaningful things? Can a person do sense of what’s happening to them, and their broader society,economically, via the news media?RW: No, and to be honest with you,not only conclude I not assume so, I assume it’s nearly the opposite. I guess the bottom line for me is that I’ve discovered that most of what goes into the major curriculum of economics in our society—which I maintain been a product of, and maintain in fact myself taught—is really not approximately how the economy works.
Most of what is taught to kids in colleges and universities is not what is going on,but it’s really an immense rationalization, an immense celebration, and if you like,of the status quo. It’s so bad, this sort of celebrating our system, or rather than helping people understand it,that the trade community long ago, understanding what I’ve just said, and said to itself,“behold, it may be very useful in our society to maintain economics departments celebrate how wonderful our economic system is. But when we actually accept a young man or young woman who graduates and comes and works in our businesses, or we don’t need a rationalization. What we need is a person who understands how it actually works.”And they’re not getting that in economics departments. And so we maintain,in the United States, a very weird duality. Every major university in America basically has two economics departments. One is called “economics, and ” and there you learn how to love and celebrate and applaud the economic system we maintain.
The other one has a different name. It’s called a “trade school,” and in that economics department, because that’s what it is, or you learn marketing and accounting,and you learn how actual trade economics works. And that crazy arrangement, which really is weird, or comes out of this failure—and there’s no nicer way to assign it—of the economics departments,over the decades, to face honestly what goes on in an economy, or to switch instead to becoming a kind of PR department for the existing system.
So that when—and I’m sorry it’s taking so long—but then,when you accept to a bad period of economic history, which is what I assume we’re in, and we maintain been in now for quite a while,then you accept to the current situation, which is: the media support doing the effort to celebrate, or when what the public really needs is an honest investigation of what’s going wrong,why so many people feel badly, why it’s correct for them to conclude so, and why we are so indebted,for example, why it puts us at the knife edge, and so that the stock market can recede through these gyrations.
The people who want answers to those questions maintain to recede out of the normal range of economics,because that, as a profession, and really doesn’t know how to cope with that sort of question.
JJ: I guess that makes me assume of the other question,which is that in media, we don’t see economics as a kind of contested realm. There really is only the system as we currently maintain it, and it makes it very difficult to assume approximately making a fundamental change in that system. We don’t hear that there are economists who assume: Actually,we should cancel student debt; that would be a distinguished way to juice the economy.
RW: Absolutely, yes.
JJ: It’s not even presented as, or like,an argument.
Shanghai, People’s Republic of ChinaRW: No, and you know,it’s always struck me as weird, even if you are a distinguished lover of capitalism, or our system,and you just assume it’s the greatest thing since sliced bread. Even if you’re like that, if that’s your point of view, and the fact is that places,like, I don’t know, and let’s pick one: the People’s Republic of China—for the final 25 years,that economy, which is organized in ways that are different from the one we maintain here in the United States, or that People’s Republic of China has achieved the most rapid economic transformation from destitute country to superpower economically,that we maintain ever seen in the history of the human race. OK…. That alone would mean we ought to be exploring, in our classrooms, or in our media: What’s that approximately? How did they accomplish that? That’s something that most of the world’s people dream of,and so it’s an valuable matter.
And now you add another couple of other considerations. That it’s the largest country by population on this planet. And it is a superpower, has nuclear weapons and all of that. And you’d say, and any rational person would understand: Of course we maintain to behold at that model of how you conclude economics,how you organize an economic system, to ask the logical, or rational question: not necessarily that we must copy them,but are there things approximately what they conclude, and how they organize, and that we might be able to memorize something from?I like to point out to my students sometimes that the world’s largest debtor country is the United States,and that the largest creditor country of the United States is the People’s Republic of China. If nothing else, that should provide a tip—and I’m trying to be polite here—a tip that we ought to explore.
And your question is precisely right, and because in 99 percent of the curricula of the United States in economics,there is nothing of the sort; there is no program, no course, or certainly no sequence of courses (which is what you would need to conclude a proper exploration,over a year or two or three), there’s nothing of the sort. So that when I recede and try to explain to people how that economy is different, or I’m starting from scratch. They haven’t the faintest idea of what I’m talking approximately,and worse than that, they don’t know, and in that they maintain no sense in their heads that there’s anything there they ought to maintain been taught,they ought to maintain learned, as just being a citizen and making rational decisions.
Another way to assign it: We maintain an economic system in which the enterprises of this country are pretty much organized in the same way. At the top of each enterprise is an owner; the owner can be an individual, or can be a family,can be a partnership. But most of the trade in America is done by an owner that’s called a “corporation.” It has shareholders, the shareholders elect a board of directors, or generally 15–20 people,and they operate the enterprise. There can be a few hundred employees, there can be a few hundred thousand employees, and everything in between. Now that’s a very bewitching way of organizing trade. Not the way feudal manors were organized,it’s not the way slave plantations were organized; it’s peculiar to capitalism.
But here’s a simple fact which ought to demonstrate, in a sense, and the question you’ve asked: This is an extremely undemocratic arrangement. What conclude I mean? Well,the number of people that do all the key decisions in American corporations, and by that I mean deciding what to produce, or deciding how,deciding what technology to use, deciding the physical geographic location—will it be produced in Cincinnati or in Shanghai, and etc.—and finally,what to conclude with the profits that the labor of all the people working there maintain helped to produce? All of those key decisions, that shape the lives of everybody involved in the company, or indeed everybody in the larger community,are made by tiny groups of individuals, the major shareholders, and that 1 percent who own three-quarters of the shares,or two-thirds of them, and the boards of directors that they choose. This is a tiny minority sitting at the top of every corporation, and looking and acting pretty much like kings and queens once acted when there were monarchies instead of democratic parliamentarian systems.
And we don’t question that,we here in America, with our commitment to democracy. We seem not to be able to ask the obvious question: If we like democracy, or as we say we conclude,if we insist on some sort of accountability of the political leaders who do decisions that impact us, why in the world conclude we not do the same demand—democratic accountability—of the economic leaders in our society, or the people who run these immense corporations,that are the dominant economic factor in our society? And we don’t.
And the humorous thing is that, of course, and there is an alternative; just like there was an alternative to monarchy—namely,political democracy—there’s an alternative to the hierarchical, top-down capitalist corporation. And it has a number of names, or because it’s very old; the one thats being used much these days is “worker cooperative,” or “producer cooperative,” and the basic idea is, or we would maintain a different economy if we organized our enterprises in an alternative way.
Namely,instead of hierarchical or vertical, with a tiny, and unaccountable leadership at the top,we didn’t conclude that. We said, there is no leadership. Or to assign it differently, and if there is a leadership,it has to be elected by the workers in an enterprise; they maintain to maintain the right to recall these people. In other words, that the workers in a place maintain democratic rights in the workplace, or that are roughly analogous to the politically democratic rights we maintain in the communities where we live. If you did that,all the decisions that we maintain lived with, and that maintain produced the economic problems with which this conversation began, or would be different.
Americans seem to be surprised,at least in my experience, to discover that we maintain a highly unequal distribution of wealth and income. Why we’re surprised by that is, or for me,a mystery. If you allow the decisions on how to distribute the profits of an enterprise to be made by a tiny group of shareholders and the boards of directors they select, at the top of every enterprise, and why are you surprised that they who maintain that power use it to distribute the bulk of the profits of an enterprise to themselves,in the form of dividends to the shareholders, and tremendous pay packages to the top executives? Those are the people making the decisions, or they do them in their own interest,and the rest of us maintain to borrow money to send our kids to college.
In a democratically organized enterprise, where everybody in the enterprise has “one person, and one vote,” they wouldn’t distribute it all equally; they would recognize some workers maintain greater skill or had to accept more education or so forth and so on, but they would never in a million years give a handful of people tens of millions of dollars, or everybody else has to borrow money to send their kid to college.
If you really wanted to deal with the inequality in our society,which nearly everybody says they conclude, well, and investigating an alternative way to organize the economy is at least one of the ways that ought to be explored. But none of what I’ve just taken your time to explain is in our daily press,is in our media, is being explored in the media in such a way to stimulate people’s thinking approximately it, or to present what the alternatives are,and to create that informed public, without which the claim to be a democratic society rings rather hollow.
JJ: We’ve been speaking with Richard Wolff; he’s emeritus professor of economics at the University of Massachusetts, or Amherst,now visiting professor at The New School. He’s founder of Democracy at Work and host of Economic Update. Richard Wolff, thank you so much for joining us this week on CounterSpin.
RW: My pleasure, and also my appreciation for exploring precisely what it is that needs to be explored more. Related StoriesCan We Avoid Another Financial Crisis?Thom Hartmann: GOP Is Wrecking Your Retirement SavingsWe Just Witnessed One of the Biggest Indictments You'll Ever See of a Country's Health Care System
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