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Economist Richard Wolff says every capitalist tries to systematically reduce wages and then can’t sell what wage workers have produced

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to the Real News Network. I’m Paul Jay in Baltimore.

It used to be that to talk about the capitalist system would bring up all the demons of McCarthyism and the House Un-American Activities Committee. You couldn’t even talk about the economic system unless you were somewhere in some university political economic courses or such. In popular parlance, it was almost un-American to talk about the system everyone was actually part of.

Well, that’s changed. We’ve got generations of people now that don’t even know what McCarthyism was, and the issue of whether it’s capitalism or socialism is kind of just a question of what are the options. And it’s a debate that perhaps needs to come way out more in the open, ’cause I think ordinary people are a lot more ready for that conversation than a lot of the people who have been insiders of this conversation think so.

So without further ado, now joining us in the studio is a Marxist. Oh no! A Marxist!


JAY: No horns! Richard Wolff is one of the nation’s most well-known Marxist economists. He’s a professor of economics emeritus at the University of Massachusetts Amherst, where he taught economics for 35 years, and he’s currently a visiting professor of the graduate program in international affairs at the New School University in New York. He’s the host of The Economic Update, a weekly radio show on WBAI. He’s edited all kinds of books, and he’s appeared on lots of TV shows, including Bill Maher and Bill Moyers and Charlie Rose.

And thanks for joining us.

WOLFF: Thank you.

JAY: And the fact that you’re getting invited on all these shows kind of speaks to the fact that you can actually talk about Marx and economic systems and socialism and such. In that sense, public opinion has changed.

WOLFF: It’s an amazing thing to me, having spent most of my life trying to offer what I thought were constructive criticisms of capitalism and having relatively few opportunities to do it. You’re exactly right. The last three or four years is a complete seachange, like nothing I’ve ever seen before or that I ever expected. Everywhere in the country, people want to have that conversation. They want to look at the critical perspective on capitalism and not just hear the cheerleading that comes from the politicians and the journalists, with few exceptions. And so I’m finding out audiences left and right that I never dreamed were there, and the conversations are intense, engaged, and very much looking for new solutions.

JAY: I mean, I think it’s getting clear to a lot of people that capitalism is out of solutions within its own framework. I mean, first of all, in terms of financial reform, there’s been nothing serious enough. It’s pretty clear there are still enormous financial institutions that are still speculating wildly, and the same stuff that happened in ’07 and ’08 is likely to happen again. It’s kind of a question of when rather than if.

WOLFF: That’s right.

JAY: The issue of demand in the economy, low wages and such, nothing’s changed. And climate change, capitalism, so far, at least, does not consider it a threat to capitalism to have global warming, and they’re not really getting serious about it. So, I mean, are you finding that there’s this sense of that, that there aren’t solutions here anymore?

WOLFF: I think two things are happening. The one that’s most important is that as the crisis since 2007 lingers and lingers, this crisis that was not supposed to happen, that was not supposed to cut so deep, continues to do all of that and to last and last and resist government efforts to change it, that people are shifting and beginning to want to look beyond the crisis years since 2007 and ask the question whether maybe we’re not in a bigger, longer-term dilemma for capitalism. And I think we are. And if I could sketch it for a moment, think it would help people to see this as a momentary downturn within a longer crisis.

And here’s how I would summarize it. For the first 200, 250 years of capitalism, which begins in England, goes to Western Europe, and then to North America and Japan, the capitalist system, it concentrated in those countries, concentrated its factories, its offices, and stores there where it began. And it turned the rest of the world–Asia, Africa, Latin America–into a hinterland to provide the people, to provide the food, to provide the raw materials. And that was how the world was globally organized.

Then in the 1970s something radically changed. With a jet engine, you could get anywhere in the world in a matter of hours. With modern telecommunications and the computer, you could monitor a factory in Shanghai from Cincinnati as easily as you could manage a factory down the street in Cincinnati. And so capitalists–and I want this really to be driven home if I can–capitalists in the 1970s in Western Europe, North America, and Japan have basically said to the United States and Western Europe and Japan, goodbye, we’re leaving, we are abandoning you. You are not where the profit is. The profit is in those places we can now go to where we pay a small fraction of those wages, where we can operate with impunity, where the poverty of these societies, itself a product of all of this, makes them desperate to have the jobs that we can provide. It’s a perfect scenario. We made a lot of money for 200 years in the West, and now we’re leaving.

And I think the emblematic city that kind of shows this is Detroit, a place that was the apogee, the peak of capitalist efficiency in the 1960s, sustaining 2 million people population, today 700,000, a city that has been literally ripped apart and destroyed because three corporations decided, for profit, to leave that place and say goodbye and leave behind the desolation, the unemployment, the collapsed housing, and all the rest of a city and now has to be the largest bankruptcy of any American urban area in our history.

I think the capitalists of the world are saying to Western Europe, North America, and Japan, we were willing to give you higher wages because we were able to reorganize the planet for 200 years. Now our future is in the areas that are cheap for us–the rest of the world–and we’re abandoning you.

JAY: Or beating up the wages here. Like, for example, in Detroit–

WOLFF: That’s the other side of the same thing.

JAY: –the starting wage used to be $26 an hour. In this great reorganization, it’s now $14 an hour.

WOLFF: That’s right. So basically they’re saying to the West, we’re leaving. Now, of course, if you make it worth our while not to leave by bringing the wages and the costs [incompr.] well, we might reconsider. But then what they’re saying to the American people is, you can have a choice of a slow decline as we leave or a rapid decline to slow our departure. This is an unbelievable proposition to present to Western Europe, Japan, and the United States and I think will shape the basic political struggles in all these places for years to come.

JAY: But it’s so self-destructive even for capitalism, because now you’ve taken a market that was the consumer of last resort for the world and turning people into increasingly low-wage workers. You’re going to sell your profits where? The places that are already low-wage workers? I mean, it’s really completely–.

WOLFF: You know, it’s wonderful, ’cause as you introduced me as a Marxist, Marx was fond of saying that capitalists are caught in a stunning contradiction. Every capitalist tries to lower the wage costs, reduce the workers, substitute a machine, cut the wages, never wanting to face the fact that if all capitalists are trapped in a system where they’re systematically reducing the wages, then they won’t be able to sell what those wage workers are producing. And if you don’t face that, you’re caught in the contradiction that what the system makes you do undoes you by the absence of anyone to buy this stuff. And there we are, back to the naked, basic contradiction of a system that doesn’t want to face that it has these kinds of internal problems.

JAY: So in terms of long-term decline, why isn’t this cyclical? We’ve seen these things over the last century. Why is this any different?

WOLFF: Well, I think that we have the cyclicals, but the one thing that I find so interesting is that this one has certain unique characteristics. It was really out of the blue in the sense that almost nobody saw this kind of thing coming. Everyone assured us, not just the president and the politicians, but the economists, that it wouldn’t last long. That was wrong. That it would cut deep. That was wrong.

But I think the thing that really strikes me is the kind of utter failure of anyone in this system to cope with this other than the 1 percent. The politicians can’t figure out a solution. The bankers can’t, as you rightly put it–for example, the banks that were too big to fail without exception are now bigger than they were then. Nobody is solving it. And even the mass of people are like deer caught in the headlights not knowing which way to go. In the ’30s, after all, they joined unions, [they joined (?)] socialist and communist parties, and that made a difference. At this point, there is the behavior of a system that kind of knows that this isn’t just a temporary crisis, there’s something fundamental shifting. And yet no one quite knows what to do.

JAY: There’s another part from–I mean, I know something about Marx. I’m not–I haven’t studied it the way you have. But I’ve always been struck that one of the things that Marx and Engels said that I think gets completely underestimated is that socialism isn’t just some good idea. It’s not a better policy that we could adopt. It’s something that actually grows within capitalism. You get these massive enterprises, and they’re fabulously well-planned. Like, you take Walmart, you get a toothpaste off of a shelf in Walmart, they know to get another toothpaste thing going somewhere in China. But the individual, as you say, the individual enterprises try to drive down wages, but they also get extremely efficient, and especially with computerization and digitization. Walmart is a planned economy.

WOLFF: Absolutely.

JAY: But it’s, like, the biggest private employer. I mean, Marx’s whole point is this is actually–this is the seeds of socialism, except they’re privately owned.

WOLFF: That’s right. They’re privately owned. They’re driven by the maximization of profit for a tiny fraction of the population. And then you can’t be surprised that the capacity, what they’re capable of doing, which is a staggering saving of labor for the community, ends up not saving the labor for the community at all, because the whole point of it is to gather absurd wealth in the tiny number of hands. And Marx’s point was this is an irrationality that even the best public relations cannot forever cover over.

And I think we’re in a moment where, both in the short-run crisis and this longer-run decline, the irrationalities, the contradictions–. Look, basically capitalism is saying to particularly the American working class, for 200 years, we really exploited you on the job, but we gave you rising standard of living. Compensation of an awful day was that you could go someplace at the end of the day and have something called a happy hour to console you for the unhappy hours prior. Now capitalism is saying to you, we’re going to exploit the hell out of you, but we’re not giving you a rising standard of living. We’re actually giving you a falling one. We’re condemning your students to debt they can’t handle. We’re taking away the benefits. We’re taking away all of the job prospects and hopes for the younger generation. We’re going to work you on the job more hours than ever, and we’re going to give you less for it. Whatever you think about the past, I’m not clear that the American working class will find that an acceptable offer.

JAY: Now, you’re traveling a lot around the country. You’re speaking all over the place. What are you seeing? Are you seeing anything politically that excites you?

WOLFF: Yes. I’m a teacher. I’ve been a professor of economics all my life. I see a level of hunger to understand what’s going on. I’ve never seen that before. It’s like a teacher’s dream. What you want in your students is a desire for what it is you have to teach. I now travel around the country, and I see audiences of 200, 400, 1,000. And what’s clear is they want me to explain how did this happen, what happened to this American dream they thought they were going to get, why is it disintegrating, why is it disappearing. And if I’m going to explain it to them and if I’m going to be critical, they are so grateful for someone giving them a sense of what’s going on that my leftism is a kind of extra benefit. They’re willing to hear me halfway out, which is all I ask. So to make a long story short, as a teacher with a critical perspective, I’m having the time of my life.

JAY: Alright. Now, Rick has to run, but he’s agreed to come back. So–.

WOLFF: We just had a good time.

JAY: Yeah. So Rick’s going to come back, and we’re going to do, like, a multipart series interview and really dig into all this stuff. But he’s got a speaking engagement (one of his many) tonight, and I promised he could get there.

So thanks very much for joining us.

WOLFF: Thank you for the opportunity.

JAY: And thank you for joining us on The Real News Network.


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Richard D. Wolff is a Professor of Economics Emeritus at the University of Massachusetts, Amherst, and currently a Visiting Professor of the Graduate Program in International Affairs at the New School University in New York. He is the author of many books, including Democracy at Work: A Cure or Capitalism, and Imagine: Living in a Socialist USA.