Richard D. Wolff & Tom Hartmann discuss “Capitalism’s Crisis Deepens”

Thom Hartmann: With the presidential campaign heading into its final weeks, it seems like the American political system is at the point of crisis, which really shouldn’t surprise anyone because the economy has been in a crisis for almost a decade. The conventional wisdom is that we recovered from the Great Recession eight years ago – but that’s only really true of the wealthiest of Americans. Most people still find themselves much as they were eight years ago, when the worst financial crisis since the Great Depression tanked the global economy and sent unemployment skyrocketing.

So why has the economy taken so long to recover for most people?

Is it just a matter of a few policy mistakes here and there?

Or we we witnessing a system wide crisis of capitalism – one that signals the end of the old order and the beginning of a new one?

My guest for tonight’s Conversations with Great Minds has looked into those questions and more in his fascinating new book: “Capitalism’s Crisis Deepens: Essays on the Global Economic Meltdown“. Joining me now is Dr. Richard Wolff – Professor of Economics Emeritus at the University of Massachusetts Amherst and Visiting Professor at the The New School in New York City. Dr. Richard Wolff – welcome back.

Richard Wolff: Thank you, Thom. Glad to be here.

Thom Hartmann: It is always an honor and pleasure to have you with us. I want to start with the title of your new book. What do you mean when you use the word “crisis”?

Richard Wolff: A crisis is a general term that’s been around for as long as capitalism. It refers to this peculiar quality of the capitalist system that every four to seven years – and I mean every four to seven years for two to three hundred years, this system goes into a tailspin. Suddenly, large numbers of people are thrown out of work. All kind of businesses cut back, even more businesses go out of business and we have a kind of a shaking out of our economic system, causing enormous harm often to millions of people. The only thing that’s variable about it is how long each one lasts and how deep it cuts. So some of them are short and shallow and some of them, like the one in the 1930s, and like the one we’re in still now from 2008, last a long time and affect tens or hundreds of millions of people.

A crisis is this peculiar built-in instability of the capitalist system.

Thom Hartmann: Well, when I look at how Warren Buffett has grown his wealth over the years, you know, there’s the old cliché ‘buy low, sell high’. If somebody was just starting out their life as an investor and they knew that the economy goes through these four to seven or eight year cycles that you’re talking about, wait for a crash, buy everything you can, all the good stocks, wait until you’re at a peak, sell them, you may have to wait a year or so for the crash, but sell them. And it seems like it’s not a crisis for everyone. In fact, it’s an opportunity for people at the very top, very, very wealthy people. Or am I missing something here?

Richard Wolff: No, no. The first rule of anyone who’s wealthy in this country is either to hire someone, which is what they mostly do, or to learn real quickly on their own, how exactly to play this kind of up and down. It’s quite correct. You can make money when it goes down, if you have done the right things, and likewise when it goes up. But in order to do that, you have to have very good advice, you have to pay through the nose to get it, and it has been the way that the wealthy have in large part maintained their wealth when they didn’t take undue chances with that wealth. And it’s why we have a core of wealthy Americans who are able to stay in that position for a long time.

Thom Hartmann: So, describe for us the current crisis of capitalism – how did it begin and what makes it different than previous crises?

Richard Wolff: I think the way this one began really takes us at least back to the 1970s. Something happened in the 1970s, kind of everyone agrees that the capitalists in the United States and other parts of the world made a fundamental decision to change course. They were no longer going to stay in the parts of the world where capitalism had grown up: Western Europe, North America and Japan. They were going to leave. They were going to go to places where they could produce at a much lower wage level for workers, and I’m thinking here of China, India, Brazil, places like that. And they were only going to stay in their old countries under the new conditions of pressing down the wages, getting the government to cut taxes on them, basically under the threat that if you don’t do what we want where we were born, even more of us will be leaving and going elsewhere.

This put the country into a vice. It didn’t know how to react, the politicians were afraid to offend these corporations. Meanwhile the corporations became richer and richer, precisely because they were paying low wages around the rest of the world. And you have a crisis building because the rich are becoming richer and richer, they control the political situation more and more and can make it serve this very process. And along the way American middle class disappears, well-paying jobs disappear, more and more of the jobs are insecure, without benefits, because production has an option. Capitalists can leave, and they do in huge numbers.

The end result is a society polarized by most wealth in the hands of a few, the mass of people upon which this economy was built in the 20th century can’t afford to shop any more, we have dead malls across America becoming major eyesores literally everywhere. We have collapsed industrial cities – Detroit, Cleveland, Camden, New Jersey, my home town of Youngstown, Ohio and on and on and on. So what you’re seeing is not a crisis of this or that detail, this or that industry. What you’re seeing is a crisis of a system that in its own logic has produced conditions that make it harder and harder to solve the very problems that this system is creating.

And that’s usually a sign of a system coming to the end of its historical period.

Thom Hartmann: Yikes! Isn’t this what Alexander Hamilton addressed in 1791 when he presented his 11 point plan to Congress and to President Washington which included tariffs to keep manufacturing in the United States which encouraged, which included essentially ‘buy America’ provisions for government purchasing which includes subsidies for essential industries? I mean, is that not a solution and did we not do that for 150, 200 years?

Richard Wolff: It was a solution and it did work for a while. But you know, we were a small ex colony at that time. We were not a major player in the world economy the way Britain and Western Europe were. Now we are the colossus of the world economy. And things you can do when you’re a small corner, you can’t do if you’re the Big Kahuna on the beach.

For example, if you were actually to see the United States today try to put a wall of tariffs around itself, one of the first things you’d notice really quickly would be that the rest of the world’s countries would do exactly the same against the United States. So while we would celebrate having more jobs because we don’t let foreign goods come in, we would also have to commiserate with one another for all the lost jobs here because we can’t export to those countries. They’re not all going to sit down and play by the rule book that advantages the United States at their expense. The Chinese aren’t going to do it and the Europeans aren’t going to do it, and the Japanese are not going to do it.

You have to face that this is now a world capitalist system that has boxed itself into a dead end which is why I stress, even though it is scary, that we really now have to ask a question. Capitalism has collapsed twice in the last 75 years: first in the 1930s, and now we have 2008. Between those two we had 11 economic downturns. That’s the measure of the National Bureau of Economic Research which keeps those records here in the United States. The instability of this system coupled with the decision to maximize profits by going overseas to exploit low wage workers has put us into a situation where even when we solve the problems we have, the solution leads to the next net of problems that are even worse.

This is the time when the question about the viability of the system should be debated forefront. We have an election for president where the two candidates, if you can say anything about them, is they share the evasion of this question. The refusal to question this system, to debate almost anything other than asking whether this system is now dysfunctional for the mass of people, profitable for a few, but that’s not the basis for longevity. That was what was experienced by other systems in the past and we need to ask those questions about our system now.

Thom Hartmann: So, let’s ask those questions. What are the indicators, you listed a number of them, how do we understand how dysfunctional the system is and what possible alternatives are there to it?

Richard Wolff: Let me talk first about the signs. I want to quote to you a report from Oxfam, that famous old British institution that studies global inequality. They issue a couple of reports every year and I like to quote the one from this year initially published in February. The 62 richest people on this Earth – 62 individuals – most of whom are American, not all, but most, those 62 today own more wealth together than the bottom half of the population of the planet – three and a half billion people. Let’s remember that the bottom half of our people or our fellow human beings, those are the ones that die early, those are the ones that have all the diseases for which we know the cures, those are the ones whose children go hungry. All of that.

If we took half the wealth of the richest, they’d still be the 62 richest, that’s how rich they are. But we would be able to do something for the mass of people, something which, as in your earlier part of this program, every Christian, every Jewish, every religion I know of would favor on moral and ethical grounds. We have a system that has brought us to that kind of obscene inequality. That’s not sustainable in view of the values, at least the values we claim, govern what we agree to.

Second example. The instability I just spoke about. What kind of a system is this that plunges down every four to seven years? And then periodically plunges down in a horrific way that makes hundreds of millions of people suffer even though their skill at production is unchanged, even though their needs are, if anything, growing. That we stumble over ourselves, the instability, the inequality, those should be more than enough to have as signs that this is a system which for most of us is not working.

Shall I talk a little bit about what the alternatives are?

Thom Hartmann: I would love to. We just have about 20 seconds left, so we’ll pick this up on the other side of the break. But you’ve done an absolutely extraordinary and marvelous job of laying out the problem, and we will get to that in just a moment. More of tonight’s Conversations with Great Minds with Richard Wolff, Dr. Richard Wolff, right after the break.

Here Are The Alternatives To Capitalism…

Thom Hartmann: And welcome back to Conversations with Great Minds. I’m speaking with Dr. Richard Wolff – Professor of Economics Emeritus at the University of Massachusetts Amherst and Visiting Professor at The New School in New York City, author of “Capitalism’s Crisis Deepens: Essays on the Global Economic Meltdown“.

So, Dr. Wolff, you have done a great job of laying out the problem. What are the solutions?

Richard Wolff: Well, I think we have to begin by recognizing a core element of the problem, because therein lies the solution. That core element is how we organize the production of the goods and services that we all depend on – the food, the clothing, the shelter, the housing, all of it. We do that mostly by means of a capitalist enterprise. And by that, I mean an enterprise that is governed by the people who own the shares of the companies – since most of the companies that are key to our economy are corporations – the people who own the shares and the board of directors that they elect to run the company.

Let’s be real clear. One percent of shareholders own two thirds of all the shares. So that’s the one percent that Occupy taught us about, it’s the one percent that are the owners. They then select who’s the board of directors. That’s how our business is organized. That’s how we produce. And this has an enormous meaning. It means that the basic decisions – what to produce, how to produce, where to produce, and what to do with the profits – is made by a tiny number of people. Major shareholders, ten, twenty institutions or individuals. Board of directors, 15 or 20 individuals in most companies. And under them, the mass of employees. You. Me. The average person. A tiny group of people make the decisions, and here comes something that should surprise nobody. If a tiny group of people make all those economic decisions, they make those decisions so the economy serves them; the shareholders, the big corporate executives, the directors. And that’s what we have. We have a capitalism that has done real well by them.

But what they don’t do is make the decisions that are good for the rest of us. And in order for that to happen, you have to have – here comes the funny word – democracy. That is, you have to have the decisions in every enterprise made first and foremost in a democratic way by all the people that are working there. Not by a tiny handful. If you want the economy to work for the people, you’ve got to put the people in charge, and what that means at the level of every enterprise is the people there have to become the group that makes those decisions democratically as a group.

Now let me give you a couple of examples of how that might work. Suppose that at the end of every year the decision about how to divide up the profits – the profits that everybody who works at that enterprise helped to produce by his or her work, whatever it was. Suppose the decision of how to use the profits was made democratically by all the workers. Do you think they would give a handful of top executives ten, twenty, thirty million dollars a year while they can’t pay for their kids to go to college? Never would happen. Do you think they would distribute to the already wealthy shareholders a huge proportion of the dividends that we now have in corporations, profit used to give to shareholders? I don’t think so.

I think what they would do is come to a much less unequal distribution of the profits than what we have. That, then, would be a more effective way to deal with the inequality people talk about but never do much about. It would be to democratize the enterprise, to change the way we organize production, by facing the failures of the capitalist system of doing that and moving to a democratic decision-making over production. It’s long overdue. Human beings have gone in the direction of this kind of co-operative enterprise for thousands of years. I think we’re now at a point where the inability of capitalism to meet the needs of a growing majority of people will make us go back and rediscover a co-operative enterprise as a whole new and better direction.

Thom Hartmann: I absolutely don’t disagree. I’ve been to Mondragon and seen co-ops all over the world. In fact, I wrote a chapter about it in one of my books, specifically Mondragon.

But there’s, haven’t we, aren’t you describing sort of a middle ground that we have actually been at in the United States. I remember when I was growing up, my dad worked in a tool and die shop and used to negotiate the union contracts with the owner of the tool and die shop who he knew. And, but he had a union. Everybody in the tool and die shop was unionized. They could walk out, they could strike, and as a consequence to that, all these guys were just basically high school graduates, but every single one of them had the ability to buy a house, take vacations, buy a car, put their kids through college, and prior to Reagan we had about a third of the country unionized. Now it’s what, ten percent, maybe? Did that fail?

In Europe we’ve got countries that are 60, 70, 80 percent unionization. Is that part of the way toward a co-operative economy? Is it a variation on it? What am I missing, here?

Richard Wolff: I don’t think you’re missing anything. I think what you’re seeing is something that history teaches us. If you go back a hundred years, the union movement was closely allied with – and very much in sympathy with – the co-operative movement. In fact, workers would say to each other, if we are isolated as individuals, we can’t negotiate successfully with an employer to make decent living conditions. So we form a union because it gives us more power; it gives us more standing to negotiate, if not as equals, at least in a stronger position and so we have a better chance to get a decent life.

Well, the co-op is the next stage, because better than negotiating with an employer whose interests are opposite to yours, who wants to make more profit if you get lower wages, etcetera, if you become a co-op you’re discussing amongst yourselves, a little bit like the story you just told. You’re all in the boat together. You all care about the enterprise because you are not just a drone who comes to work five days a week from 9 to 5, you are part of what directs, what governs and what organizes the entire enterprise. I think it’s where people wanted to go for a long time. If you leave the final power in the hands of the corporation, which the unions did, then you can’t be surprised if those corporations also figure all this out in reverse and do everything they can to undermine, weaken and destroy the unions precisely because they can better call the tune for their own profits.

I think the decline of the labor movement is a sign that we now have to bite the bullet and recognize that that co-op is when the workers become themselves the owners and operators, that’s the only way to be sure that the organization of enterprise meets the needs of the majority. Because leaving a small number of people to own and direct the enterprises means they will do it for themselves first as we all might well do and you have to learn the lesson if you want a different economy, you’ve got to put the people in charge and the democratization of the enterprise is a feasible clear way to move in that direction.

Thom Hartmann: You know, in the early 1970s most businesses were not at all political and were not involved in politics and after Ralph Nader and Rachel Carson wrote their books and started the consumer movement and the environmental movement, Lewis Powell wrote his famous memo in ’71, ’72, saying we’ve got to get involved. We’ve got to basically start buying politicians and universities and all kinds of things.

And arguably that led to the destruction of the unions, because the union movement existed within the context of government protections which were progressively torn apart. How do you prevent, how do you reorganize government which is, define the rules of the game of business and has redefined how unions fit into those rules, how do you, on the first hand, change it so that co-operatives become viable and are actually encouraged, and then secondly, how do you prevent a repeat of what happened in the 70’s, and Reagan took and ran with like crazy in the 80’s, the destruction of the co-operative movement through the exact same process that destroyed the union movement.

Richard Wolff: I think the answer lies in the need to raise as a fundamental demand and as a major objective of people who see the problem that we have to develop in the United States a co-operative business sector. A sector of the economy in manufacturing, in services, in factories, in offices, in stores, we have to establish co-operative enterprises. Once we begin that process, and that’s already underway, and it’s under way in a nice way here in the United States, too. Once we begin that process, certain natural developments will follow. That kind of co-operative sector, it will need its political party, just like the capitalist business sector has captured the Republicans and the Democrats and made them serve their interests, among others, by killing off the labor movement and all the militant young people who used to work with the labor movement.

I think we have to do that. And let me give you an example of an ally of the United States where this is being understood and done and giving me the ability to suggest this on this program. In Great Britain the leader of the Labour Party, which is their second major party, Conservative and Labour in England is roughly like Republican and Democrat here. The new leader of the Labour Party, often called the Bernie Sanders of Britain, is named Jeremy Corbyn. And his party is committed to developing a co-operative organization sector of the British economy. Big, spread all over the country. A real alternative and competitor to capitalist organizations, corporate organizations, so that the British actually can see how these two work and make a choice.

And here’s how they’re going to do it. They are going to pass a law – the Labour Party’s committed to this – if they win the next national election, they will pass a law which says the following: every business that now exists is free to continue, but if they get to a point where they either want to close the business or sell it to another corporation or go public, to become a shareholding company, they must give what’s called right of first refusal to the workers of that enterprise to buy out that company and run it as a democratic co-op. And the government of England will not only pass that law that mandates that, but it will provide the capital to the workers to enable them to do exactly that. That is an amazing commitment, amazing commitment to develop a co-op sector as something an economy ought to have as an important corrective to the failures of capitalism and I think it shows us a way to go.

Thom Hartmann: Yeah. Brilliant. Professor Richard Wolff, thank you so much for being with us tonight.

Richard Wolff: My pleasure.

Thom Hartmann: Thank you. To see this and other Conversations With Great Minds, go to our web site,

Transcribed by Sue Nethercott.

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