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Janine Jackson interviewed Richard Wolff about 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 about panic and freefall in the stock market and not think you’re supposed to feel some kind of way; when you get explanations, 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 about.
Corporate media talk a lot about the economy, but it’s a formulaic, jargony kind of reporting that rarely talks about 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, emeritus professor of economics at the University of Massachusetts, Amherst, and visiting professor, now, at The New School, He’s also founder of Democracy at Work and host of Economic Update, 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, glad to be here.
JJ: We hear, and we understand in a general way, that Wall Street is not the economy. But then, 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, on the one hand, and what some economists call the “real economy,” on the other.
First of all, 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 do 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 about two-thirds of all the shares. So it’s really a tiny number of people and institutions who do the bulk of the trading in the stock market, and they are influenced by many, 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 have a large portfolio, 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, 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, because if the value of the stocks goes up or down, that will affect the decisions all kinds of people make about all kinds of other subjects, and that can impact your life, and so it becomes important.
Let me just give you one quick example: Probably the single most important factor in plunging stocks down over the last few days, in the way that got all the headlines—one of those factors was the fact that over the last 30 years particularly, and even more over the last 20, the level of debt in the United States, borrowing, outstripped anything we have ever seen in a capitalist country, 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, and the new one, college student debt. We have never had this kind of debt-ridden society before. Corporations did likewise. And the government borrowed.
You put all of those together, and we suddenly have, over the last 20 years, an economy where everybody is concerned, not only about how they’re doing in their particular economic activity, 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 have a debt-ridden economy, and the beginnings of a trend towards rising interest rates, you can see the panic that can evolve, and that’s what we saw this last week, very great anxiety that rising interest rates, for all kinds of reasons, are going to put an awful lot of people, businesses and governments, 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 have 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, you might say, of trouble coming.
JJ: When you talk about debt, I can’t help but think that on an individual level, debt is so politically paralyzing; it really sort of shortens your horizon of what you think is possible for you to do in your life.
RW: Absolutely. I mean, I literally read, a few minutes ago, a very moving analysis from Europe. And it comes from an obstetrician, a woman doctor in Greece, who writes a beautiful kind of story, 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 think that they are going to be childless, that they are not going to do it. And you can begin to see that something as fundamental as the literal construction of a family is being impacted, because the explanations these young folks are giving is that their job prospects, their income prospects and the debts they’re carrying combine to make a child, or another child, literally unaffordable.
JJ: As we look to make sense of this, to see why things are this way, we are forced back again on media. I mean, for most of us, the media is the interpreter for economic news; it’s the press that tell us what the economy means, and what indicators matter. Do you think they have us tracking the most meaningful things? Can a person make sense of what’s happening to them, and their broader society, economically, via the news media?
RW: No, to be honest with you, not only do I not think so, I think it’s almost 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 have been a product of, and have in fact myself taught—is really not about 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 enormous rationalization, an enormous celebration, if you like, of the status quo. It’s so bad, this sort of celebrating our system, rather than helping people understand it, that the business community long ago, understanding what I’ve just said, said to itself, “Look, it may be very useful in our society to have economics departments celebrate how wonderful our economic system is. But when we actually get a young man or young woman who graduates and comes and works in our businesses, 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 have, in the United States, a very bizarre duality. Every major university in America basically has two economics departments. One is called “economics,” and there you learn how to love and celebrate and applaud the economic system we have.
The other one has a different name. It’s called a “business school,” and in that economics department, because that’s what it is, you learn marketing and accounting, and you learn how actual business economics works. And that crazy arrangement, which really is bizarre, comes out of this failure—and there’s no nicer way to put it—of the economics departments, over the decades, to face honestly what goes on in an economy, 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 get to a bad period of economic history, which is what I think we’re in, and we have been in now for quite a while, then you get to the current situation, which is: the media keep doing the effort to celebrate, 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 do so, why we are so indebted, for example, why it puts us at the knife edge, so that the stock market can go through these gyrations.
The people who want answers to those questions have to go out of the normal range of economics, because that, as a profession, really doesn’t know how to cope with that sort of question.
JJ: I guess that makes me think 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 have it, and it makes it very difficult to think about making a fundamental change in that system. We don’t hear that there are economists who think: Actually, we should cancel student debt; that would be a great way to juice the economy.
RW: Absolutely, yes.
JJ: It’s not even presented as, like, an argument.
Shanghai, People’s Republic of China
RW: No, you know, it’s always struck me as bizarre, even if you are a great lover of capitalism, our system, and you just think it’s the greatest thing since sliced bread. Even if you’re like that, if that’s your point of view, the fact is that places, like, I don’t know, let’s pick one: the People’s Republic of China—for the last 25 years, that economy, which is organized in ways that are different from the one we have here in the United States, that People’s Republic of China has achieved the most rapid economic transformation from poor country to superpower economically, that we have ever seen in the history of the human race. OK…. That alone would mean we ought to be exploring, in our classrooms, in our media: What’s that about? How did they accomplish that? That’s something that most of the world’s people dream of, and so it’s an important 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, any rational person would understand: Of course we have to look at that model of how you do economics, how you organize an economic system, to ask the logical, rational question: not necessarily that we must copy them, but are there things about what they do, and how they organize, that we might be able to learn 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 hint—and I’m trying to be polite here—a hint that we ought to explore.
And your question is exactly right, 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, certainly no sequence of courses (which is what you would need to do a proper exploration, over a year or two or three), there’s nothing of the sort. So that when I go and try to explain to people how that economy is different, I’m starting from scratch. They haven’t the faintest idea of what I’m talking about, and worse than that, they don’t know, in that they have no sense in their heads that there’s anything there they ought to have been taught, they ought to have learned, as just being a citizen and making rational decisions.
Another way to put it: We have 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, can be a family, can be a partnership. But most of the business in America is done by an owner that’s called a “corporation.” It has shareholders, the shareholders elect a board of directors, usually 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 interesting way of organizing business. 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 illustrate, in a sense, the question you’ve asked: This is an extremely undemocratic arrangement. What do I mean? Well, the number of people that make all the key decisions in American corporations, and by that I mean deciding what to produce, deciding how, deciding what technology to use, deciding the physical geographic location—will it be produced in Cincinnati or in Shanghai, etc.—and finally, what to do with the profits that the labor of all the people working there have helped to produce? All of those key decisions, that shape the lives of everybody involved in the company, and indeed everybody in the larger community, are made by tiny groups of individuals, the major shareholders, 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, 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, as we say we do, if we insist on some sort of accountability of the political leaders who make decisions that impact us, why in the world do we not make the same demand—democratic accountability—of the economic leaders in our society, the people who run these enormous corporations, that are the dominant economic factor in our society? And we don’t.
And the funny thing is that, of course, 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, because it’s very old; the one that’s being used much these days is “worker cooperative,” or “producer cooperative,” and the basic idea is, we would have a different economy if we organized our enterprises in an alternative way.
Namely, instead of hierarchical or vertical, with a tiny, unaccountable leadership at the top, we didn’t do that. We said, there is no leadership. Or to put it differently, if there is a leadership, it has to be elected by the workers in an enterprise; they have to have the right to recall these people. In other words, that the workers in a place have democratic rights in the workplace, that are roughly analogous to the politically democratic rights we have in the communities where we live. If you did that, all the decisions that we have lived with, and that have produced the economic problems with which this conversation began, would be different.
Americans seem to be surprised, at least in my experience, to discover that we have a highly unequal distribution of wealth and income. Why we’re surprised by that is, 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, why are you surprised that they who have 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, and they make them in their own interest, and the rest of us have to borrow money to send our kids to college.
In a democratically organized enterprise, where everybody in the enterprise has “one person, one vote,” they wouldn’t distribute it all equally; they would recognize some workers have greater skill or had to get 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, and 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 almost everybody says they do, well, 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 about it, 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, 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.