Economic Update: A Deepening Crisis of Capitalism

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This week on Economic Update, Prof. Wolff delivers updates on the IMF’s prediction of slowing global growth, Bank of England warnings on accumulation of sub-prime debt, Nordhaus Nobel prize and market ideology, Dutch unions and others against corporate tax evasion, and signs of labor militancy in Marriott strike and profit-sharing demands of steelworkers. 
In the second half of the show, Professor Wolff interviews Chris Hedges on his latest book: America: The Farewell Tour.

Chris Hedges is a columnist for TruthDig; he teaches at Princeton University in a program for incarcerated prisoners; he's a Pulitzer Prize winning journalist and a New York Times best selling author. His most recent work is called "America the Farewell."

Transcript has been edited for clarity. 

Welcome friends to another edition of Economic Update, the weekly program devoted to the economic dimensions of our lives—jobs, incomes, debts—those of our children, our own and those looming down the road.

I’m your host Richard Wolf. I’ve been a professor of economics all my adult life. And I put these updates together to give another perspective on what’s going on in the economy all around us and that we all depend on.

My first couple of updates today have to do with something that’s more and more in the news. And that is the upcoming economic downturn. That’s right. Capitalism is a fundamentally unstable economic system. On average, every 4 to 7 years, wherever capitalism has become the dominant economy of the last 250 years, we have an economic downturn, when typically millions of people are thrown out of work, large numbers of businesses dissolve, we go through a period of time of real suffering and poverty, and interrupted lives, interrupted educations, before we get back up again and to have it all happen again 4 to 7 years later.

Sometimes these downturns are short and shallow, other times they’re deep and last a long time. The famous ones—1929 and, again, 2008—were the kind that were long and deep. We are still working our way out of the crash of 2008. So that gave a particular poignancy last week when the International Monetary Fund issued a report that global economic growth is slowing dangerously. And one of the major reasons are the trade wars that were initiated by Mr. Trump and the Republican Party, and power as they imposed tariffs, first on the Mexicans and the Canadians, and demands for rewriting treaties, and then tariffs on steel and aluminum, and then on China, you know the story. It’s unfolding all the time. Turns out that these trade wars and tariffs are bad for economic growth around the world and are another contributing factor in the uncertainty of how to plan for the world that leads businesses not to invest, which in turn drives the economy down.

It’s interesting for me to point out not only to remind everyone of how unstable capitalism is, but to point out that this time the instability may be considerably worse because of what Mr. Trump and the Republicans are doing. In order to appear to their political base as though Mr. Trump is the tough guy, who’s redesigning the global economy to better serve the United States—America First. This theater is actually going to cost everybody including Americans. An economic slowdown already, and maybe, worst crash than usual any time soon.

And just to make sure you understand, this is not just me speaking. The largest bank in the United States, JPMorgan Chase, issued a report a couple of weeks ago, literally predicting that the next downturn here in the United States will happen early in the year 2020, that’s less than a year and a half from now. I don’t do predictions, I don’t believe in them, but it’s interesting that so certain is the bank, the largest bank in America, that they’re ready to make a prediction. Why did people accept an economic system that’s so unstable? That’s the real question.

As if to underscore the point, the Bank of England, which is the equivalent in Great Britain to what the Federal Reserve is here in the United States, issued another report last week, very worried about subprime debt. Here’s what they explained. Businesses have been borrowing money like crazy over the last 10 years. Why? Because in the aftermath of the crash of 2008, when the government of England, like America and many other countries, feared that the whole economy would collapse, interest rates were brought down near zero to make it easy for people to borrow and businesses to borrow in the hopes that that would stimulate the economy and prevent another great depression. So interest rates being brought down led every business—well-run, mediocrely-run, poorly-run—to see a solution to whatever problems they’ve encountered by borrowing, virtually, costless money. “The result is” says the Bank of England, “that if the economy turns down now and hurts a lot of businesses, they won’t be able to pay back the excess borrowing that they have undertaken because of the last crash.” In other words, the last crash led the Bank of England to bring interest rates down, which leads to an excess of borrowing, which sets up the next crash. Talk about an unstable system! Yeah, you have it, literally, showing its instability as it functions.

My next updates have to do with markets. Yes, markets. This institution, which we are supposed to believe, is either perfect or if not able to be perfected if only we take the right steps. The latest example of this was the winner of last week’s Nobel Prize, William Nordhaus—there were two winners, he shared it with another economist. I had known Mr. Nordhaus because he and I… our times at Yale University overlapped. And I once and twice did him a favor, when his course came to a short section on Marxian economics, he invited me to teach that, which I did to do him a favor.

Anyway, in response to his winning of the Nobel Prize, which he got by the way, for studying climate change, global warming, and how to solve this climate problem, which he took seriously. His solution, indeed, he said it was the only solution was a market solution. Raise the price of institutions, companies that pollute the air, basically. Well, I’ve always found this extraordinary, “Raise the price.” That means people who have to buy these things are going to be hurt. What an interesting way of solving a problem—hurting large numbers of people. Wouldn’t it be easier just to outlaw the practice?

Why is this playing around with markets and to tell us that the market solution is the only solution? That’s straight out wrong. Let me give you a couple of examples. A hundred years ago, one of the great horrors of capitalism was child labor. The practice of capitalists to lower the wages they had to pay to hire children as young as five and six years of age, pay them very little, and stick them in in place of adults, who would have had to be paid more. And of course, these children lost in terms of their schooling, which they lost, in terms of their childhood, which they lost. It was thought to be a horror. Now, of course, a market solution might have been to raise the wages that had to be paid to children, and there were some efforts to do that. But, thankfully, American families rose to the occasion and said, “No, no. No market solution. Cut! None of it! Make it a crime to hire children.” Guess what? Solve the problem. And it didn’t have to do it by a market, which would have been difficult and slow. Market solution is not advisable here.

Let me give you another example. The Dutch government has been trying very hard, together with the Dutch unions, to stop corporations from using the Netherlands—and the very special tax laws they have—to locate an office there, make their profits show up on their books in the Netherlands, even though they do business everywhere else in the world, because that way they can pay taxes in the Netherlands, which are low, rather than to have to pay taxes in the actual countries, where they do business. This is the scandal. Europeans have been pressing the Netherlands government to stop it, doing similar things with the Irish government that also does this. But I’m only struck by the fact that the market solution has been to let this kind of stuff go on, on the grounds that the corporation must be free in the market to do whatever it wants. Market solution? You must be kidding. This is tax evasion, using the market as an excuse just as it’s being used by folks like William Nordhaus to allow the process of dealing with climate change to go so slowly and to be costly to the people, who can least afford it, those at the bottom will have to pay the higher prices attached to the polluting items. And I’m also struck that, while the Netherlands government and the Netherlands union, and European governments are really squeezing on this tax evasion, the Trump administration, the GOP, the American government for years knowing that billions and billions of taxes are not paid on the road by American companies as, again, found it too complicated, too difficult, too small to do anything about it. Extraordinary. Really extraordinary.

And there’s another angle that’s worth mentioning. The market solution, suppose—and this is a problem for Mr. Nordhaus again—suppose politicians are for sale, suppose there’s a market and buying them, which we all know there is, and suppose those, who are richest, can buy the politicians best because that’s how market works, that’s how the market always works. If things are scarce the people with the most money bid up the price and get it. So the people with the most money get to politicians, who write the laws, that allow them to escape the taxes. That’s a market solution. The market determines whose politicians get into a position of power. Mr. Nordhaus doesn’t want the market to work there. He only wants the market to work where he’s interested in it. Okay. Then be honest and say that. Don’t say you like markets because they produce as many horrors as they produce positive outcomes. And an honest appraisal of them would always have to take that into account.

My final update for today is to remark for all of us that is an upsurge in labor militancy in the United States, something we haven’t been able to say for years. And I want to call out and recognize those workers that are no longer being passive and dorsal, not taking it, not being angry at politicians, who are not their first line of problem, but the business and capitalism, which is. And I want to give out two shout-outs—there could be many. Workers are moving across the board.

But my first shout-out is to the 8,000 workers at the Marriott hotel chain that are on strike in 23 cities across the United States as we make this program. The Marriott hotel chain, in case you’re not aware of it, runs over 6,500 hotels around the world under its own name Marriott, but also under the following names: Ritz-Carlton, Sheraton, and Renaissance. Those are all Marriott hotels. Marriott is a $50 billion-dollar corporation twice as large as the Hilton hotel chain, which many of you probably think of as the premier hotel chain. It is very important that this leader in the hotel industry has had to face 8,000 strikers led by the UNITE HERE union demanding the kinds of wages and working conditions that should have given to these workers years ago. This militancy is going to the point of strike is a very important turning point in the labor movement.

And so is the next example. This one is the United Steelworkers of America, and here is something particularly poignant I want to point out. When Trump levied the tariff on steel coming in from the rest of the world, he gave a tremendous boost to steel companies in the United States. They didn’t have to compete anymore with more efficient lower price steel coming from out of the country. That was blocked by having to pay a tariff. So the American steel companies—patriotic to the core—immediately raised the prices of their steel taking advantage of the protection of the tariffs. They didn’t do anything for their workers. And the workers are saying, “If you get a benefit from the government’s tariff, we want a share of the extra profits you got.” Very interesting. They demand a share of the profits they help to produce, more power to them. That’s a labor movement that’s becoming creative.

Well, folks, we’ve come to the end of the first half of today’s Economic Update. I want to remind you, please, to subscribe to us on our YouTube channel, follow us on Facebook, Twitter, Instagram, and be sure to check out our website democracyatwork.info. There you can find the variety of ways to make use of what we do and to work with us. And I especially want to thank the Patreon community for the support they provide, crucial to our growth and our survival. Thank you all. We will be right back

Welcome back, friends, to the second half of Economic Update.

It is my pleasure, once again, to welcome to Economic Update Chris Hedges. He hardly needs much of an introduction. You’ve all seen him on this program before and in countless other opportunities that you’ve had. But to remind those of you that may not know, Chris is a columnist for Truthdig. He teaches at the Princeton University in a program for incarcerated prisoners. He’s a Pulitzer Prize-winning journalist, and a New York Times best-selling author. His most recent work is called, in a very suggestive title, America: The Farewell Tour.

Wolff: Thank you, Chris, for joining me.

Hedges: Thanks, Rick.

Wolff: Okay, let’s talk a little bit about the book and then about some of the issues that you raised in the book. For me, what jumped out, when I first looked at your book, was a line, that appears more than once, that the United States seems to you to be a society that is—and I’ll use your word—unravelling. Tell us what you mean.

Hedges: Well, I think all the warning signs of a decayed society are palpable: the destruction of the physical infrastructure, the capture of power by an oligarchic elite, which has destroyed democratic institutions, a final military fiasco, which characterizes late Empire, which it did with the ancient Greeks, when they invaded Sicily, or when the British invaded Egypt over the nationalization of the Suez Canal and had to retreat in humiliation, the economic mismanagement, which is pushing us closer and closer towards another economic crash, this time around without a plan B—since they can’t lower interest rates anymore, they’re going to fabricate out of electronic ether another $26 trillion dollars—the loss of civil liberties: militarized police, 25% of the world’s prison population; and that sense of stagnation, despair, hopelessness, what the sociologist Émile Durkheim calls “enemy”, which expresses itself in diseases of despair: self-destructive pathologies, that are rippling across the American landscape, opioid addiction, gambling, suicides, sexual sadism, and hate groups. And as Durkheim points out, “Those who lust for the annihilation of others are driven by a yearning for self-annihilation.” So that this book is really a look at those pathologies because if we don’t rebuild those social bonds, if we don’t make it possible for people to engage in self-actualization to reach their potential, their goals, their desires—even in a limited way—then with that economic collapse, these pathologies will burst forth in even more frightening configurations than they already have. And I look at Trump as a result, as the symptom of a diseased society, not the disease itself.

Wolff: And would you say, using the old psychological term, that there’s a massive denial of everything you just said that goes with everything you just said?

Hedges: Yes.

Wolff: Because as for me, as I look around the society and live here, there is a kind of bizarre almost level of the denial that any of these things add up to what you’ve just said.

Hedges: Well, because it’s so bleak and you add climate change on top of that. The fact that we have a window now of probably a decade, at most, to radically reconfigure our relationship with the ecosystem, which we’re not doing. The reason climate scientists are so terrified of going above two degrees Celsius, our feedback loops. And they know what feedback loops do because they’ve studied it on planets like Venus, which once had water, and is now 800 degrees. At that point you’ve lost the polar ice caps, the oceans acidify, sea level rises, crops die. I mean, feedback loops essentially accelerate the deterioration in a way that there’s nothing you can do, there’s no control. And they’ve run mathematical studies, which range between a 70% die-off of the human species and complete extinction, and yet we’re not responding. We’re mesmerized by the vaudevillian reality show, which has replaced news, political discourse. And this is characteristic of a dying society as it was, for instance, in ancient Rome or the end of the Austro-Hungarian Empire. I mean, there is a kind of just checking-out, a kind of willful hedonism and infantilism almost, and inability, because the problems are so massive, to even acknowledge that they exist.

Wolff: And I think Trump in some way exemplifies, even in his personal style, a kind of willful disregard, almost with enjoyable, making fun of all of these problems as dismissing them in this blithe way. In your book, you also talk about people escaping or trying to escape. What do you mean by that? What do you see as signs of an effort to escape the very situation—even when you don’t admit it—you still try to escape it?

Hedges: Well, half of this country now effectively lives in poverty. Social mobility for the working class is all but non-existent. All of the democratic institutions have been reconfigured to consolidate both the wealth and the power of the corporate elite at our expense, as you know better than anyone. What did they do with this fabricated money? They bought back their own stock, or they gambled. I mean, the fracking industry, for instance, is a losing enterprise. It doesn’t make money, but its value is based on projected profit not real profit. Well, that’s exactly what we saw with the dot-com crisis. And they extract debt peonage on a beleaguered population, because the money has to be paid back, even though they got at 0% interest on that student loan debt $1.5 trillion, household debt, your credit card—you’re late on your credit card, it goes to 28%—that’s why they suppress wages although productivity since 1973 has increased by 77%, you still have a third of the workforce earning less than $12 dollars an hour, and that’s by design. So they’re oppressing a beleaguered working class in an effort to essentially pay off the money that they have been handed by the Fed, but it’s just, it’s an insane system… The New York Times had a story the other day that, I think, by next year we will be paying, was it $370 billion dollars a year in interest, and within 10 years, it’s $900 billion. It’s not a sustainable system. And yet, they are kind of use that phrase they always use about Mattis and “there are no adults in the room”, nobody is confronting any of these crises, which are impending. And I really, as I do in the book, look at the Christian right, and I wrote a book on a Christian right 10 years ago called American Fascists: The Christian Right and the War on America. I don’t use that term lightly, I’m a seminary graduate. But I look at them as our version of a fascistic movement, which has embraced that magical thinking: you know, the rapture, which isn’t in the Bible, the whole sort of heretical belief that if we give enough, buy enough prayer clause and give enough money to our megachurch and make our megachurch pastor a millionaire, Jesus will give us a Cadillac. It’s an order perversion of the Christian religion, and it’s been used to sacralize the worst elements of American imperialism, American capitalism, white supremacy, homophobia, islamophobia, and everything else. And it has perpetuated among tens of millions of our fellow citizens the kind of utter denial of fact and magical thinking that Trump exemplifies. And I often hear people say, “Well how can Trump build an alliance with the Christian right?” And having spent two years inside that machine, Trump embodies, you know, he has all of the characteristics that these narcissistic white male leaders of megachurches have, including preying on the despair quite effectively, in the case of the megachurches, of the congregants, in the case of his casinos, those who are in economic distress. And I would say the only difference—they’re all con artists—the only difference is that at least anecdotally, from what I can tell, the sexual proclivities of the megachurch pastors is probably little kinkier than Trump’s.

Wolff: About hate, the hate groups. They’re getting more and more numerous, in today’s New York Times, another story about it, interwoven with the Republican Party increasingly, apparently. Where does that fit in this proliferation, you mentioned it earlier, but this proliferation of groups that really want to use violence to enact a purifications ceremony of sorts here in the United States?

Hedges: We should first be clear that that’s always been within the DNA of American society that Richard Slotkin calls “regeneration through violence”. So it’s always been there. And white hate groups have always been there going all the way back to the slave patrols and the Clan, and the Baldwin–Felts and the Pinkertons. And they’ve always been part of the DNA of American society. And in times of societal distress or eventually probably economic collapse, these hate groups will be unleashed. I mean, Trump is already inciting these groups towards violence rhetorically.

Wolff: And during the campaign too.

Hedges: And he has done since. But we live now in a period of relative stability. With that stability gone, then these groups will be in essence unleashed. They’ll be given a kind of green light to attack the vulnerable. I mean, the whole idea that 11 or 12 million undocumented workers is responsible for the economic decline of the United States.

Wolff: You are already in crazy land.

Hedges: You are already in crazy land. Right. I mean, most of them are earning below… It doesn’t make any sense. But it works as you know. And I saw it in Yugoslavia. With the economic collapse of Yugoslavia, and then this rapacious and often buffoonish, Radovan Karadžić was every bit as buffoonish as Donald Trump. And so were the Nazis. I mean, Hitler could not even speak proper German. But these buffoons are dangerous. And they channel that rage, and it’s a legitimate rage in terms of betrayal, towards the elite, towards the vulnerable. And these groups are at the forefront of that. And the state wants that rage and wants that energy to be directed away from where it should be directed, which is at the elite ruling class that has mismanaged the nation.

Wolff: And the system that is decomposing on us. As we come towards the end of the program, I have to ask the question, how did you assess the Kavanaugh hearings: this whole spectacle that we had for several weeks around the Kavanaugh Supreme Court nomination?

Hedges: But that’s what it was—a spectacle. It was political theater. The outcome was utterly preordained. The fact, that Susan Collins (R-Maine) was struggling over whether Kavanaugh would revoke Roe v. Wade, is insane. The Christian Right has made it very clear that this is their guy and he’s on the Supreme Court, because he will revoke Roe v. Wade. He committed acts of perjury aside from the fact that he’s very likely a sexual predator, but none of it matters. So it was the farce of democratic process. Although Grassley (R-Iowa) like even ran, rushed out over even though decorum and the rules in place in the Senate. And I think it was a kind of public window into the utter dysfunction of American democratic institutions and the fact that all we have left is the facade of democracy. We don’t live in a democracy, there are no institutions left that can be called authentically democratic.

Wolff: In the time we have the left, where is it going? I know it’s difficult and no one can see the future and I don’t believe in predicate, but nonetheless, what’s your gut? Where is this that you so eloquently described?

Hedges: We know where it’s going vis-à-vis climate change. That’s not disputable.

Wolff: I meant the social dimension.

Hedges: Well, it’s unraveling. When you have a figure like Trump, look to the end of the Roman Empire with Caligula, Nero, Commodus. He actually reminds me of Commodus, who was not interested in governance, he was just a big show, and he dressed himself up and went to the arena and fixed fights, and that’s kind of like Trump. So but we know where it’s going. I mean, decay we have a kind of road map by looking at decaying societies. And they have very similar characteristics as Joseph Tainter has pointed out in The Collapse of Complex Societies including at the end the withdrawal by a hedonistic and irresponsible elite into the Forbidden City or something.

Wolff: So we’ve come to the end. Thank you so much, Chris. Thank you all for watching. And remember, we will continue this conversation on Patreon. And if you’re interested in following, please follow us on patreon.com/economicupdate. I look forward to speaking with you again next week.


Transcript by Aleh Haiko

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