Economic Update: Capitalism and Its Self-Delusions

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In the first half of this week's show, Wolff evaluates US capitalism as a system of production and distribution of goods and services. In the second half, he compares the evaluation with the very different self-image of dominant voices within US capitalism. His conclusion: US capitalism has peaked and finding it very difficult to face its decline.

Transcript has been edited for clarity

Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, debts, incomes —our own; those of our children. I'm your host, Richard Wolff. Today's program is a little bit different; we are going to focus on one topic and sustain it all the way through: it is nothing less, and bear with me, than an evaluation of U.S. capitalism: where is it, how does it stack up, where is it going, what's the situation.

You know, a healthy economic system should be evaluated periodically —you know, like visiting your doctor, or having someone take a look at your automobile— but there is too much ideological noise in our culture to allow an evaluation —let alone a balanced one. So, we are going to depart from that practice and do one. We are going to do it right now, and we are going to do it throughout this half-hour program. So, let's begin.

An economic system is evaluated historically according to how well or not it serves the society in which the economic system functions. In other words, how well does an economy produce goods and services, on the one hand, and then distribute them to the people in the society, on the other. And what we are looking here to see is how the organization of production and distribution —producing goods and services and distributing them— how does it take care of a population's basic economic needs to be healthy, to be safe, to have enough food, clothing, and shelter, and transport to lead a decent, happy life. How well is the economy performing in that sense?

And here is what we know, both in the past and in the present. Some societies can produce only poorly, and don't distribute very well, either. An awful lot of countries in Asia, Africa, and Latin America these days are poor producers and poor distributors. And let me explain what I mean. By producing poorly... [For production], I use the GDP the Gross Domestic Product: how much goods in the goods and services area is being produced, and is it growing over time, that kind of question. How is production going? And for distribution, I use general indices —the most famous is called the Gini Coefficient; the importance here is just the idea: are people being taken care of? Or is the distribution going mostly to a tiny minority that's rich, and the vast majority of people look at the rich, but do not participate or enjoy in the rich? So: production, distribution.

Many of the countries of Asia, Africa, and Latin America, and for quite a while, have been relatively poor at producing goods and services, and relatively poor at distributing them. By "poor," I mean a very large portion of the output goes to a tiny portion of the population at the top. There are economies that are different. The United States, for example, is not poor at producing; it produces a great deal; its GDP is huge; its GDP has grown —it doesn't grow as fast as it used to; for many of the last decades it has grown 1% or 2% a year. (For comparison, the People's Republic of China, over the last 25 years, has grown 6% to 9%, three times, or more, what the United States has.) But the production here is high, and it is growing. But the United States is quite poor at distribution. We have a tiny minority of the people who get an enormously disproportionate share of both the income and the accumulated wealth. And then there are societies which are both good producers and good distributors. Northern Europe—the Scandinavian countries—are famous for that. They produce a good bit; their production grows year after year, pretty well; and they distribute—relative to the United States and most of the rest of the world— much more equally, [there's] much less of a gap between rich and poor. And then there are in-between: there are countries, yes, that do not produce very well but distribute quite equally. Eastern Europe comes to mind. They don't produce very well —they [haven't] grown for most of the last period very quickly, but they are much more equal, they are much more successful, on the distribution end.

Now, of course, if your distribution is unequal, then the assessment of how well your economic system is doing will be very different. If you are part of the very rich at the top, in a society that distributes very unequally, you can be easily persuaded that the economy is doing really well because you are. You are part of the part that is doing well, and you may be quite distant from the mass of the people who aren't. I would talk about that a lot if I had more time, because that's the situation of the United States. I'm an observer; I'm an economist; I pick up the Wall Street Journal, or the financial section of the New York Times —those kinds of outlets— and I read about "economic recovery" and "economic prosperity" and "a booming economy"; for them, everything looks really good and I understand why: these are the 10% of the people who own 80% of the shares of stock. If the stock market goes up, they are happy folks! But the vast majority of Americans own no stock, or no amount of stock that's appreciably part of their standard of living, so a booming stock market leaves them cold. And then, when I look at the rest of the economic indicators for the mass of people in the United States, it's not looking good at all, especially the last two or three years. Wow. What are we seeing? (And I'll come back to that.) But for the mass of the American people things are not so good.

So, a minority—if it's doing well; if the distribution in the country is poor because the vast bulk of what's produced goes to a small number— you are going to get them seeing the economy doing well, whereas the mass of the people are angry, bitter, divided, looking for scapegoats to explain why their situation isn't good, seeing their jobs as insecure, inadequately paying... Look at the numbers! Millions of Americans are quitting their jobs, unionization is spreading all over the country, to places it had not spread before, like Amazon warehouses or Starbucks coffee shops. We see the seething upset of the mass of people next to the minority who keeps telling themselves everything is going well. In other words, how you evaluate a capitalist system, like ours, will give you insights into its politics and into its culture, as well.

Okay. Let's take a look, then, at the United States, particularly, which is our interest, and let's talk about it. Well, we start with what I already mentioned: we have a big GDP —we produce a lot— but our growth over the last 30, 40, 50 years has been very—how should I say it?—"modest." The growth of goods and services —production— has gone up, on the average, 2% —1.5% - 2% per year. Now, compare that with the People's Republic of China: it's been going up 6% to 9% a year. That's why China has become the great "other" of the United States, economically speaking, right now, and many countries fall in various places between the absolutely remarkable economic growth of GDP in China relative to the—how shall I say it?— "modest" growth here in the United States. Distribution? There is a dramatic change. Before 1970, the United States was less unequal than most of the countries of Europe; that is, we distributed goods and services less unequally; we didn't give a huge share of our output to a tiny minority at the top, the way most European countries did. That was back in 1970, Today, all of that is different. We have outrun Europe. We are now the most unequally distributed advanced capitalist country, compared to the Europeans. We have, for most of the last half century, distributed the overwhelming bulk of output growth to a tiny fraction of our people, which is why we have mega billionaires —a thousand of them— of people in this country who are now—or nearly a thousand— billionaires, some with hundreds of billions of dollars. That's an [enormous] concentrate. And how has a society with modest economic production and really awful, unequal distribution, how has it done on that measuring rod I mentioned about public health, safety, food, clothing, shelter, and so forth?

Well, the record of the United States is not good—there is no other way to describe it. We were, as a society, unprepared for the COVID-19 pandemic; the reality was that the distribution meant we didn't distribute goods and services in order to have tests, and ventilators, and masks in vast quantities, located in secure, healthy warehouses all over this country to be available for the public to be safe in the event of a virus. We knew what viruses were; we had a horrible viral pandemic 100 years ago; we know that SARS and MERS have been here in recent years; we know what you have to do to contain a viral pandemic; we knew what we had to know, but we so badly distributed what we were capable of producing, that the companies that could have produced the ventilators, the masks, and so on didn't do so; they went and did something they found to be more profitable. We didn't manage our health and safety really well. The record of the United States measured, for example, in COVID deaths is one of the worst in the world. A rich country; [it] produces a lot; but, this is not a successful economic system. We then had a depression in 2020 and 2021 —I use that word advisedly.

More than half of the labor force in this country was unemployed, some for only a few weeks, some for the whole time; but half or more of your working class, of your labor force, unemployed is an economic disaster—we are not yet near feeling all the effects of it. That's not successful performance, either.

And now the last one, affecting us now. After two years of a horrible pandemic and a horrible depression, we are slapped in the face, as a people, with an inflation running out of control, costing all of us. It's too much. But it's most importantly a sign of a system that isn't doing well. We've come to the end of the first part of today's show and, as always, I want to say thank you to all of those of you whose support makes this show, and others we produce, possible. To learn more about the different ways you can support Democracy at Work and this program please go to, or visit our website: Please remember to subscribe to our YouTube channel, and I'd like to encourage you to share what you've learned here today with friends, and relatives, and coworkers. Please stay with us; we'll be right back to continue this evaluation of U.S. capitalism. Welcome back, friends, to the second half of Economic Update. This part of evaluating U.S. capitalism will not look in quite such general terms at what actually happened; that's what we just finished doing. What I want to do now is to look a little bit more closely at what it all means, and how Americans have tried to understand the economic system they are living within, and that, of course, has been shaped by where they fit with that system, what positions they do and do not occupy. And I want to alert you that the way people understand their situation varies all over the lot, and there are many, many examples of people going through a situation not understanding it very well having first this idea or that idea about what it all means.

So, let's begin. The United States capitalism, right now, confronts Russia and China as its two great adversaries. This is sort of interesting because it raises a question about the whole 20th century, the one behind us. Why? During that century, we were told, particularly after the Russian Revolution, back in 1917, that it was a century of the great struggle of capitalism versus socialism; —capitalism led by the United States; socialism led by the USSR, the Soviet Union. Well, there is no more socialism in the sense of the Soviet Union; it imploded and disappeared in 1989, which is 30 .... over 30 years ago. China is more capitalist today than at any point since its revolution in 1949; it has welcomed private capitalist enterprises to take an enormously important, large position in their society. In other words, Russia and China today are far less socialist than they've ever been, and yet the United States remains in an "enemy" situation with them, literally, as I speak, arming Ukrainians to fight against Russian military —I mean, that's a remarkable degree of confrontation. And the attack using sanctions against Russia begins in the early 1990s, literally months after there is no more socialism in control in Russia. So, it turns out that it really wasn't the great struggle between capitalism and socialism that characterized the 20th century. People told themselves that, but it was actually something else: it was the growth of American capitalism. The 20th century was the spectacular rise of the U.S. capitalist system to an absolutely dominant position at the end of the century. The year 2000 may go down in history as marking the peak (maybe 10 years earlier; maybe 10 years later —those things are never that precise). But if you look at the United States in 1900 and compare it to 2000, —a hundred years later— it went from a small capitalist country into a hegemonic, dominant, global capitalist country. The 20th century was the rise of U.S. capitalism. The fact that they thought it was a great struggle of capitalism versus socialism, and that we now can see that whatever it was, it wasn't that, because socialism is gone in Russia; it's much reduced in China, and the United States is, if anything, more of an "enemy" situation with those two countries than it ever was before. I want to look at another way that this experience of the rise of U.S. capitalism has been understood very differently.

From its beginnings in colonial U.S., when we were still a colony of Great Britain, the United States liked to think of itself —its leading intellectuals— as a kind of brave, new society, one developed here, in the Western Hemisphere, different from and breaking with Old Europe. We were a new democracy, defending ourselves against the threats to our new, young, vibrant democracy. That's the way people like to think. So we fought against the oppressor, George III, to become an independent country, the better to defend our new, young democracy. We fought against the indigenous people who lived in this continent in order to defend our young, vibrant democracy from all of those "savage" people. We waged a terrible civil war against slavery, a system that we were defending our young, vibrant capitalist democracy from. In World War I, we defended our young democracy from the old powers of Europe, Germany, above all; Austria —those old empires that we were new and different from. And then we defended ourselves again against the threat of German fascism and the Japanese expansion; we defended ... Notice? We are constantly defending ourselves! The government agency in charge of [military activity] around the world is called the Defense Department. —England called their thing the War Department; I'll leave it to you to think about which is more accurate. And then, after World War II, we defended ourselves, our democratic system, you know, from "Russia" and "China" and "socialism" and "communism"; that started way back after the Russian Revolution but no one took it quite all that seriously then. And now, in the 21st century, we are defending ourselves again. Against whom? Muslim terrorists. Ooh, that's good: we are defending democracy against them. And then against China. And then against Russia. And you know where else we are defending our democracy? Watch your headlines: we are defending it against bitter, angry Americans. Isn't that what we are being told? That January 6th of last year was a struggle to —yep— defend democracy against yet another threat, this one internal, associated with Donald Trump, white supremacy and, you know, all the rest.

Is the history of U.S. capitalism about the defense of democracy? Well, let me tell you why I don't think so. Democracy means —if it means anything— that if you are affected by a decision, you have the right to participate in it; you cannot be made subject to decisions over which you have no power or control. That would be an autocracy, or a dictatorship, or something like that. Democracy means we, the people, control the decisions we have to live with. And as I have said on this program countless times, American capitalism is not democratic. No capitalism is. Why not? Because that's the way it's organized: in every work place, every store, every office, every factory, with a tiny number of exceptions, we have a small group of people at the top —the owner, the manager, the CEO, the Board of Directors, whatever you call them— a tiny group who makes all the decisions. They can not only decide what we produce, what technology we use, where we sit, where the production occurs, and what's done with the output, but they can literally take our jobs away from us, and our income away from us; they have extraordinary power over us, and we don't have it over them —we don't elect them, we don't veto then, nothing. It is an undemocratic system, where you cross the threshold into your place of work. Capitalism is not about defending democracy, because we've never had democracy in our workplaces, and we have no movement among capitalists to bring it in —they fight every effort of a union to have some say for the workers, let alone to control the situation. Seven percent of our workers in the private sector are even in an union, and most unions don't have that power, either.

So, this is not a democratic system, and you can't really sustain an evaluation of U.S. capitalism with this fantasy of "defending democracy." That's not what it's been about. But what has it been about? Well, it's been about the evolution of capitalism as a system. Let's be honest: capitalism, which starts in England in the 17th century, really had a great run there, didn't it? It developed powers of production and economic growth, to power a navy, to power their military, and they became the British Empire. They ruled the world. As they loved to say, "The sun never sets on the British Empire"; we are everywhere. All right? Capitalism in a period of time, —lasting, I don't know, a century— brought Britain to its peak. And then capitalism, the system, moved on. The very profit-making capitalists in England moved production somewhere else: to America, to the rest of Europe, to Asia, to Africa, to Latin America. They moved. And the British Empire that had ridden the capitalist roller coaster up, rode it down to become the small, secondary country it is today. And that happened to the Netherlands before that; it happened in its own way to the feudal grandeur of France, which, when the capitalist revolution happened, couldn't sustain it. Why do you think the United States won't suffer exactly the same? My argument here is simple: we are going through the same. Starting in the 1870s, American capitalism did what British, Dutch, and other capitalisms had done before it:

it found ways to make money that involved leaving where it had been. You know, once upon a time, industry was in New England and the Midwest, here in America. And now it isn't, is it? And we call the Midwest "The Rust Belt." And those industries went to the South, and the Southwest, and California, and all of that. We know— inside our country. But the same thing happens internationally. We called it "globalization"; we shouldn't. We shouldn't have given it a new name because it's a very old process.

We peaked—our capitalism— and the world is now adjusting to the fact that the economic explosion of growth has moved. That's the meaning of that statistic that now I'm going to give you for the third time today: the United States, over the last 25 years, has grown at, roughly, 2% a year, and the People's Republic, at 6% to 9%. There it is. And we'd better understand that our position in the world has changed. And every event that happens —[like the] trade war with China, by Mr. Trump— goes nowhere. Russia and the Ukraine: whatever the momentary event is, its context, its frame, is a reorganization of the world to take account of how capitalism has moved on.

That's the real history, past and present, of the United States capitalist system. It explains what that system achieved: great wealth, great output, great political power; and it explains how that is fading away now, as it has everywhere else. Thank you very much for your attention today. I hope this kind of program is interesting enough for you to partner with us and share it, and I look forward, as always, to speaking with you again, next week.

Transcript by Mercedes Dollard.

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