Economic Update: Capitalism in Denial

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[S9 E35]

The first half of this week’s episode of Economic Update features a discussion by Professor Wolff on the parallels of declining capitalism in the UK and the U.S. and how the denials of the systemic problems inherent with capitalism are making the economic situations in both countries profoundly worse.

In the second half of this week’s show, Professor Wolff presents two longer segments on (1) the political economy of immigration, and (2) why the basic problem of Central and South America is 2-3 centuries of capitalism producing and reproducing extreme inequality, staggering poverty, and corrupt government elites. That is the crucial context for the Cuban and Venezuelan efforts, however imperfect and against U.S. opposition, to break out of capitalism.

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Prof. Wolff's latest book "Understanding Marxism"

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Transcript has been edited for clarity

Welcome, friends, to another edition of Economic Update, a weekly program that you're quite familiar with by now, and you're also familiar with me. I'm your host, Richard Wolff. I want to talk today in the beginning of our program about two parallel economic developments, one in the United Kingdom, Britain, and the other one here, in the United States, because they really are quite similar, which is probably not surprising considering they were all both once part of the same British Empire, now long gone

Let's start with the United Kingdom. They suffered the great, global, capitalist crash in 2008 as badly as any country did. A little bit differently, they followed it with a very harsh austerity. They had bailed out the big banks and corporations. They had borrowed huge amounts of money. The government had to bail them out, and then immediately having bailed out the companies that actually brought them the crash, they turned to the mass of the British people and said, Well, we borrowed so much money. We have to pay it back. We can't afford the services we provide to you. And they cut back the services, and they laid off employees. Wages declined in Britain more severely than they did elsewhere in the last ten years since the crash. It got so bad for the British people, they did something extraordinary; namely, they decided that the fault was not the capitalism that failed to work for them, but rather the fact that Britain was part of Europe. So they had the Brexit vote, where they voted to divorce themselves from Europe. That genius idea was the Conservative Party doing its part to focus people not on the capitalist system that was screwing them, but on the Europeans who weren't. And so they are now separating from Europe, which is causing them even more economic problems. All of this is managed by a ruling Conservative Party led by Mr. Cameron, at first who caused the Brexit vote, then fumbled and bumbled by Teresa May and now in the hands of Britain's own Trump, Mr. Boris Johnson, who is threatening to take Britain out in October, and God knows what will happen.

This is a sad story. It is a story of capitalism's decline in England and the inability of the people who lead it to face that reality and try to cope with it, but instead to engage in a real program of denial, blaming immigrants—how popular these days—and Europeans. How nice to blame foreigners. Notice immigrants and foreigners are the problem, and you rail against them, and you leave them, and you expel them, and you imagine that this is gonna solve the problem of a declining capitalism. The tragedy of it is that the decline is only getting worse, and the British people, deep in their souls know it, and they're gonna have to make big changes or they're gonna go down with it.

Now let's shift to the United States, and you're going to see, if you haven't already, that the story is quite similar. I'll focus on Mr. Trump and the Federal Reserve. Here's the problem in the United States: We have a capitalist system, and everywhere that capitalism has existed as an economic system in a society, the same truth has shown itself over and over again. Every four to seven years, this capitalism has an economic meltdown. It's called a recession, a depression, a downturn, a meltdown—the words are endless because the repetition is endless. And we're now about nine years from the last one, 2009 and [20]10, which means the averages are catching up to us, and we're gonna revert to another recession. Everybody in the financial world knows that and knows that it's only a question of when, no longer a question of whether, and now here comes the problem for Mr. Trump, which is parallel to the problem for the Conservatives in the UK who are Mr. Trump's parallel. Here's the problem: Mr. Trump is running for re-election (just as he has been doing since the day he was first elected) and having to say that the economy is great.

Well, it isn't because it's a capitalist economy about to have a nasty recession, and usually when you have had a recession postponed, the postponement makes it worse—you know, like having an illness that you don't attend to gets worse if you don't attend to it. Well, capitalism has a lot of parallels with illnesses. So Mr. Trump goes around saying it's wonderful, but the reality is (as his economic advisors know) that a recession is coming. This scares Mr. Trump. It threatens his reelection because if that downturn we all know is coming because of capitalism; if that downturn hits in 2019 or even if it hits in the first part of 2020, it's going to hurt millions of Americans (they always do, these downturns), and those people are not gonna be happy with Mr. Trump. And whoever runs against him will say, Hey, Mr. Trump, it's the economy, stupid! (like earlier candidates have done in the same situation). So what is Mr. Trump doing? Well, he's trying to blame the economic troubles on somebody else, and he's a specialist (just like Mr. Johnson is in England). He blames (you guessed it!) immigrants, why not? And foreigners, why not? The Chinese, you see, have been cheating us, and the Mexicans and the Canadians and the Europeans—gee! the whole world has been just taking it out on the good old victim United States. It's a picture no other part of the world recognizes, but it sells in the US, or at least Mr. Trump hopes so. So he's gonna blame them, but that's not enough because this is a doozy that's coming. So he's decided to blame the Federal Reserve. You see, they should cut interest rates. By yelling about the Federal Reserve, he's already showing where the blame he hopes will go for the economic troubles—not to him, not to his policy, not to his carrying out what capitalism wants while blaming immigrants and foreigners—no, no! He can now also blame the Federal Reserve. It didn't cut interest rates. And the second reason he wants that to happen is if you cut interest rates, you make it cheaper for people to borrow. Maybe he hopes he crosses his fingers, or whatever it is that he crosses, and he hopes that maybe with lower interest rates, people will borrow more, businesses will borrow more, and maybe the economy, the downturn, will be delayed a few months, just long enough to get him to slide back into office in November of 2020.

That's what's going on. Capitalism is, in fact, in trouble in the United States, as the extreme inequality makes evident every day, as the turmoil—everything from opioid crisis to mass shootings gives you ample evidence. What is being done? Well, in the US, as in the UK, next to nothing. Instead, we engage in denial, blaming scapegoats, wherever we can find them: immigrants, foreign trading partners, the Federal Reserve, anything but the system. Because Mr. Trump, like Mr. Johnson, are loyal servants of the status quo. Don't blame the system; don't change the system; that's the iron rule governing them. You can say whatever you want, as long as you protect what puts you in office and what keeps you in office. That's the harsh reality, but the irony of it all is that the capitalism they're protecting keeps deteriorating because they're not facing what the problems are and what the changes needed to fix it are all about, and that can only go so far. Stories of decline, of societies, coupled with blindness on the part of the people who lead those societies, that always ends badly. And here's the irony that history should have shown to both the UK and the US. They were both parts of something once called the great British Empire, upon which it was said the sun never sets because it's everywhere.) Well, guess what? The people who led it lost it. It's gone, never to return because they didn't face the realities of what it meant, and that sad story is being recapitulated right now in these two countries who pretend, and hope everybody else does, that what I just described is not going on and that will end badly too. We've come to the end of the first part of this program. Please stay with us. I think you'll find the second part interesting and valuable as well.


Welcome back, friends, to the second half of today's Economic Update. Before jumping in to the two big topics I want to talk to you about today, one of which is the political economy of immigration and the other one is what's going on in Latin America, with particular reference to Venezuela. Before doing that, I want to remind you that it is a very important support for us to have YouTube subscribers. If you have not yet subscribed to our YouTube channel, Democracy at Work, please do so. It helps us enormously, and it's a simple click for you to do. And secondly, I want to invite you to make use of our websites, Democracy at Work (all one word: democracyatwork.info) and our RDWolff.com. There you can communicate with us, sign up to follow us on Facebook, Twitter, and Instagram. And, finally, as always, a strong thank you to the support of our Patreon audience. We value your support and your interest. It is an important encouragement for all that we do.

So let me begin with the economics of immigration, a topic that seems to be lost in all of the hoopla around the Trump administration's behavior at our border. Immigration happens by and large because employers want it. They often are recruiting directly and indirectly around the world to bring workers here. Why? The basic reason is it's profitable, which is why companies do most of the things they do in a capitalist system. So they bring immigrants—sometimes educated immigrants, sometimes not so well-educated immigrants—because they're cheaper to employ than their native American counterparts. And now let's watch how this plays out.

First, the Democrats. The Democrats reward, support the employers in bringing in cheap immigrants by reading to them the imprint on the Statue of Liberty about how we, as a nation, welcomed the poor, the tired, the hungry masses huddled around the world who want to come here. And that's how the Democrats help the employers get the cheaper labor. The Republican Party supports the capitalist employer in a different way. It works real hard to turn the native workers, watching the cheaper immigrants come in, turns the native worker against them, sees the problem as the poor immigrant rather than the employer profiting off bringing that immigrant here. If the native upset and anger at the immigrant community moving into the school, moving into the neighborhood, moving into the jobs, bringing a different language and culture—if that boils over, then the two parties play a different role.

The Democrats wave their scolding finger first at the native Americans for being hostile to the immigrant, and secondly, to the GOP, the Republicans, for a kind of racist support of all of this. The Republicans answer in again helping the employer by saying all the Democrats only really support immigrants because they want their votes. While all this bickering between Republicans and Democrats goes on, the employers are laughing all the way to the bank. They are getting the extra profits from the immigrants. They are crowding them into housing for which they overcharge the rentals. You get the picture. And if it all begins to boil over to the point where someone like Trump comes in and builds an entire career around this kind of stuff (battling and yelling and accusing and blaming)! If this actually works to stop immigration, what will the employers do? They’ll do what they have always done when they run out of cheap immigrants. Some of them will move to where the immigrants came from, to hire them there and pay them the low wages over there, so that Americans will be wondering where the jobs went. And if that isn't feasible, then the employer will replace native workers (who are expensive) with machines and automate.

The system is the problem. That's the problem, that's what has to be faced. It isn't this or that detail. The immigrants are here because it pleased capitalism to bring them. It's profitable, and if the noise and trouble that ensues makes it unprofitable or difficult, then we will solve the problem, say the capitalists, another way. We’ll move the jobs over there or we’ll automate the job right out of existence. If you don't want to be on the wrong end of this problem and this process, capitalism is your difficulty, not poor immigrants. It makes as much sense beating them up as if you ran into the factory and beat up the machine that replaced you. “Grow up” is the answer we need in the face of a system that is designed for profit and not for the needs of people.

This is an old story, and if you ask me (which you are entitled to do), what should we do about immigration? Here's a simple, two-part answer. Number one, every person who wants a job in the United States ought to be given the right to have one. A decent economic system finds out how to match the individual interests and passions and skills and enjoyments of individuals with what is needed in society. People are happy if they make a contribution to society, and society is better off if it can find and harness the creativity that varies from one individual to another. Either you do that well and you succeed as a society, or you don't. Currently, we don't. And if you did that, if everybody had a job, then you could have a proper democratic decision. There are people who would like to join us to bring us the benefits of different cultures, different cuisines, different dresses. There are also people who need a better life, just as our own forefathers and foremothers did. And let's have a democratic decision whether we can find a place in our economy, as in our hearts, for people who need help. Many of us are devotees of religions that tell us that's what God wants us to do. It's remarkable how few of us seem to be listening.

Let me turn now to the second major topic for today's conversation. It has to do with Venezuela, but really, the problem of Venezuela has to be put into a context. Venezuela is one of 20 countries in Latin America, Central America, South America, whatever you want to call it. Those countries have been part of the world for a long time. That means for the last two three hundred years, they've been part of a global capitalist system. They were never colonies, a few of them were, but most of them were not colonies. They had their independence once they broke away from Spain and Portugal, which were the major European countries that did try to colonize them and did colonize them early on, but they became independent countries. Their economies were capitalist; they were private enterprises by and large. They had markets as the institutions through which people bought and sold their ability to work and there buy the products that their work helped to produce, etc. Free enterprises, private enterprises, markets: the accoutrements of capitalism. The basic relationship in their production systems was the relationship of employer to employee. The employers were a small minority; the employees were a vast majority. And this was the way the economy was organized, which is why it deserves the name capitalist for the last two or three hundred years. There have been very few exceptions. The only exceptions right now that deserve the name are Cuba and Venezuela.

What can we say about capitalism and South America? Well, the answer is very obvious. In every country, there is a small minority of very rich people, and I'm talking Mexico to Chile and everything in between. A small minority of very rich people and a vast majority of extraordinarily poor people. If you go to a major city in Brazil, South America's largest country, you will be taken, if you dare—I've done this in Sao Paulo—you'll be taken, if you dare, by a host, if the host dares, to the edges of this city where the vast majority of the city's residents live. Those areas in Brazil are called favelas. They are some of the worst slums on this planet. Every major city in Latin America, in South America, has huge populations of desperately poor people, people who don't really have homes or houses. They live in shacks of corrugated metal and cardboard, where there's no real sewage and no real running water, except on a few occasions when they all have to compete. The conditions are abominable, and they have been that way for the last two centuries. Capitalism develops unevenly, and one of the most glaring unevennesses are all over Latin America: Chile, Peru, Ecuador, Mexico, Honduras—it never stops.

Well, what do you say about this? Well, occasionally, in every one of these countries, a revolution breaks out, which should surprise no one because these conditions for the masses of people are horrific, not just in Cuba and Venezuela. In 1954, the people of Guatemala had a revolution. They wanted to
take over the land and distribute it equally to undo the grotesque inequality that capitalism has reproduced for two centuries. But the United States got rid of the leader Jacobo Árbenz, and he disappeared. And I could give the story about virtually every other country. The United States has looked upon South America as its special area. We call that the Monroe Doctrine from back in the early 19th century when President Monroe declared that this was our area and the Europeans were to keep out. It was as if one big colony for the United States, which is how the United States has dealt with those parts of the world for pretty much the rest of the period until now.

So yes, in 1959, Cuba's turn. It had a revolution, and the interesting thing was for the first time the revolution was threatened by the United States—indeed, like always, the attempt was made to overthrow the Cuban Revolution. Yeah, yeah. It was 1961. Bay of Pigs. Look it up if you're not familiar with the history. But the new young leader in Cuba, a man named Fidel Castro, unlike the Jacobo Árbenz in Guatemala few years earlier, managed to survive, and his government managed to survive to the present day. In Venezuela, Hugo Chávez, and now his successor, Maduro, are trying; they're trying to overcome, to stop the horrific legacy of what capitalism has meant in Venezuela, a resource-rich country, oil, that has nonetheless the same pattern of a minority of very rich people, a majority of very poor people, and a small middle class in between, usually one dependent on employment from the very rich at the top. People have been critical both of Cuba and of Hugo Chávez, whom the United States, by the way, also tried to overthrow at the beginning, a botched effort that was the laughingstock of the world, if you know the story.

But here's the interesting point: Are there things that Cuba and Venezuela do that are worthy of criticism? Of course. Have they done things that we wouldn't want them to do, that a decent society shouldn't do? You betcha! They are not perfect. They are not the solution to the human problem, and they make mistakes—sometimes big ones—and they make people suffer. All true, all true. But you are no way going to undo two to three centuries of capitalist inequality deeply engrained in the consciousness of your people by making a social change that has no blemishes, has no failures, has no cruelties. That's not gonna happen. We might wish it, and I certainly do, and we might say it's important to point out the mistakes that the Cubans and the Venezuelans have made and are making. Fair enough. But once you understand the context, you will understand that the big problem facing Latin America is not Cuba and not Venezuela, neither of their regimes. They don't even have the history to justify it. The history is on the side of saying the big problem of the economic backwardness, inequality, and instability of Latin America. There the credit belongs where the credit is due. It's the capitalist system that has produced and reproduced their poverty, their misery, their inequality. If that isn't dealt with, you are going to have one revolution after another, as we have already seen. The future will be as the past has been, and will the United States each time be entering and trying to stop and control what in the end will win? The demand of people for an economic system that does not perform in the future as it has in the past. The overwhelming majority of people of in Latin America want out of a system that has brought them the kind of suffering, the kind of inequality that is in fact behind the migration of people north to the United States because the conditions where they are, are unbearable. That, too, is a product of a capitalist system brought to Latin America and South America by Europeans, left there, managed now by their own elites, their wealthy elites. This is not a sustainable situation, and finding fault with Cuba and Venezuela for how they have managed to get out of this situation is an inappropriate cheap shot that doesn't belong if you understand the economics of that part of the world.

I hope you have found these discussions, first of immigration and then of South America, up-to-date, topical, and a useful corrective to what is so often said in the mainstream media about these urgent problems that need our attention. Thank you, and I look forward to speaking with you again next week.


Transcript by Kate McGreevy

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Showing 1 comment

  • luke grossmiller
    commented 2019-09-21 22:03:50 -0400
    Love this episode. So nice to have a better understanding of what a free market is and rules by which it functions, and then comparing it to a family dinner distribution at Thanksgiving- makes it so clear! Thank you!

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