[S11 E03] New
On this week's show, Professor Wolff explains where the government is respected and empowered, nations have effectively contained the Covid-19 pandemic. He gives examples including New Zealand, Taiwan, South Korea, Cuba, Vietnam, and China. Alternately, where the government is demonized, disrespected, distrusted, the pandemic has been devastating. Examples of this include the UK and the US. Wolff argues that a rational economy includes both less and more government-regulated private enterprises plus state-owned and operated enterprises according to which performs best to meet society's needs. No fundamentalist "either/or" arguments are justified. Finally, he says how private and government enterprises are internally organized - hierarchical or alternatively democratic worker-co-op - is equally important.
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 and those of our children. I'm your host, Richard Wolff.
I want to devote today's program to one of the profound economics lessons that we can draw already from the efforts, successful and unsuccessful, to fight the COVID-19 pandemic around the world. Let me summarize what that lesson is and then show you how it is taught to us.
The lesson has to do with the benefits and the costs of the different ways we've organized capitalist economies around the world. And the one difference that is most often debated as if it were the only, or the most important, one is the question of whether we're going to have the economy run by private enterprises — individuals and groups forming enterprises, owning and operating them as private property — or whether we're going to have the government come in to rule, regulate, control, and even in some cases run their own enterprises. The whole debate between private and state: private enterprise vs. state enterprise, free markets vs. government-regulated markets, and all of that. The COVID-19 pandemic teaches a lesson on that subject that is very important.
Now, let me begin. Capitalism has always, everywhere, involved both private and state enterprises. Even here in the United States, for example, we have the post office, we have Amtrak, we have the Tennessee Valley Authority, we have many cities that have their own government-run transportation systems, and so on. We have public enterprises as well as private ones. And likewise, we have markets that are relatively free of government intervention, regulations, and so on, and then we have enterprises that are governed by regulations. For example, the 50 states each have a utility commission which regulates public utilities — the electric companies, the gas companies, and so on. But other industries are not regulated and are left alone; they don't have commissions. The insurance business does have commissions governing them; other businesses don't. So you get that sense of a mixture.
But there has always been, alongside the mixture, a kind of wild fundamentalism. What do I mean? I mean people who don't want the mixture, who want it either one way or the other. Here in the United States, the dominant fundamentalism is the idea that we should have free enterprises, and private enterprises, and no government at all, or the minimum. I'm going to come back to that. In the Soviet Union, we had the other extreme. The government regulated and the government owned and operated, basically, most of the industry, leaving very little space — it was never zero, but little space — for private or free enterprise. The fundamentalism I'm also going to come back to because covid teaches about that.
So let me get into what the lessons are that covid taught us. First I want to start with the areas in the world where the fight against covid has been really quite successful, and talk to you about what was key to their success. In each of the cases I'm going to briefly summarize with you, you're going to see that the state played an absolutely crucial role. The government entered into the society with rules, regulations, of all kinds, to make sure that the fight against this virus was coordinated, that resources, public and private, were mobilized in an effective way to deal with it. For example, lockdowns of enterprises; lockdowns of entire cities; absolute rules governing masks, social distancing, and all the rest.
So where was it successful, and what can we say to explain it? Well, sometimes it was successful because a leader of a government had the prestige, had the reputation, and had the strength to make it all work. The best example I can think of is Jacinda Ardern in New Zealand. She really mobilized her government. She had become very popular, having won the election and really gotten through major crises in New Zealand. The state, under her leadership, was given a lot of authority, and she used it to get the state to mobilize the country against the disease, and they did it. And they did it very well.
Sometimes there's a cultural tradition that makes the state strong, and has it with a powerful reputation. I would give as examples both Taiwan and South Korea, where the government has played a crucial role in their economic life and growth for decades, and therefore is in a position to mobilize resources. And they did it very successfully.
Sometimes it's a society in which the state has already taken a major economic power role, and it now used it to fight the virus. Cuba and Vietnam are excellent examples of that state-fostered success.
And then sometimes the government has been so successful in recent decades in lifting up the standard of living, in mobilizing for economic growth, that they took the prestige that comes from successful growth and used it to fight the virus. And by far the most important example of that is the People's Republic of China with its extraordinary state-mobilized economic growth. They've been the fastest growing economy in the world for over 25 years. It's an extraordinary achievement, rarely equaled in human history. And they're able to mobilize their strength, and the prestige that comes from such an achievement, to lock down a city of many millions, Wuhan, where the virus is thought to have started, and to contain that virus. So a country with four times the population of the United States has a small fraction of the number of cases and deaths of the United States.
In each of these examples, and for somewhat different reasons, the state was able to mobilize, focus, organize, and beat the virus. So now let me show you what happened in those countries where almost the opposite is the case. That is, where struggle against the virus has been very poorly undertaken, where preparations for the virus were poor. But even more terrible, containing the virus after it hit was also poor. I could also add now poor delivery of vaccines, but that's for another day. Let's focus on the failures of these societies to prepare for or contain the virus.
And the examples I'm going to give you, the two countries, are the United Kingdom and the United States, because they are the outstanding examples. And in both cases — let me drive home the lesson again — in both of these societies the state is not an institution of great reputation. It is not an institution of great prestige. It is not an institution given the authority and the power to really mobilize in a general way, for all kinds of things. It's not that they never had that. They did. Both Britain and the United States showed the ability of the government to control and mobilize in fighting World War Ⅱ — a stunning achievement. They were very good at that. Let's remember, the United States government took over the railroad system, took over the transportation system, initiated a rationing system to distribute consumer goods fairly. The government intervened economically in fighting the war in a dramatic example that it could do what it didn't do to fight this virus.
And what have we got? Well, we have here in the United States, as you all know, a clear reason. We have demonized the government in the United States. We have that fundamentalism that I talked about before. Private is good; government is bad. It's kind of the flip side of what happened in the 1930s and ‘40s, when the private sector was bad — it had brought us the Great Depression — and the government was good because that was the New Deal that got us out of the depression. Private bad, government good was followed by the pendulum swinging the other way: government bad, private good.
But if you demonize the government for decades, as we have in this country, as you blame it for everything that goes wrong and you exempt from blame the private sector, it means that when you have a crisis of the sort of this pandemic, you have immobilized. You've taken all the strength away from the government. It has low prestige. We even have a philosophy in this country called “libertarianism” that organizes into principles that the government is intrinsically a burden and a problem, and the private is always the better way to go. That's fundamentalism; that's not understanding when you need the one and when you need the other in a rational way of organizing to meet the real challenges you face.
So now let me take you through the examples of that. I'll start with Great Britain, the United Kingdom. The United Kingdom has a situation where the government is simply not trusted by the mass of people. Let's remember, the government organized that vote around Brexit, trying to convince people that the problems of their society, which come out of their capitalist economic system, were not the fault of the capitalist economic system. They were the fault of — you guessed it — foreigners, immigrants coming from Europe, and Europe altogether.
So the solution, these folks said, was to get away from the Europeans. And when they talked about the Europeans, they meant the European government. See the picture again? The government is bad. We're going to withdraw from Europe, and that way we won't be oppressed by that government over there. Because if there's one thing worse than a government, it's a foreign government. All government is bad; foreign governments are worse. So the British broke away.
This, of course, solved nothing. The last five years (because Brexit, the vote of Brexit, was back in 2016), the last five years have been a downward skid of the British economy, worse and worse, impacting mostly the working class in that society. So they are very angry at the government. They don't trust their government. They are bitter. They want this Brexit craziness over with. They're hoping it'll make it better. There's no evidence to suggest it will. It's a very bad situation.
But it's a conservative government that believes that getting away from the European government and having minimum government is the great way to go. It's the old laissez-faire idea: That government is best which governs least. You know what that does? It makes you uniquely incapacitated when it comes to dealing with a threat like a virus. They may have said it was like being in a war, but they did not act that way, and the British are paying a horrific price with a combination of the worst depression in centuries in England and a terrible covid experience.
Before I go on to the US example, we're going to make our usual break. We've come to the end of the first part of today's show. Before we move on, I want to encourage you to learn more about my latest book, The Sickness is the System: When Capitalism Fails to Save Us from Pandemic or Itself, at democracyatwork.info/books. It's a compilation of essays that aims to explain how and why capitalism is the sickness underlying all the systems. Thank you, of course, as always, to the Economic Update patrons who help make this show possible. If you would like to learn more about supporting this program, please go to patreon.com/economic update. And, as always, be sure to follow us on YouTube, Facebook, Twitter, and Instagram. Please stay with us; we'll be right back to continue.
Welcome back, friends, to the second half of today's Economic Update. This is a program designed to draw the lessons of the fight against COVID-19's pandemic, the success and the failure. We talked in the first half, when we concluded, about Britain, about the United Kingdom — its demonization of the state, its failure to uplift their economy, the attempt to distract the mass of people suffering from British capitalism's decline by blaming the Europeans, or immigrants, and the resulting poverty, if you like, of the government, of the state so that it could not, and it would not, fight in an appropriate way against this terrible threat of the COVID-19.
I'm going to turn now to the United States, which in a way is the paradigm case that I'm trying to make here. In the United States we have the following — not so much an economic decline. That was more the UK's experience — an economic decline, blamed by the conservatives on the government because the job of the conservatives in the UK and the US is always to exempt capitalism from the blame. Find something else to explain the suffering that the system imposes on the mass of people.
Here in the United States it's been more ideological. For the last 30, 40, 50 years, maybe longer, there has been a desperate effort in this country by the capitalist/business/employer class to get out from under their responsibility. So you have this remarkable experience in the United States that when people are fired by an employer, they get angry at the government. When people are thrown out of their house by a lender, a bank, they get angry at the government. There's a training in the United States. It starts early in your life, goes through all your schooling, all your media, that the danger, that the problem, that the evil, is the government, and that the private capitalist economy is simply like Santa Claus. It just brings presents and nothing else. This kind of attitude is, of course, wonderful for private enterprise. It gets them out from under the danger that the public enterprise — public rules, public regulations, and even public businesses — could be shaped, as is supposed to happen by universal suffrage, by the majority voting. The majority voting will get different results from what you'll get if you let the private capitalist businessman and -woman run the show.
And so they've worked really hard, the private businessmen and -women, to minimize the government, to impoverish the government, to cut back on the taxes made available to the government, and to demonize the government as the source of everything that goes wrong, and the private sector as the source of everything that goes right. Whatever benefits the private sector gets from that, what you have done effectively is to hobble the government. It can't step in and deal with the COVID-19 crisis. Again, let me remind you, it did do that in the Second World War. But not surprisingly, the Second World War came right after the Great Depression, when the government came in massively to clean up the enormous mess that had been made economically by private enterprise and its dominance in the first decades of the 20th century.
So what we have is a government that's hobbled in the United States, as it was in England, and as it still is. Hobbled by its bad reputation, it's low prestige, it's limited funds. How is it going to enter? And there’s the ideological notion that it isn't supposed to. Private enterprise doesn't want it. So what did we have in the United States? We had resistance: No, don't lock down.
The Chinese had shown in Wuhan what a massive, strict lockdown could do. The merchants in Wuhan could not countermand what the government ordered. They had to shut down. The government helped all these enterprises get through this period, and the Chinese are the only economy growing in the year 2020. None of the other major economies has economic growth; they all have economic shrinkage. The Chinese proved that the strict lockdown turned out to enable them to open up much sooner than we have been able to do. They've been open for months, their businesses to recover. That's why they're growing.
It turned out that it was shortsighted of businesses to oppose lockdown. That's the job of a powerful government, to sometimes do what individual businesses won't do but should do. And they need the government to come in and do it. That's what happened in World War Ⅱ. That's why we were able to succeed there, and that's why we are unable to succeed now. Same thing with wearing a mask. Same thing with social distancing. The government says, the government does, but you have hobbled the government with its bad prestige, with its demonization. So people feel no, no, no— I don't have to. I shouldn't; they shouldn't. It's a whole different mentality. And it has cost Americans millions of cases and hundreds of thousands of dead people. This is a very serious business.
Let me give you a couple of examples of how far this has gone, so you get a feeling, I hope, for the seriousness of all of this. If you make people suffer economically over a long period of time — and the American working class has suffered. The real wages have not gone up, barely at all, for 40 years. Meanwhile, the productivity, the amount of profits that workers generate for their employers, has gone steadily up. The line goes up for producing profit; the line of wages is flat. That's why we have such stunning inequality in the United States, between the class that are employers — that's your one to five percent — and everybody else, to varying degrees. It's been a great 40 years for the top, and it's been at the expense of all the rest of us, which is agitating our society.
But imagine if, with all of the suffering — that you can't deliver the American dream to yourself and your family, that you can't pay for the education you know is your way up, that you can't cover your debts at the end of the month, that you're even having hunger problems, worrying about eviction, as we know tens of millions are — where are you going to put your upset, your anger, your rage? Well, if you live in a society that has demonized the government, you put it there. You blame the government.
So now you can begin to see bizarre behavior. If you don't trust the government, if you don't let them do what they have to do when you're facing an existential threat to your society, you get bizarre behavior. People who won't wear a mask telling you it's because they want their personal freedom. Whoa! Let's take a step back. That's like a person saying to you, you know, when I go driving through an intersection with my car, I'm not going to let the government tell me when I can go and when I can't. What's this with the red lights and the green lights? I am a free American, and I will drive as I want, when I want, in my car. That's a recipe for lots of people being hurt and killed in traffic accidents. That's why we have the rule.
What about a person who says (and we have lots of those), I'm not going to pay taxes? The government is taking away my freedom to decide how I'm going to spend my money, by taking a chunk of it away. Yeah, but, uh, you know when you go drive down the road? That road? That's what’s paid for by your taxes. You can't have one without the other, unless you believe in magic, which is kind of what they're heading their way to.
You know, I have been a teacher of economics most of my life, and I explain to people what it is we get when we give up some of our personal freedom. We get to know it's safe to go through a traffic light. We get to know that there is a traffic light, put up there by our taxes. And you know what else we get? We get serious protection against a pandemic. And if we don't allow the government to do these things, we won't have it.
Okay, what are the conclusions, then? Here they are, and they are as important as anything I can tell you. First, a rational, non-fundamentalist society would reasonably say the following: Some things in an economy are probably best done by a private enterprise run by individuals in a community with minimum need for regulation or rules. Some.
Then there are some things that are probably better done with some rules applied. You know, like food, to make sure it's healthy and clean and safe. And medicine, to make sure of the same. We don't want that to be just governed by profit. That could lead to shortcuts that are scary. And you know we understand that somewhere. We have an FDA, and we have all those other agencies that have had to step up.
And then there are some things that the government should do as its own activity. There should be government enterprises charged with doing what they do best. And that can be figured out by trial and error, and that can be figured out by thinking.
But there's no need to short-circuit the difficult question of how to organize by having a fundamentalist mentality that either the one is all good, or the other one is all bad, or both of them. A rational society wouldn't do that, shouldn't do that. And the covid disasters in the UK and the US should teach that lesson.
And then there's a further lesson. All of our economic problems cannot be reduced to having more or less government. Because you know something? If you have a little more government or a little less government relative to private enterprises, here's what you're not dealing with: how the enterprise — whether it's private or government — is organized. Are a few people telling everybody else what to do? That's what we have now. We have it in the West with capitalism. We have it in the East with whatever you want to call the Chinese model. There, it's state officials that have a big role to play. Here in the United States, it's private, but is it really different? Not much. In those societies, they have a national economic plan. Inside the big megacorporations, they have a corporate economic plan. And the mass of people do what they're told.
Turns out, one of the problems of modern society is that. It's not going to be solved by more or less government, more or less private. It's going to be solved by changing how the workplace is organized, whether it's private or state. You know, here's a metaphor, parallel. If you're obese and you get told, well, you know, here's the kinds of exercises you should do. There's yoga, and then there's exercise in the gym, and then there's sports. And then you have a debate between those who want yoga and those . . . . Stop! someone says. Besides the debate over what way to exercise your way out of obesity, there's this other issue you ought to pay attention to. It's called diet, and what you take in. That's part of it. We know that Coca-Cola and other companies want us to focus on exercise because if we focus on diet, we won't buy the Cokes. But we're not subject to that. We're rational human beings.
And we ought to be able to realize we also have to change the way business is organized. If the people themselves, in all enterprises, state and private, got together, you know something? They would distribute covid tests to themselves. They would protect themselves. They would have demanded that the government play the role it ought to play to manage this social issue. The problems of this country are not reducible to more or less state or private. That's a way to focus people away from something else that needs change — namely the organization inside the workplace, in terms of who makes the decisions and how the place is run. That, too, is an enormously important lesson from what the failures to cope with covid have meant in the societies that suffer them.
Thank you very much for your attention. I hope you found this of some use. I want to thank you all. And I say to you, as I always do, that I look forward to speaking with you again next week.
Transcript by Marilou Baughman
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Showing 2 comments
To the contrary, I believe it was WWII that brought the U.S. out of economic depression. However that success was fostered by record setting (at the time) debt-to-gdp levels on the order of 115%. And to the victors of war went the spoils. The U.S. enjoyed that “might makes right” advantage for the next 20-30 years by exploiting other nations natural resources— by dictate. But that came at a price that took time to unravel. The beginning of the end, as it were, came when Ronald Regan took office in 1980, deregulation ruled, and our national debt shot from $1T to now over $28T. We have pasted over our fiscal insolvency with ever larger amounts of fiat currency being printed and are now facing debt-to-gdp ratio’s (depending on what propaganda source you quote) north of 130%. The emperor clearly has no clothes. This is why we failed to deal with the pandemic in a rational and successful manner. It’s that simple.
This is also why the social democrats are now having their way with their communist-like agenda. Its communist-like because its not really communal gain. Global elite capitalists (central bankers) are taking those collective resources for their own with the help of bought government officials. If our government were, indeed, not harnessed with such insurmountable debt and insolvent then it might make sense to move toward a re-incarnated New Deal. But alas, the government is bust. I would go so far as to say the U.S. is being take over by corporate raiders and being pillaged for whatever they can squeeze from the American taxpayer in terms of paying interest on that big pile of debt. Right now it is almost $1/2 T annually. Not a bad return for printing a bunch of funny money.