Economic Update: Living in a Socialist Economy

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[S9 E20]

This week on Economic Update, Professor Wolff delivers updates on the college admissions scandal in the U.S., how lobbyists reflect and worsen inequality, North and South Carolina teachers’ strike for better education and how NDAs (non-disclosure agreements) reflect and worsen workplace inequalities across global capitalism. 

In the second half of the show, Professor Wolff interviews Victor Grossman, an American who lived and worked in socialist Germany across the entire history of the GDR.

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Victor Grossman, born Stephen Wechsler, a New York red-diaper baby of the 1930s, joined the Communist Party as a Harvard student. Fleeing the U.S. Army during the McCarthy Era, he swam the Danube River to the Soviet Zone of Austria and was sent to East Germany. There, he studied journalism and became a freelance writer and popular speaker. He was pardoned by the U.S. Army in 1994 and, in 2003, published an autobiography, Crossing the River: A Memoir of the American Left, the Cold War, and Life in East Germany ((U. of Mass.Press).  Victor Grossman will be visiting Washington, DC from May 15-May 18 on a national book tour of his latest book weighing problems of GDR socialism and modern capitalism entitled A Socialist Defector: From Harvard to Karl-Marx-Allee by Monthly Review press.


Transcript edited for clarity. 


RICHARD WOLFF: Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives—our debts, our incomes, our wages and how we think about all those things. I’m your host, Richard Wolff.

Well, today I want to begin with Warren Buffett, one of the richest people on this planet, who recently at a meeting of his Berkshire Hathaway corporation commented on the growing interest in socialism and the comparisons between socialism and capitalism. He avowed that he was a 100% capitalist, which came as an immense surprise to nobody. In addition, he answered a question with a remark I thought was extraordinary. “I am afraid capitalism will always hurt some people.” Well, you know, coming from a person who is never in the group “some people,” this was an extraordinary remark. Because if capitalism will always hurt some people, and if today a whopping majority of people feel hurt by capitalism, then even by Mr. Berkshire Hathaway—Mr. Buffett—even by his lights, maybe a question ought to be asked. He also boasted that he didn’t think socialism would come here in the next fifty to twenty to third years. That reminded me of President Trump, whose State of the Union message was that socialism would never come. All I can say is Mr. Buffett and Mr. Trump are part of a group. It’s the group of all those leaders, in all those countries just before they went socialist who said the same thing.

Let me turn now to the economic updates for today. The big one that several of you asked me to speak about is called the college admissions scandal. It turned out that a clever hustler named Rick Singer got an awful lot of people to give him an awful lot of money—we’re talking millions here—to arrange for their children to get into prestigious universities. He did this in a number of—I was about to say unorthodox ways, but that would be inaccurate. Let me tell you what he did. He bribed coaches to make up stories about how these young people were great athletes when they weren’t. He arranged for others to take tests for them because their performance would have gotten them no chance at all. He bribed folks for changing grades that weren’t so good. Caught up in this scandal were famous actresses, Lori Loughlin and Felicity Huffman. To make matters worse, some of the people who gave him huge amounts of money then took that money off of their income tax, for tax purposes, claiming it was a contribution to the school. You really have to admire their courage. One Chinese couple, in China, paid Singer 6.5 million dollars to get their daughter into Stanford University, where she is today.

Why am I bringing this up? Well, I want you to understand, if you don’t already, what inequality means and here’s a juicy example. It means people who can’t make it in others ways use their money to do what their brains, for example, don’t allow them to do. You can’t get your kid into school? Buy the way in. That’s what inequality does. Most people get away with all of that, because that’s how our system works. Occasionally it’s so gross, as in this scandal, that it gets out into the public awareness and we tell each other stories about how it shouldn’t be.

So let me add a story, a little different. I was a student at Harvard in my undergraduate life, and one of the things that surprised me was that there were so many in my dorms who didn’t want to be there, who weren’t happy there, who had no interest in education, who couldn’t do the work that was asked of them—not because they weren’t smart, but because they weren’t interested. And when I asked them, well, why are you here? They told me my parents bought my way in and there was no conversation—I had to do it. So the irony is even for many of the young people involved, this is not a happy outcome. But I want you to keep in mind that when people flash a college degree, a university degree, a Harvard degree, a USC degree, keep in mind what it really means. It’s a crapshoot. You may be getting someone who knows something, but you’re just as likely to get someone whose money is what you’re talking to.

Then there’s another example of inequality. It’s called lobbying. If you have a lot of money, you can hire a bunch of high-priced lawyers, accountants to work on the state legislators or the federal legislators to get the kind of law you want. And a story on May 1st in The New York Times epitomizes this and so I wanted to make sure you were all aware of it. It’s about a New Jersey lawyer named Kevin Sheehan. His firm had close ties to Democratic leaders who run the state of New Jersey. And they allowed him, several of him did, to write the actual words in the laws before they were passed. And he wrote in the words that helped the corporations that had hired him to be a lobbyist. How nice! Or to be an advisor, if he wasn’t an official, if he wasn’t an official lobbyist—how nice. And here’s what the New York Times’ research showed: the companies got a break on their taxes worth 260 million dollars. That’s money deprived of the state of New Jersey, unavailable therefore to maintain the schools, the hospitals, the roads, all the public services. How much did the state benefit for giving away 260 million in taxes? The New York Times calculated it: $155,000. Lost 260 million, gained $155,000. That’s what goes on every day, in Washington and in all fifty state capitals. The money talks and the more money, the louder it talks, and that’s how the laws get shaped. And that’s why there’s budget crunch at the state level and at the federal level. When those politicians tell you there’s no money to do the things you, your children, your neighbors need, that’s not true. The money is there, but it’s been given away to those with the biggest purse to pay the biggest bunch of lobbyists.

I want to take my hat off, in my next update, to the teachers of North and South Carolina, who have been conducting strikes against those two states’ bureaucracies. You know, the Deep South is not a place where you read about strikes too often. It’s a place that is hesitant to go that road. But it’s been too much for too long for the public school teachers of North and South Carolina, both of them around May Day staged major public strikes and actions saying that the children of the state have been neglected by no funding for the schools, inadequate funding for the teachers, who are among the lowest paid in the fifty states of the United States, nor did those teachers shy away from pointing the finger where it belongs—not really at the politicians, because they’re just puppets. The politicians are cutting the budgets of school systems around the country, because they don’t have the courage to tax rich people and corporations, which is where the money is, which is where the money has been accumulating and which have been buying those politicians’ silence, until and unless the teachers, like other working people, fight back. Hats off to the teachers of North and South Carolina.

My last economic update has to do with another story in the news that I want to speak with you about, because of the lessons it teaches. This has to do with NDA’s. What’s an NDA? Non-disclosure agreement. You know, that’s what President Trump arranged for a couple of women that he had relationships with to sign so that they wouldn’t go public with the sex he had with them. They signed NDA’s. So did a lot of the people caught up in the scandals around Hollywood producers, big-name TV personalities. It turns out that this is routine in America and in other countries. My attention, in fact, was won to this issue by a story from Australia, where they have put up a new government agency that is looking into NDA’s. They named a famous lawyer, Kate Jenkins, to lead this effort and she circulated a memo asking corporate leaders whether they were prepared now to open up their NDA’s so everybody would know that this was going on. She expected they would, because many of them had said this was a good idea. They mostly refused. She got six companies to give her access. The rest refused. Why? Because NDA’s are a way for wealthy people to buy their way out of being held accountable for what they do. You violate someone’s privacy, you abuse someone sexually and you are afraid that the victim may say something, so you say to the victim, “I’ll buy your silence—how much?” And then you negotiate the price. And, of course, there’s a threat. Because if the victim doesn’t agree, then you’re going to throw lawyers and public relations slime agains them—very scary. Most people sign. The BBC in London recently did a study and discovered that universities in that country, over just the last two years, paid out 110 million dollars in NDA agreements. In the United States, millions have been paid to just a few that caught the public eye—Mr. [O’Reilly] in the Fox News empire, Mr. Weinstein in Hollywood and so on. Wow.

It turns out that New York State has a law, but like so often the law is window-dressing. Here’s what the law says. You can’t have an NDA between and employer and an employee unless the employee agrees to request one. OK, so the employer—instead of saying, “Sign this or I’ll really hurt you,” he now says, “Ask for this or I’ll really hurt you.” You haven’t changed anything. You won’t, not with this reform or another, because this kind of abuse and behavior with its countless victims is a result of a working system, a job system, a workplace arrangement in which some people have power and a lot of money and other people don’t. The inequality of wealth and power built to our capitalist enterprise is an invitation that has been accepted by countless top executives—people above other people in the hierarchy of capitalist enterprises, abusing their economic position for whatever other needs they have and coercing those below them to accept the deal for money and silence. Is it ugly? You bet. But don’t think that this or that rule imposed by the company or by the government is going to get around the problem. It’s the system’s inequality that lies at the root of this behavior. If you re-organized enterprises, so that they were democratically organized with everybody with an equal voice, then you would see this behavior stop.

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Welcome back, friends, to the second half of today’s Economic Update. It is my pleasure to introduce a remarkable man, whom I’ve asked to joined with us, because he can tell us stories and realities we would not otherwise have access to. His name is Victor Grossman. He was born Stephen Wechsler, a New York red diaper baby of the 1930s. As a Harvard student, which is where he went to school, he joined the Communist Party. He also served in the U.S. Army and settled in East Germany at the end of the war. He became a freelance writer and a popular speaker in East Germany, where he has lived—in the city of Berlin—ever since.

In 2003, he published a book called Crossing The River: A Memoir of The American Left, The Cold War and Life in East Germany. He has recently published a new book, which is part of why I asked him to join us today. That book is called A Socialist Defector: From Harvard to Karl-Marx-Allee, which is a major street in Berlin. If you’re interested in some of the specifics and particulars of his remarkable life, take a look at this new book and it’ll give you many details.

Victor, welcome to the program—glad to have you.

VICTOR GROSSMAN: Thank you, thank you.

WOLFF: OK. I would guess my listeners and my viewers will want to know, as their first question, give us an idea why you made the decision as an American student, as an American GI to spend the rest of your life in East Germany. What was that about?

GROSSMAN: It wasn’t voluntary, really. It was because I had been active leftist at Harvard before, then and after, partly as a red diaper baby, and then I was drafted. I was lucky not to be sent to Korea, but to West Germany at that time, hoping that the army would not check up and find that I had been a leftist and had not admitted that when filling out a questionnaire. Because if they caught me that I had been lying, five years sentence was due—was possible. So when I found out that they did find out about my past, I saw five years, my god! And that’s when I decided in real panic to desert. And I did, in a very dramatic way. I deserted by crossing from the American zone of Austria to the Soviet zone, which meant swimming across the Danube river. And I managed that, really in panic but safely. As you see, I arrived safely.

WOLFF: So you’ve led the last several decades of your life in East Germany, in what was then the official name the German Democratic Republic—the DDR, as it was called there. Having lived there, having lived in that society, give us your sense of the strengths and weaknesses, what you think was an accomplishment we can learn from and what was something we need to learn to avoid. How would you put that together?

GROSSMAN: There were about four reasons why I felt close to the GDR, why I really felt myself a part of it. One basic reason was because right starting in 1945, under pressure from the Soviets who occupied it, they got rid of all of the war criminals who had been guilty of Hitler’s crimes in the war—that’s where these big industry banks and so forth, who had built Hitler up and profited from his war, they were all thrown out and that for me was, as a Jewish antifascist, especially important.

The second thing as that because East Germany, as opposed to West Germany, supported Allende in Chile, South African freedom movement, the anti-Franco movement in Spain, North Vietnam—these were things which were part of my upbringing, always for the underdog, and I supported it.

A third reason was because the GDR in its way, which was very complicated—that I would come to with the bad parts—but it was trying to establish a society where nobody was poor, where poverty was done away with, and it largely succeeded in this. In fact, one of the main things I think of when I go through the streets coming now to visit the States again, in all the years—thirty-eight years I lived there—I didn’t see one single person sleeping in a street or one single beggar.

And, to add to that, they succeeded with a certain basic tax that all medical expenses were covered, everything—including all prescriptions—you never paid a penny. And education the same, I went to college—my two sons went to college. We not only paid no tuition, you got a certain amount every month to cover basic expenses. Things like that. The same with maternal leave and childcare was free. These were good things that I liked.

As for the bad things, because of this, because they chased out all these big shots and huge economic things and because a lot of people never really appreciated this or some people took it for granted, after a while, that they didn’t pay—only a tenth of their pay for rent, for example—they were constantly under pressure from the West, constantly. And little East Germany, which was only a third of Germany, could never compete with rich West Germany, with all its modern commodities and its Marshall Plan money, etc. It could never compete. It was able to make sure that everybody had enough to get along, but an awful lot of goods were missing. Nice cars, even many fruits—bananas were short, for example. Many other commodities. And this put them at such a disadvantage that many people thought, gee, we want to go across and this forced or this meant a degree of repression, which was the basic negative part of East Germany.

WOLFF: Repression in terms of…? Give us a little sense of what that meant.

GROSSMAN: Well, there was no freedom of the press, for example. The press publications, all the media were basically directed by the central party. That means—there were variations… There were phases when a stricter and less strict, but by and large there was no freedom of the press. And also, people were not afraid of the Stasi and every word they said—this secret, state security—they talked freely in private terms, generally, but in public, at meetings and so forth, people were careful as to what they said. They might—they wouldn’t be thrown in jail, but they might not get a bonus. They might not get a promotion. They might not get this or that perk or advantage.

WOLFF: OK, let’s move forward. In 1989, 1990 the Soviet Union imploded on itself, Eastern Europe shifted and in Germany there was a reunification. The East and the West, which had been separate countries since the end of the Second World War, were reunited. Tell us what that meant for East Germany, to be reunited in one country. How has that changed Germans and Germany? What’s your sense of the significance of this reunification for Germany, then to become the dominant economy of Europe and all the other consequences.

GROSSMAN: Well, the positive side, which is very strong, is that families which had been divided were able to get together. East Germans were able to travel to Western countries, which had been difficult—very, very difficult. They could travel to the east, but not to the west—except pensioners could, but others were limited. So there was free travel and a huge, new array of modern commodities. Shops were full, the department stores and the supermarkets were full. This was a big advantage. And, of course, the pressure I spoke of in the media, they became much more—well, sensational. There was now advertising. We didn’t have advertising in East Germany before, basically.

But the disadvantage was that almost from the start, within the first two years the entire industry was destroyed. The entire industry of East Germany and most of the agriculture as well, which meant that millions were out of jobs. And not only that, but youth clubs were disbanded. Childcare became expensive. Medical care was still much better than it is here, in the United States, but it meant now that you had to pay for your glasses, you had to pay for hearing aids, you had to pay for prescriptions. So there were many disadvantages. And especially, you weren’t sure of a job. You didn’t know what was going to happen tomorrow. And you were willingly to work overtime or weekends just so that you wouldn’t be fired. This was one of the differences.

WOLFF: Here’s a question that two people asked me to ask you. What would you say, based on your life in a very different society, what are the things that the United States could learn from what East Germany did for those years that it was the German Democratic Republic?

GROSSMAN: Well, of course it should not learn from the repressive side. But then the little GDR was always under pressure for outside, that led to this repression—they were defending themselves. As I used to say, a besieged fortress is never very tolerant. But what they could learn is—I think that only when you get rid of these huge, huge millionaires and billionaires—you quoted one earlier—I think that they will never permit most of the people to have a free and decent life. I think it with every crisis it will get worse. It means that I think that they should learn that only by taking over production into the hands of the people who work on it—and with the experts, of course, who learn to do that—I think this is the only way to solve the dangers: ecological, the danger of atomic war, this terrible gap between the very, very wealthy and the very, very poor which I noticed every day here. I think this could be altered and done away with if you got rid of the main winners, the main profiteers, which are the extremely wealthy and their companies.

WOLFF: Do you have the sense of the Cold War, this extraordinary period from 1945, roughly, until 1989—for lack of a better term—what did it mean? You lived your life in a sense on the other side. How does it look, looking back, what was that period? What was it about?

GROSSMAN: Well, it was extremely tense, because the GDR was always conscious of the fact that West Germany officially wanted to take over—they said re-unite, it was basically more like taking over, because it was more like colonization, even though many people rejoiced at it. But this conflict between east and west was fought out every evening on the TV screens, because West German television was always telling their people that GDR—how bad things were. And the GDR television was trying to tell them how good things were. Interestingly, the West German television, right or wrong, was very skillful—more skillful—than the GDR, which was often—not always, but often very dull. So that there was this constant… Based on TV was the main manifestation of the Cold War and a constant question… You’d have two women standing on line, waiting for rolls in the morning and one would talk to the other, “So, last night I made a sort of mistake, I pushed the wrong button…” In other words, they got western television. And the other lady says, “Oh, I did too, by the way!” And they start chatting about western television—unless maybe a man standing next to them was wearing a party button and then they perhaps would not talk about it, because they would make a fuss, say, “What are you doing listening to that?” This was sort of the situation. It was in all our lives, all the time—this East/West conflict.

WOLFF: Last question we have time for, unfortunately. What’s the legacy now? Do the left-wing parties, either the German Socialist Party or the new Die Linke party—are they in some sense carrying on at least a plus side, the positive sides? Do you see some return to an interest in those things that the GDR did well?

GROSSMAN: Well, first of all, the Social Democratic Party is its title—no. They’re opposed to everything involved with the GDR. The Left Party—Die Linke, as it’s called in German—is somewhat divided. Many members of this Left Party say we don’t want to return completely to the GDR, but some of the things were very good. You had job security, cheap rent and things like that.

WOLFF: Victor, I wish we had more time. Thank you for your reminiscences and your thoughts. Thank you all for listening. A glimpse, without good guys and bad guys, to the strengths and weaknesses of another socialist effort is something I thought would be worth bringing to your attention. I look forward to speaking with you again next week.


Transcript by Christian L.

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