Economic Update: The Socialism Issue

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On this week's show, Prof. Wolff talks about the recreation of `company towns' (eg., Kalamazoo, MI) by the richest US capitalists, Biden and the reality of US jobs lost, how and why the US follows UK decline, and rising mass alienation from established political leaders and parties. The second half of the program features a discussion of socialism without Cold War taboos.


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 begin today's program with something happening to many cities and towns across the United States, and nothing better encapsulates the decline of our Capitalist economic system than what I'm about to describe to you. I’m going to take the example of Kalamazoo, Michigan, a city of about 75,000 people. And in case you're interested in getting more details, which I hope you will, Time Magazine’s double issue of January 17th and January 24th of this year carries a good article that gives you an overview of what I'm about to summarize.

The problem that Kalamazoo has, like so many other cities, is that corporations and the rich have been able to use their wealth and their power to reduce the amount of taxes they have to pay to the city where they either work, or live, or have their business, and it has produced the predictable outcome. The cities, deprived of the taxes they could and should get, were corporations and the rich to pay their fair share, have to do what? Well, one of two things, or both of them. They either have to shift the burden of taxes on average people, which they usually do, or they have to cut the public services they can provide to the local community, because they're not getting that money from the wealthy. And usually most cities do a little bit of both, but they reach a kind of dead end after at least a few years, when the mass of people will not tolerate more and more taxes, even if they don't know exactly that it's being shifted on to them, because you're not getting the money from corporations or the rich. So now they all, sooner or later, have to cut services. That’s why your garbage isn't picked up the way it once was. That's why your schools don't have the kind of budgets they need, your firefighters, your police, and so on.

So now comes the unique capitalist solution: the same wealthy corporations and individuals in Kalamazoo (and I’m going to give you their name in a minute) came up with a clever way to take all of this one step further. I’m talking about William Parfette and William Johnston. They’re known as “the two Bills” in Kalamazoo. They set up something called the “Foundation for Excellence in Kalamazoo” — modesty’s not their strong suit — and they gave it a lot of money. They distribute to the city, on average, about 25 million dollars a year in what — here we go — they think they can do to help the city in its difficulties.

Well, let's see, let's first look at this. Who’s William Parfette? Well, he's a long-time executive in the Upjohn Pharmaceutical Company, which merged into something you all now know as the Pfizer Corporation. That's right. The one making millions by overcharging us for all of those vaccines. That’s what you want running your town?And the other one, William Johnston, is the owner of The Green Leaf Group, which happens to own the Radisson Hotel in downtown Kalamazoo, don't you know, and other properties there, too. So the two richest guys in Kalamazoo avoid paying their taxes, turn around, use the money they didn't pay in taxes to give it to a corporation they own and operate, which can then dole out the money in whatever way they think is appropriate for the future of that town.

You know, we have a name for this in American history. It's called “the company town,” but this time it's just whoever the richest folks are in town. And to cap it all off, the money that they didn't pay in taxes, that they give to the foundation that then doles it out to the local politicians to keep them on a short leash, that contribution to that little foundation they set up, that lowers their taxes elsewhere as well. Talk about hustling the system! City after city in America is becoming dominated by a few rich people who have, in this way, done an end run around any claim for democratic control of our urban areas that anyone could reasonably advance.

I turn next to President Biden, who said a few days, maybe a couple of weeks ago, how happy he was that in 2021, the year just ended, we added 6.4 million jobs. Well you know, there’s a difference between an honest politician telling us about an urgent issue like unemployment, and a huckster who's telling us something advertising agents usually do. You know, advertising is a system in which they tell you whatever the positive is about what they want you to buy, and they hide or deny the negative. That's not an honest conversation; that’s a hustle to get you to part with your money, and you and I both know that. We want our politicians not to be advertisers. We’ve got too much of that as it is. We want honest conversation, which advertising is the opposite of, but we don't get that. And it's not just Mr. Biden, of course. Trump was even worse. Obama, they all do it. So I want to unpack this one.

Is it true that we got 6.4 million more jobs in 2021? Yes, it is. Is that the end of the story? The way Mr. Biden wanted to tell it, no. It isn’t. Why not? Because in the year 2020, the one just before, we lost — get ready! — just shy of 10 million jobs. So if you lost 10 million jobs in 2020, the first year of the pandemic, and you got back 6.4 million jobs in the second year of the pandemic, you're still down three and a half million lost jobs that have not come back. That’s a lot of jobs, a lot of people, a lot of families, a lot of towns, a lot of cities. This is not to celebrate. This is, to be honest, we have a long way to go. And let's remember we have a bigger population two years later than we did before. We need more jobs, not 3.5 million fewer jobs. That's what an honest politician would have told us.

But it's even worse. We’re not being told about what we call the “labor force participation rate.” That’s the percentage of people of working age who are looking for work, and have a job, versus those who have simply quit and walked away. In the beginning of the pandemic (the numbers don't matter, but I'll give them to you) the participation rate was 63.4, and today it is 62. That's 3 million or so jobs. There they are again. People have given up. They’ve gone out of the labor market. That’s a very serious problem. We're all still here consuming, but millions fewer of us are working, or intending to work. These are serious problems, not covered over by a huckster telling us the one piece of good news you can figure out in all of this. Then there's the fact that by talking this way you don't face it as a problem, and therefore you don't talk to people about the solution. Because, you know, there's a very easy solution to the three and a half million, at least, that are without work, that had it, that needed it, that still need it. You know what that is? It's to do now what this country did in the 1930s: a public jobs program. How about the federal government hire the three and a half million people to green this country, to make us have better insulation in our homes, to do something about the failing infrastructure we heard so much about? Come on! And you know what? We could give them all $17 an hour minimum wage. That's higher than the one we have, and that would be real competition for our private employers, because they'd have to do just as well, otherwise no one would work for them, since you could get a government job at 17 bucks an hour. In case any of you think that's extreme, which it isn’t, let me tell you quickly about West Hollywood, California, a city. They've passed the minimum wage for their town — here it is — $17 and 64 cents an hour. Don’t tell me it isn't possible. That’s what hotel workers in that town get, and they don't get that in Kalamazoo, Michigan.

Then there's the polls I want to talk to you about, but before I do, I want to mention — because one of you asked me — that in the United Kingdom, in Britain, there is the same kind of disintegration we have in this country. They have one of the worst records on fighting COVID, right up there with the United States. They have moved to the right politically. The divisions in their society are incredible, and they voted a Trump-like kind of character into office. He's different from Trump. Trump's distinctive by his red tie, and his big belly; Mr. Boris Johnson is distinctive by the fact that he doesn't understand the concept ‘comb and brush,’ and he makes a thing out of that and that, by the way, is probably his best feature because it's downhill after that. And he is now suffering the same kind of loser problem that Mr. Trump did. He is now down to a 23 percent approval rate in the polls, because he got caught. First he rushed the country into Brexit, promising it would solve their problems. It made them worse. Then he told everyone back in May that there has to be a lockdown in Britain, because the COVID was so terrible, and while he forbade more than three people to gather in one place, he was having big drunken parties. He made a terrible mistake; He didn't check who was at them, and so it has gotten out into the press, and the poor Mr. Johnson is heading down into the toilet.

Why is this interesting? Because the British Empire reached its peak a hundred years ago, but it didn't understand that it had reached its peak, so it kept trying to go on as if it still were the great British Empire. That only hastened its demise. After World War I it became a debtor; it owed more money to the United States than it could ever repay. That was a sign you aren’t the big empire anymore, but it didn't face it. It didn’t struggle to figure out how to manage decline. So with World War II, which it had thought it was winning, it lost the entire empire. No sooner was the war done then India under Mahatma Gandhi said, ‘Bye-bye, we don't need this anymore.’ The British tried to stop it. They were defeated, and then they were defeated in every other corner of their empire — Asia, Africa, Latin America —it made no difference. And now they are… what? A cold island, wet, off the mainland of Europe, more and more isolated, more and more —as their unkind critics put it — Washington’s poodle. They could have had a very different outcome, but they would have had to face that the peak was over. Why do I tell you this story? Because the United States is now at that same point. How are we, as a nation, going to handle the decline of what was a nice ride up in the 20th century, but isn't there for us anymore? The baton has passed somewhere else, and you all know where. That’s the big issue.

We’ve come to the end of the first part of today's show and, as always, I want to thank all 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, Economic Update, please go to Patreon.com, Economic Update. Or even better, visit Democracy at Work, dot, info. I also want to remind you of our recently released hardcover edition of “Understanding Marxism,” that is available now, along with several other books we've published at Democracy at Work, dot, info, slash books. Please stay with us. We will be right back.

Welcome back, friends, to the second half of today's Economic Update. I want to talk a little bit about the implication of what recent polling in the United States has shown us. It seems that the majority of Americans are at least agreed on the following: They don't approve of Mr. Biden, they don't approve of Mr. Trump, they don’t approve of the Republicans, and they don't approve of the Democrats. Therein lies something significant I want to kind of pull out.

What's going on? My best guess, and I spent a lot of time trying to figure this out, is that the majority of Americans — correctly, in my view — understand that this political system we have is so utterly out of touch with what the real problems we have as a society, that it's kind of irrelevant what they say, what they do, how they posture, how they pretend to attack each other, or do. This is all a kind of shadow game that more and more Americans are too busy to pay much attention to, because it doesn't seem to matter which one is in there. The rich get richer, the inequality deepens, the crappy jobs remain crappy, no one is punished for the big failures. COVID is an unbelievable failure in this country where we haven't done as well as most other countries, even though we’re richer than they are. Nobody is punished, nobody is held accountable, the blame game is more and more irrelevant, and people tune it out. No one was punished for the fact that we had an economic crash, together with the pandemic, another crash of the umpteen we have had, for which nobody was prepared. We’re even running around this country today, two years plus into a pandemic, and we still don't have enough tests, we still don’t have enough — I mean, it's beyond words. And there's this sense that the political system is irrelevant, except to provide ever more money to keep this sad system going.

Look, this kind of poor government, late government, it didn't matter all that much in the United States between 1820 and 1950, maybe even 1970. The American economy was on the way up. The American economy was growing. The rest of the world, not so much, and even when it was, the United States was so big, it dominated. But that's not the case anymore. We are an economy that has passed its peak, and however hard it is to get our heads around it, that’s the reality. So we need more government intervention to help manage the downturn, because it isn't the nice ride that the upturn was, and we need to think about how to do that. Not ad hoc when there's a crisis, which is how we bring the government in, but over the long run. And here's a warning: If you don't do that in a rational way, you're going to suffer in the U.S. The decline into secondary status that our forebears, the United Kingdom, have been living out this last century, as they've ended up a very small, sad, residue of what the British empire once was. It didn't have to go that way, but their commitment to keeping the government away, so that private capitalists can have the day, is costing them as a society, literally, as I talk.

I want to use the bulk of the today’s second half of the program to answer a question many of you have been sending, to talk about Socialism, this ‘other’ of Capitalism. It’s been around a long while. It seems to be coming back now in various parts of the world, something about which a level of nonsense is spoken in the United States that's downright embarrassing to me. I was born in the United States. I've lived and worked here all my life. It's embarrassing what a taboo it is. People haven't thought about it, read about it, learned about it, and yet speak as if they understand it in ways, as I say, that are above all embarrassing. So I want to address that in a summary way to make sure we all are on the same page.

Socialism is the number one alternative to capitalism. It emerged pretty soon after capitalism itself became a big thing in Western Europe back in the 17th and 18th century. It took a while to catch up to capitalism as its ‘other,’ as the alternative to it, but when it did, it did so with gusto, and it has been an important alternative criticism of capitalism, and an alternative to it, ever since. It is that today. So let's look at it, without the usual American hysteria, about dealing with this in a normal, rational way.

Socialism is two things, and has been those for quite a while now. Number one, and this is how it began, it's a movement of criticism. It says basically, that Capitalism, which has had its achievements, and made its progress, is now holding back human progress. In other words, we can do better than Capitalism, and human beings can, and should, be proud that they have felt they could do better throughout the history of the species we call human beings. We have quite a nice thing to show for this commitment to do better, and there’s no reason, the Socialists tell us, to think that that's all stopped now, that we shouldn't think about doing better. That’s what Socialists do: They think we can do better than Capitalism. So in the 19th and 20th century, Socialism emerges as what it already was before, but it became publicly so, as the number one alternative, with Socialist political parties spreading to every country of this earth, and varieties of Socialism emerging. I’m going have more to say about that, but with the Russian Revolution in 1917, just over 100 years ago, Socialism was split. Part of it remained a critical movement, as in for example the Socialist party in many, many countries, but part of it took on a whole new identity — a government. So some Socialists were busy criticizing Capitalism, others were busy setting up governments, setting up societies, that would be different from Capitalism. Those are two very different tasks, and they have a lot of tensions to work out, and those tensions are with us to this moment. There are Socialists whose focus is on criticizing what's wrong with the Capitalism they work within, and how it could be better. Bernie is that. AOC is that, and many others. Then there are socialists who are in power, whose critical momentum was strong enough to get them elected into, or maybe in some cases by revolutions, to become the government.

I want to stop here and mention them, because in the United States this is very poorly understood, so I'm going to give you an example of places today where Socialism is in power, where Socialists are the government, and have been elected and put there, either by a vote, or by a revolution, or by both. Ready? The last general election in Germany, the number one political party at the end of the elections only a few weeks ago was the German Socialist Party, now renamed the German Social Democratic Party, but it has a long history as a German Socialist Party. So the most important economy in Europe, the number one political party, is a Socialist party. In Portugal, another European country, there’s a three-party coalition. the strongest party is the Portuguese Socialist Party. It's coalition partner, number two, is the Portuguese Communist Party, and the third member of the government of Portugal is the Portuguese Green Party. Do you understand? This is a Socialist government in Portugal. Then there is China, the number one contender of the United States, which calls itself “Socialism with Chinese characteristics.” Then, just to mention a few other kinds of socialism: Cuba, Bolivia, Chile. I mentioned them all because in right-wing America, socialism is equated with one country — Venezuela. As if somehow what you could say about Venezuela covers everything. Now mostly that's ignorance, but it's also malevolence. It would be the equivalent if I said, “Well, let me tell you about Capitalism, and I'm going to use the Philippines, Paraguay, and Liberia as my examples.” How long would that last before somebody with half a brain made the obvious criticism?

Socialism has three basic varieties in the world today. If I had more time, I would go into all the history, but I want to make sure that three are understood. Number one: Socialism regulates and limits Capitalism. It limits the enterprises owned and operated by Capitalists. All it does is say, “You can't go this far.” For example, “You can't pay below this as a minimum wage; you must pay taxes like this; you must give your workers paid vacation; you must give them a health insurance; you must…” In other words, as it is called often in Europe, Socialism really is Capitalism with a human face, and that human face is imposed by a government. That’s what we call Scandinavian Socialism. That's what Bernie means when he talks about Denmark. That's what Western Germany, France, Italy, Spain — that's what they do. Socialism is Capitalism with a governmental constraint.

Then there was the Soviet Union. That was a little different. There the Socialists weren't satisfied with regulating private Capitalists. They told the private Capitalists, “Go away. You don't own anything anymore. The government is going to take over and run the enterprises.” That's another kind of Socialism, not what they have in France, or Germany, or Scandinavia. It's what they had in Russia for a while. China is a hybrid between those first two; that is, it has a huge private Capitalist sector, regulated by a Socialist government, sort of like Western Europe and Scandinavia, but it has another sizable sector of its economy owned and run by the government. That's a bit like the Soviet Union was, so think of a hybrid, and think of China's logic, because they've explained it. “We don't want to make the mistakes we think Western Europe makes, and we don't want to make the mistakes we think Russia made, so we have this hybrid.”

The last kind of Socialism is a critique of all of those I've just mentioned, not that what they all did was wrong, but they they left something out. They changed the government, they changed the regulation, but they didn't change the workplace itself — the daily reality of the office, the factory, or the store, and that that is a failure. That is an omission that modern Socialism now has to focus on, and correct. There has to be — and this is the nicest way to say it — the democratization of enterprises. No more a handful of people at the top who are the boss, nor does it matter whether these people are private citizens who are put there by shareholders, or they're government officials. Whichever one they are, and it could be either, the crucial issue now is to put the working people in charge. To transform these enterprises into what we in America call “Worker Co-ops,” where the workers directly — one worker, one vote — make the decisions about what to produce, how to produce, where to produce, and what to do, how to distribute the revenues and profits the enterprise achieves. That can be done democratically. It should be done democratically, and a real Socialism would require it. That the Soviet Union didn't do, and that Western European, Scandinavian Social Democracy didn't do, and the Chinese either. Therefore this is a new kind of Socialism, but if you're going to talk about Socialism, all of those have to be part of what you're discussing, or else you're sharing ignorance.

Thank you very much for your attention. I hope this program was of interest, and that you can partner with us by sharing it, and above all, I look forward to speaking with you again next week.

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Showing 1 comment

  • pasqual digesu
    commented 2022-02-09 09:52:59 -0500
    A breakthrough lecture professor, it seems that the deeper our understanding of history, natural forces and their ultimate direction, the narrower and more parallel and closer our thoughts become. Yes, there are different forms of socialism, and some control industry and run them completely, some allow their operations to be privately managed with caveats, and some do both. In certain authoritarian governments which allowed corporatism, the only industries that were outright state controlled were the ones considered priority in the interest of national security which included oil or energy, and transportation. (Hugo Chavez did just that when he threw our oil companies out successfully and as Mossadegh tried in Iran but failed) Others which included certain defense companies, food, education etc. were closely monitored while funded. Today china’s success is based on this control of capitalist powers; our down trend is from our reversal of this policy, I witnessed this change throughout my own career involving state and industry. As for a nation of coop businesses, you still require a central government’s blessing like in Emilia Romagna where you’re allowed to pool your 2 year unemployment checks with 9 others to start a business partnership. It was made possible by government legislation and organization, like minimum wage and OSHA. As for coop businesses that fall in the above national security risk, they too must be controlled or regulated and monitored by honest government. As long as human beings are involved, greed is still a factor in any form of business structure, caveat emptor.
    As for china’s success, this socialist government is also striving for power as did others in the last century by maximizing economic power. But recognizing the reality of the natural forces at work today in our changing ecology as reflected by your past guest Fabian Scheidler whose awareness is similar to Peter Russel, our future cannot be planned anymore around simple economic growth goals, but (generally speaking) an economy that will decrease manufacturing and its consumption of required natural resources starting with many unnecessary and illogical toys for grownups (comforts, desires, lifestyles etc.) “So, how do you go back to the farm once you’ve seen Paree?” you have no choice if you want to be part of the future, and it will take a central government to lead us for the same 2 reason, our inability and because there is always some form of it in control.
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