Planet Money - Socialism 101

Episode Date: March 26, 2021

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This is Planet Money from NPR. So there's this flaw in capitalism. Wherever capitalism has settled in the world, it has a crash. On average, every four to seven years. Some are short and shallow, others are long and deep. This is economist Richard Wolff, and we have a lot of words for this crash. Depression. Recession. Recession, right. Boom and bust. A downturn. The crash happens all the time,

but you probably already knew that. We had the dot-com crash in early 2000. We had the subprime mortgage crash in 2008. And here we are in the COVID-19 crash. Notice, three crashes, 20 years right on the target, right on the schedule. Is COVID-19 different from the other ones, though? Like, was that a capitalist crash or was that because of a global health pandemic? Well, let me answer it this way. It could have been set off by anything, but the pandemic has made it infinitely worse. There had been big, reliable signs in the economy that a recession might be coming a full year before the pandemic. So if the pandemic didn't set it off, something else might have. The point is, no one has been able to stop

these crashes from happening. There's a boom, then a bust over and over. It's a cycle. That's actually the official name for the ups and downs, the business cycle. So capitalism has this instability sort of baked into it. Right. And when I teach this, by the way, I lean across the podium, stare at my students in a big auditorium, and I say, if you lived with a roommate as unstable as capitalism, you would have moved out long ago. It's a way for a socialist to get an idea across. Anyway, so socialists... Yeah, Richard Wolff is no regular economist.

No regular economist. You're not like a typical economist. No, I have a different perspective on what's going on than most do. Richard Wolff is a socialist economist, like the socialist economist in the United States. And there are not many. Most economists are very, very pro-capitalism. Anyway, here's what comes after the boom and bust. Unemployment.

Every four to seven years, suddenly, millions of people lose their job, independent of who they are, what they do, how well they work, how committed they are. If everyone in society was always worried about losing their job every four to seven years, Richard says no one would tolerate that system. We tolerate it, he says, because not everyone is affected. One group or another is sort of told, you're going to be the shock absorber. We're sorry, but someone has to do it, and we can't survive as a system if that risk is felt by everybody. This is the real flaw in capitalism, the inequality. One group that's badly affected? Immigrants. In the good times, they come in to get a job. When the economy turns down,

they're thrown out. Here's another group, women. Economy booming, you get a job. Economy shrinking, you go back into the home and be a homemaker. This is what's happening right now. Women, and really women of color, lost a million more jobs than men during and after the COVID recession. And here comes the one which I hope you've already guessed. African Americans in American history. You couldn't throw them out, although there were people who tried. You couldn't throw them out, although there were people who tried. So you made them an in-house, an inside-the-country shock absorber. What is the shock? Capitalism. And who gets fired first? The've seen that the unemployment rate for black people spikes immediately and takes longer to get back to normal. So Richard Wolff, Harvard, Stanford, and Yale-educated, classically trained economist is here to say maybe there should be a little more criticism of capitalism. Capitalism isn't the greatest thing since sliced bread.

It's just another phase. Every economic system the world has ever seen was born, evolved, and died. Capitalism is among them. It was born. It has evolved. So guess what the next stage is? It dies. Hello and welcome to Planet Money. I'm Sarah Gonzalez.

And I'm Robert Smith. Over the centuries, the world has seen many an economic system, and our current version of capitalism probably won't be the last one the world ever sees. Today on the show, we're going to do something different. We're going to hear the main case against capitalism from one of its biggest critics. And, you know, Planet Money has been around for over a decade, and we've done a couple socialism shows, but not a big socialism 101 show. So here it is. And because we're Planet Money, Planet Capital, we're going to look specifically at the economic side of socialism. So let me do this again. Hello and welcome to Planet Worker. It's a planet worker. Okay, so it's Socialism 101.

You are teaching a Socialism 101 class. How do you start this class? Is there like a super simple explanation of socialism? Good. The answer is complicated, and I wish it weren't, but here we go. Here we go. Richard Wolff teaches economic history at the University of Massachusetts at Amherst. He is a socialist economist, which here in the United States may seem a little bit like an oxymoron, but in the rest of the world,

this is a completely normal thing. There are plenty of socialist economists. Richard has been at it a long time. So he's going to walk us through this. And he says we can start by thinking of socialism as a reaction to capitalism. Socialism is capitalism's critical shadow. Think of them as critics. Socialism is a criticism of capitalism. And, you know, capitalism was really just a criticism of feudalism. And to understand socialism, we get to go back to feudalism, to European feudalism in particular, which starts in the 400s, like year 400. It's the Middle Ages. You know, you get your plagues, your knights in shining armor, jousting, crusades. And society is divided into kings and peasants, lords and serfs.

The serfs are the labor, the lords reap the benefits. And there was no chance to work your way out of peasant life, to innovate, to come up with inventions, to like get rich. If your parents were peasants, you were destined to be poor forever. And sure, there were some traders and merchants and market towns and versions of what we'd recognize as capitalist activities going back to ancient times even. But it isn't until a thousand plus years into the whole feudalism thing that people go, we don't want it anymore. We don't want feudalism. We don't want any of that.

There are revolutions and wars and a new system emerges. Peasants, poor people, have some mobility now. They don't have to work that. There are revolutions and wars, and a new system emerges. Peasants, poor people, have some mobility now. They don't have to work for the lords anymore. You're not a serf stuck on the land because your parents happen to be serfs stuck on the land, etc., etc. The Industrial Revolution starts to give people even more options. You can now work in a factory and be paid a wage for your labor. Most historians say this new system happened in England first and then spread all over Europe and eventually across the ocean to the U.S. And at first it doesn't really have a name.

It's just a reality. But it would later be called capitalism. And capitalism was supposed to be radically different from feudalism. But, and here it comes now, but it does bear an alarming similarity to feudalism because once again it divides everybody into one or the other of two categories. A tiny minority like lords were is employers. And the vast majority of us are employees. There was also forced labor. There was slavery. Capitalism became a global system

because it could exploit slave labor, particularly in the cotton industry. And this whole system, employers, employees, forced labor, it grew bigger and more complicated through the decades. And as a means to make money, there was no better system. The people who owned the land and the factories and the tools, also known as the means of production, they got richer and richer. And eventually, the employees were like, huh, we got rid of the lords, but this still feels a little peasant-y.

Did somebody say the means of production? Because I feel like we're about to hear from Karl Marx. You knew it was coming. In 1848, Karl Marx, one of the fathers of socialism, says, I know what the problem is. It's the hierarchy. It doesn't make enough of a difference if you switch from a lord to a boss. There are still just a few people calling all of the shots. The worker works to make the boss richer, and the worker has to accept this arrangement because the other option is don't have a job at all and make no money. So Karl Marx, he says, this is what we got to do. The workers need to own the means of production.

They should own the land, the factory, the tools in some collective way so that they can be their own bosses, have the opportunity to make themselves wealthy too. That's what the breakthrough is. That's what the socialism is focused on. No more master-slave, no more lord-serve, and no more employer versus employee. This is when socialism becomes known as a criticism of capitalism. And the main thing socialism comes to signify is taking on inequality through some kind of government intervention. Government intervention.

But how exactly the government should intervene? It went in two wildly different directions in the early 1900s. The first kind of socialism, think of it as capitalism with a socialist band-aid. You can basically be a full-on capitalist country, but the government intervenes to offset some of the inequalities. It intervenes through regulations, imposing taxes, redistributing wealth. People usually think of, you know, Scandinavia and Western European countries as falling into this bucket. Places with universal health care for everyone, affordable, or even free college for everyone. But those countries are not socialist, Richard says.

They're capitalist. That's right. They're not a socialist society. So their version is like the high taxes with a lot of capitalism that addresses some of the inequality that capitalism creates. Exactly. This is probably the most popular version of socialism. Bernie Sanders, AOC, they're in this camp. This one is all about shifting the power away from capital and more towards the worker through things like more regulation, strong labor unions. And, you know, if you think about it, there are socialist band-aids all over the U.S. already. The government does step in. It subsidizes public education.

It sets a minimum wage. It regulates food and drug so that we are not poisoned to death by people wanting to make money, etc., etc. You know the story. For socialists, the existence of government subsidies and regulations is proof that capitalism alone doesn't meet all of our needs. Capitalism didn't create a school system for everyone, so the government chose to intervene. And by the way, that ended up helping capitalism by educating workers. Many very pro-capitalist economists agree that, yeah, the U.S. is a mixed economy. There is some socialism here.

We have government-run police departments, Social Security, Medicare. Et cetera, et cetera. Okay, that is one kind of socialism, the first kind of socialism. A little sprinkle of government intervention, a little soussant of the socialism. The first kind of socialism. A little sprinkle of government intervention, a little soussant of the socialism. The other kind of socialism is full-on level 10 government intervention. Think Cuba, Venezuela, the USSR. Hammer and sickle. Setting aside for a moment the grand sweep of history and how those turned out, here is the hardcore socialist logic. You cannot trust capitalists. Regulations

meant to level the playing field? Come on. Rich people, capitalists, the people in power, they're not going to let regulations stand in their way. Because the capitalists will figure out how to get around, how to evade, how to avoid, how to repeal whatever regulations you try to impose. And so what the government should do is take over the enterprises. Meaning take over and run and regulate all of the industries. In 1917, Russia, the USSR, they tried this version of socialism through revolution. And they took over industry in Russia or in the Soviet Union, and they ran them as government enterprises. And this version can lead to, and has actually led to, authoritarianism.

This is the one that a lot of people are afraid of. Now, you might think of the USSR or Cuba as communist countries, not socialist, because they have been run by communist parties. But the economic systems are based on socialist principles. And Richard says that most socialists today, they don't want this version anyway. We don't want even the extent or anything like the extent of governmental domination of the economy. We don't like that. Okay, but then there are socialists who say, what's the deal with all this government intervention talk, the Band-Aid kind and the full on kind? That's not socialism. Did you even read Karl Marx, bro?

There's another way. That's after the break. All right. So we have the Band-Aid version of socialism and the full-on government intervention kind. But in both of these versions, there is still a hierarchy. Either the private capitalists run the businesses or the government does. So there's all these other socialists who say the hierarchy needs to go away. Remember the whole who owns the means of production thing? For them, the issue is how is the business organized? If it's employer-employee, it's capitalism and we don't want it.

We want workers themselves to own and operate the businesses. This is the version of socialism Richard Wolff wants. And you know, there are some worker-owned companies in the U.S. already. Like Publix, a supermarket chain. There are companies where the workers own the majority of the stock. There are startups where everyone gets equity. How are those different? Very simple.

It is one thing to own a company. It's another thing to run it. So your local food co-op or whatever, just because it has co-op in the title doesn't mean the workers are the real decision makers. When the workers own and run a business collectively, they make all the decisions. There's no board of directors or anything like that. Everyone votes on how much to pay everyone, what the hours should be, what they should make, what chemicals to use or not use, and the majority wins. And if you need someone to be like the order giver because it gets the job done, okay, fine. But you rotate the order giver position. The most successful worker co-op in the world

right now is an enterprise in Spain. It's called the Mondragon Cooperative Corporation. Mondragon. Yeah, like M-O-N and then the word dragon, Mondragon. It's the name of a city in the north of Spain, just in the foothills of the Pyrenees Mountains. Mondragon started in 1956. A Roman Catholic priest named Father Erzmendi gave this sermon about not waiting for someone to come in and give everyone in Mondragon a job. It started with six people, and today there are more than 100,000 workers and dozens and dozens of co-ops within the corporation. They do everything, manufacturing, services.

They maintain, by the way, their own university. They have their own bank. They also produce food on farms. And the workers truly own, and more importantly, run everything. And it's not like everyone has to make the same amount of money in Mondragon. Some people still make more than others. You can move up. There are supervisors. There is still some inequality, but it's not so stark because there's a rule at Mondragon.

The highest paid worker cannot get more. I think the last time I looked was eight and a half times, might be nine times what the lowest paid worker gets. For Richard, this is how you begin to address capitalism's worst trait, the inequality problem. If everyone gets to vote on what everyone's salary is, he says there's probably not going to be huge pay gaps. You will not see giving huge salary packages to half a dozen executives at the top while the average worker in the establishment

cannot pay for their kid to go to college without taking crippling loans. That's not going to happen. And remember how recessions affect some groups more than other groups? In worker-run businesses, the impact of economic downturns are distributed more equally.

For instance, during the early days of the COVID pandemic, workers at Mondragon voted to take pay cuts rather than lay people off. And back in 2008, 2009, the recession hit Spain really hard, but workers at Mondragon were reassigned to other companies within the collective instead of losing their jobs. Now, this is just one company. So in this version of socialism, where the people, the workers, they are the decision makers, they control the business, the school, the enterprise, this version has never

actually appeared in the world in any big way, right? Like the world could have formed in a number of ways, and it didn't form in this way. No, no. There's lots of examples. Well, there's, like, I know about Mondragon in Spain, and that's, like, a big example in Spain. Right. But it's not, like, all of Spain. It's, like, this, you know, it's, there's pockets of this version of socialism. That's right. It hasn't, we haven't seen, like, a whole country try this version.

Not yet. That's correct. Yeah, there's no whole country that is only worker-run businesses. But there are some companies. Italy actually has a ton of co-ops and strong laws that make it easier for workers to buy out companies. There's a clothing company in France, a bike store in Portland, Oregon, of course. There are bakeries in the Bay Area named after the priest in Spain, Father Erasmendi. Pro-capitalist economists love this point. They say, see, we already have socialist businesses under capitalism.

It's not like there's a rule that you can't have them in the U.S. You can. We just heard of some. If people wanted more, there would be more. If socialist companies were truly better, they would take over the world. But Richard says there's just not a level playing field to make that decision. You know, when people hear socialism, they think about the Cuba version, and that sort of ends the discussion. There are fewer subsidies for socialist-run businesses. And there's a bigger problem here.

In order to start a business, you need investors. And you know what investors don't like to hear? Hey, we have 35 CEOs and make all of our decisions in a democratic way. You'd have to deal with these conditions. Then you can tell me that it doesn't exist because people don't want it. Now, the big main defense of capitalism is that more poor people are better off than not under this system. Yes, there is inequality. No one disagrees with that. But the pie has gotten bigger for everyone. Capitalism has propelled innovation. And some capitalist economists say that the flaws in

capitalism can be solved by more capitalism. Richard says, you know, capitalism was just a way to solve some of the problems with feudalism. And now he thinks socialism is a way to solve some of the problems with capitalism. And he says his version of socialism, if it's ever tried, sure, there's going to be problems with that system too, but it doesn't have to be the last economic system ever. There will be things that socialism doesn't do well,

promises perhaps it doesn't keep, issues it encounters, problems it discovers, and there will be critics who will want it to change. That's the human experience. I expect that for socialism, and I welcome it. All right, we did not get into all of the intricacies and nuances of capitalism. So if you want that, we have more than a thousand shows for you in our feed and probably a thousand more ahead of us. If you have opinions about the show, you don't think we critique socialism enough or we didn't defend capitalism enough. You can email us planetmoney at NPR.org.

We're also on Facebook, Instagram, Twitter, TikTok at Planet Money. at NPR.org. We're also on Facebook, Instagram, Twitter, TikTok, at Planet Money. And we want to hear from everyone, capitalists, socialists, mercantilists, chartalists, feudalists, if they're out there, write us. The means of production for our interview with Richard Wolff was a program known as Skype, which is owned by Microsoft, which makes us credit a piece of software. Maybe if the workers of the world owned it, it'd be slightly different. Today's show was produced by Dave Blanchard, and we got a ton of help on this episode from our intern, Dan Gurma. Sarah Saracen edited this episode, Alex Goldmark is our supervising producer, and Brian Terstad is our show editor.

I'm Robert Smith. And I'm Sarah Gonzalez. This is NPR. Thanks for listening. PR. Thanks for listening. Hey, Sarah. What? Do you hear the people sing, singing a song of angry men? It is the music of a people who will not be slaves again. When the beating of your heart echoes the beating of the drums, there is a life about to start when tomorrow comes. I'm Guy Raz, and on NPR's How I Built This, how the one that got away led Justin McCloud to build the dating app Hinge,

and how Hinge led him to the love of his life. Subscribe or listen now. to the love of his life. Subscribe or listen now. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.