Upstream - The Recession isn't Over, but is Capitalism? with Richard Wolff

Episode Date: December 17, 2016

Unemployment is down and the stock market is up. So we're in a recovery, right? Many politicians & economists would like us to think that, but in this Conversation, Professor Richard D. Wolff explains how this couldn't be farther from the truth. Not only is the recession that started in 2008 far from over, but we might actually be witnessing the collapse of capitalism as we know it. Professor Richard Wolff studied economics at Harvard, Stanford, and Yale. He is the author of the recent book Capitalism's Crisis Deepens, the founder of Democracy @ Work, host of the radio program Economic Update, and is currently teaching at the New School University in NYC. This episode of Upstream was made possible with support from listeners like you. Upstream is a labor of love — we couldn't keep this project going without the generosity of our listeners and fans. Please consider chipping in a one-time or recurring donation at www.upstreampodcast.org/support If your organization wants to sponsor one of our upcoming documentaries, we have a number of sponsorship packages available. Find out more at upstreampodcast.org/sponsorship For more from Upstream, visit www.upstreampodcast.org and follow us on Twitter, Instagram, Facebook, and Bluesky. You can also subscribe to us on Apple Podcasts, Spotify, or wherever you listen to your favorite podcasts.

You are listening to an Upstream Sneak Peek with Professor Richard Wolff. We're in New York, in New York City, and I am coming here because I'm looking at economics. I see economics everywhere. So I was noticing being in England and now here, there are many more homeless people on the street here than in London even or England in general. And on the subway, we had a young African-American man selling something on the train as we go by. So these symbols of economic crisis and inequality were really relevant to me. However, this morning when I was speaking with the person we're staying with, and I was talking about the economic crisis, and she said, but haven't we recovered from the recession? Because

the stock market is up and unemployment is relatively low. And it's interesting how we can see different realities. So I'm wondering, from your perspective, do you see us as having recovered? And if not, what would be your response to someone? Yeah, we haven't recovered, not even close. This is a game in which more and more the political life of this country, and unfortunately the ideological and academic life, is a kind of screaming your preferred image of the world at one another. So if you want the news to be good, you insist it is. And if you want the news to be bad, you insist it isn't. And the winner of this absurd game is whoever has the most megaphones and can yell the loudest. So let me give you some ideas. Your host is right. Stock market is up and

unemployment is down. And that's very nice. Who can object? But it really has nothing to do with anything once you understand what those words mean. For example, the unemployment. In the United States, unemployment is measured in a very specific way. The government, the Labor Department, literally inquires of a vast number of people. It's a kind of questionnaire system. Asks them the following question. Are you working? If you answer yes, you're counted as an employed person. If you answer no, I'm not, you are asked the second question. Are you looking for work? If you answer the second question, yes, I am,

then you're counted as an unemployed person. But if you answer the second question, no, I'm not looking, you aren't counted. That is considered to be a person out of the labor force. So now do a little arithmetic with me. If in month number one, there are 5 million people who say, I am not working, but I am looking, that's five million people unemployed. If a month later, a million of those five million have become so discouraged from not finding a job that they answer the second question, no, I'm not looking anymore, the unemployment is marked as having gone down from five million to four million. But the reality is that the situation is worse, not better.

That one out of the 5 million are so discouraged, they're not even looking anymore. They are becoming illegal. People who work in an illegal business of one kind or another, they may have gone to school. If they're women, they may have gone back into the home to be a housewife. Who knows what they've done? But the statistic is we have a reduction of one million people less unemployed because they are now not in the labor force. If you don't know that, and I would roughly estimate that 99% of Americans listening to the radio or television announcement don't know what I just said, then you would be like your host or hostess, say, well, the unemployment rate has gone down. We had the most bizarre thing this last few months,

that the President of the United States, Mr. Obama, was touting, as Mrs. Clinton did, the falling unemployment rate, because that's good news for them, requiring Mr. Trump to say, well, he tried to explain the statistics I just summarized, didn't do a very good job of it, so he didn't get very far, he didn't have good advisors about this, but he should have made clear what I just did, that these numbers not only don't say what they are used to claim, they actually say the opposite. Same thing with the stock market. Why did the stock market go up? Over the last eight years since the crisis of 2008, the panic in the government of the

United States about a collapsing economy, and let's remember, the collapse of 2008 is the second worst breakdown of capitalism in its history. The only thing worse than that was the Great Depression of the 1930s, which started in 1929 and lasted until 1941. We may yet surpass that, but we haven't yet. So we're just number two. But that's not a good record for a system, two major collapses in 75 years. And if you actually study economics, you'll know that between the end of the Great Depression, 1941, and the beginning of the one we're in now, 2008, there were 11 economic downturns. This is a system fraught with the instability. And every one of these downturns, millions of people lose their job.

Tens of thousands of businesses never recover. Lives are shattered. Educations are interrupted. Every kind of social ill imaginable. You know, what kind of an economic system commands loyalty that plunges its people every four to seven years, that's the average, into an economic downturn, some of which are long and deep, like the 1930s or the one we're in now. Well, in any case, the government, to deal with this disaster, pumped more money into the American economic system than has ever been done. By pumping more money, I mean the agency in charge of that's called the Federal Reserve System. It's our central bank. It's hard for Americans to understand this. And parenthetically,

that's because the economics literacy in the United States is, I can't think of a polite word, it's abysmal. So in any case, the way we determine the amount of money in our economy is the Federal Reserve, that's a banking institution, partillions of new money into the system in order, hoping that this money percolates all over the place, leads people to have the wherewithal to make purchases of goods and services, which in turn will give jobs to people. So the whole idea was to do that. The only problem with this policy, with this hypothesis, is that if you fill the banks, which is how it's done with money, new money, they have to find someone to borrow it. The hope is businesses will come, borrow the money, hire more workers, produce more things, and we'll all be back into a good economic system. But suppose the businesses don't believe that there are customers out there to buy this stuff. Then they won't borrow the money to buy machines, buy fleets of trucks, hire lots of workers, because it's insane if you're a businessman or woman, to borrow money to build out more capacity if you cannot sell what you are going to produce. This was exactly the situation that the collapse provoked.

So the money that was poured in didn't go to create jobs, didn't go to produce more. Where did it go? It went into stock market buying, speculation in stocks. And so the price of stocks was bid up for the people who buy and sell stocks. And let's remember, 1% of shareholders own two-thirds of all shares. So it's a highly concentrated group. Those people buying and selling stocks to each other drive up the price, feeling very good about it all, not remembering that anything that goes up like this can also go down and will, as it always has. But for the moment, they're feeling okay. They can read in the newspaper that unemployment goes down, not understanding what that means, and that stock prices go up and imagine that everything is okay that's why that

part of the society was so utterly unprepared for mr trump's victory since that's a dependent on masses of people saying this system is in terrible shape it's in the worst shape i've ever seen i'm going to vote for a person i otherwise would have laughed at as something of a joke or a clown but not now because so you can tell them all day long about lower unemployment, don't make any difference. And so what we've just seen is a kind of a cold shower in which the self-congratulatory we've recovered is confronted with a political reality that is screamingly saying, oh, no, we haven't. So you have a new book called Capitalism's Crisis Deepens. And you wrote an article also about capitalism crumbling, wind systems crumble.

And so the crisis deepening and capitalism crumbling, but you just also mentioned the ebb and flow or the crisis and, you know, recession. So how do we know this is potential collapse? Or how do we know this isn't just the ups and downs? You know, how will we know when it's finally unraveling or ending? The sad reality is we can't know. That is, we can't know in advance. And beyond something that should never be more than a parlor game, speculating about the future on any subject. I mean, I don't know what's going to happen tomorrow, neither does anybody else. And that's true with the economics as well. A lot of economists are paid enormous amounts of money to make these predictions, which is why you will encounter them.

But I'm not going to make a prediction. What I will tell you, and I'll tell you in the form of a story, I'm a left-wing economist. But I have plenty of colleagues who are right-wing economists or economists in the center. And we do not agree on how we got into the economic mess the world is in. And we do not agree on how we got into the economic mess the world is in. And we do not agree on how to get out of it. But the most amazing thing of the last three or four years for me is that when I get together with my colleagues and we have a cup of coffee or lunch, we all agree that this is the worst condition of the American economy in our lifetimes. We agree on that. Even though we don't agree on how we got in or how to get out.

I think that's a tremendously powerful sign that whatever it is that's going on and wherever it goes, something is terribly, terribly wrong. And I think most of us, left, right, and center, kind of know it has to do with this extraordinary widening or deepening of the gap between rich and poor that has gone on now for 40 years, all over the world, in the advanced part, in the not so advanced part, in the United States, in Europe, in Japan, I mean, wherever you look. And now what this has done is concentrated more and more wealth in the hands of a smaller and smaller rich 1% or whatever you call them at the top. These people don't spend all that money. You couldn't. I mean, you'd be in the store all day just shopping. And even for those people, that's too boring to contemplate.

So they sit on a pile of money that they throw into the stock market because they can't spend it. But for the mass of people whose money has been taken from them to be given to those at the top, they can't buy the basics of life. They can't buy the food, the clothing, the shelter. the basics of life. They can't buy the food, the clothing, the shelter. That's why you see the huge number of beggars and unemployed people and homeless people all across the United States. That's why you have this bizarre economic system that juxtaposes millions of homes that have been lost by people over the last four or five years through the crisis, literally across the street from what we now have, which is hundreds of thousands of people who have no

home. The homes are there. The homes are standing there empty. The people who need them are standing there. And this is an economic system. Can't put these two together, which is an indictment of capitalism, which for me is already enough, even if I didn't know all the rest of the horrible story. So I think what we have is a economic system which, for the first

time in my life, is not only experiencing yet another one of its periodic downturns, which, to be fair, we can emerge from. I don't see it right now, which is already a sign. I don't see how that's going to happen. But I also know, it's a kind of a gut feeling, I wouldn't want to claim more for it than that, that this is a level of interrelated problems, domestic, foreign, manufacturing services, urban, rural, across the board of dysfunction, tension, trouble, so that for the first time in my life, I think it's possible that this system is done.

And let me say a word about that. me say a word about that. Every economic system before capitalism, and we've had quite a few, was born, evolved over time, and died, passed away. Once upon a time, most of the world was organized as a slave economy, slave economy characterized by some people who do the work, called slaves, and some people who reap the benefit, called slaves, and some people who reap the benefit, called masters, master, slave, thousands of years in various parts of the world. It's mostly gone now. It was born. It evolved over time.

It died. Feudalism, okay? Different system. Not master, slave, lord, and serf. Exists in Europe from roughly 500 to 1500 AD, a thousand years of feudalism, different kind of system, born, evolved, died. It's replaced by capitalism,

which is born, evolved, and then will die. The burden is not on me to say that it will die. The burden is on anyone to think that it wouldn't when every other one has. But the notion that capitalism is here forever, that it is the greatest system since sliced bread, a point of view, by the way, shared by everybody in feudalism for a thousand years and before that by everybody in slavery, this is a self-delusional idea because of the fear of change, the fear of the unknown, the fear of wondering what comes next if the system we've become used to were to fall apart. But since every other system did, it's only the height of rationality to begin

to think, especially when you're at a time of great difficulty, which we are, to think about, is this maybe the end? And if it is, where do we go? What do we do? How do we manage this situation? Once you open that door, which by the way is kept very closed in this country. For example, the presidential race between Trump and Clinton, not one word was ever uttered by either candidate to raise even the question that the capitalist system that we are living in might be coming to an end, might be in a terminal illness, might be in a critical stage where it's very...ent. No, no, no, no, no.

The presumption that everything is capitalist, that the relationship of employer to employee is somehow permanent in a way that master slave wasn't, lord serf wasn't, employer employee, guess what? It doesn't have to be that way. In fact, throughout the history of the human race, people have had other ways of organizing it. And then as this percolates through people's mind, it becomes possible to recognize what the alternatives are. And then that sort of aha moment when you begin to realize that those alternatives, they're already here. People are already finding ways to protect themselves as individuals from going down with the capitalist ship. And the minute you recognize that possibility, you see it all around. It's a

little bit like people who have the flu. And they say, oh my goodness, I have the flu. And then they start talking to their friends and they find out half their friends have the flu. Somehow when it hits you, you become aware that it isn't just you, that there are loads of folks who share this. And that's happening now across this planet as people begin to realize what are the alternatives to capitalism? How could we otherwise organize? And might some of these alternatives be much better than the capitalism? Might we get to the point of looking on the passing of capitalism not as a horrible collapse to worry about, but as an opening, as a possibility, as a liberation to welcome, as happened with the

transition from slavery to feudalism, from feudalism to capitalism. I mean, I like to tell my students, if you study the transition from feudalism to capitalism, you discover that the If you study the transition from feudalism to capitalism, you discover that the artistic icons of Western culture are all about that. Let me give you an example. The music of Beethoven, which we celebrate, is the celebration by a German artist of the end of feudalism and the arrival, in this case, of the French Revolution, which he was celebrating. The whole notion, if you listen to the Ninth Symphony, is supposedly his greatest, the ode to joy, the choral part of the last part of the symphony, is a celebration of the rights of man, of the slogans of the French Revolution,

which he welcomed. The Renaissance is the beginning of the end of feudalism. It's the celebration of the rediscovery of what existed before feudalism, ancient Rome and so on, in a new form, a renaissance in French, the rebirth of a society that wouldn't be feudal anymore. It's on and on and on. So we have to understand that the transition from one system to another not only can be, but typically has been viewed

as a liberational, progressive moment in human history. The French Revolution, the American Revolution, the British Revolution, those are now retrospectively seen as the opening of capitalism, the wonderful thing. My guess is we are on the verge of a transition that will also in its time be understood as a breakthrough to something new, difficult as all such breakthroughs are. for more from upstream please visit www.upstreampodcast.org