Monday, March 6, 2017

Richard D. Wolff — Trump and Saving Capitalism

Capitalism, Thomas Piketty showed in his book, Capital in the Twenty-First Century has a built-in tendency to worsen income and wealth inequalities. One consequence of this tendency are periodic political explosions of mass, popular anger. People push back against those inequalities and the political corruption and social divisions they always aggravate. Politicians who grasp these moments often succeed in taking advantage of them and win. Politicians who fail to see, admit, or accommodate these moments lose. Such losers have usually served as administrators and cheerleaders for capitalism – its sequential “establishments.” So busy (and well paid) celebrating the system, they are undone by their own defensive blindness to its failures and critical oppositions....
Counterpunch
Trump and Saving Capitalism
Richard D. Wolff | Professor of Economics Emeritus, University of Massachusetts, Amherst, and currently a Visiting Professor in the Graduate Program in International Affairs of the New School University in New York.

29 comments:

MRW said...

Capitalism isn't the cause, as if the system of earning income from the fruits of your labor has an inherent flaw. Failure of a government to care for its people (fiscal policy etc) is the cause, and so are the leaders that the voters put in there.

MRW said...

Or, rather, so are the voters who elect these leaders.

MRW said...

Another Hitler comparison? It wasn't the immigrant issue. It was Hitler's brilliant economist--the one with Horace Greeley as his middle names--who refused to pay the draconian reparations in gold that were bankrupting the country, and used the currency to create massive amounts of new jobs, institutions, the autobahn (Eisenhower was impressed), and social programs that gave the Germans paid holidays and health care. I hear the quiet resignation and unexpressed seething of the hoi polloi in the bar when the nightly news comes on, and they roll their eyes at the demonstrations and anchor hyperbole. I get the sense they are just waiting for the midterms to polish off the rest of them. Going to be an interesting ride.

Magpie said...

MRW said...

Capitalism isn't the cause, as if the system of earning income from the fruits of your labor has an inherent flaw.

I'm not sure I understand you there, MRW.

Capitalism is a system where some (capitalists) earn income from the fruits of other people's labour (workers). That's ultimately why capitalism is prone to crisis.

The specific mechanisms change, of course, but in that capitalism is exactly the same as slavery: the slave works, his/her owner profits from it. Or serfdom: the serf works, his/her lord profits from it.

Could government intervention ameliorate that? Sure it could, within limits: too much amelioration destroys the system. There cannot be capitalism without capitalism, just like there cannot be slavery if one sets slaves free.

GLH said...

The problem doesn't seem to be capitalism but the form of capitalism. Reagan brought in neoliberalism and changed the country from industrial capitalism to finance capitalism and every president since has followed that lead. Now we work for the rent seekers on Wall Street.

Magpie said...

GLH said...

The problem doesn't seem to be capitalism but the form of capitalism.

The patient is not dying of cancer, no siree. What's killing him is bowels cancer. :-)

MRW said...

the slave works, his/her owner profits from it. Or serfdom: the serf works, his/her lord profits from it.

I call that feudalism. I suppose my definition of capitalism is the one that prevailed after WWII until the institutions that protected the population and increased their prosperity were gradually dismantled starting in the late 70s.

People forget that US public corporations were created, or allowed, initially to benefit the public. Public corporations. CEOs and upper management had a public responsibility to their workers, and the concept of labor sharing in the profits with management or owners was almost a sacred trust. In the late 70s, the idea of continuing with that vamoosed, as corps looked for cheap labor offshore and the mantra of working for the benefit of shareholders became the new business religion. Must enrich the owners!

Then in 1981, as the NYT reported at the time: “Back in 1981 John Shad, a Wall Street banker and Ronald Reagan backer, became head of the Securities and Exchange Commission. Shad, like the Chicago economists who influenced him, believed that a deregulated stock market was good for the economy. In November 1982 the very government agency that is supposed to regulate the stock market adopted Rule 10b-18, which instead encourages corporations to manipulate stock prices through open-market repurchases.” And they passed it through while Reagan was recuperating from being shot in the head.

More here: “How The SEC Engineered Every Stock Market Bubble Since 1982”
http://www.dark-bid.com/SEC-engineered-every-stock-market-bubble-since-1982.html

But the net effect was instead of spending $ on R&D, or entering new markets, or improving wages, they used their profits to buyback the stocks, which raised the price of the stock, and upper management collected enormous year-end bonuses because their compensation was now tied to the price of the stock.

So you ask: Could government intervention ameliorate that?

Bet your ass. That’s its responsibility. What it’s doing now isn’t amelioration enough.

MRW said...

Here's another good article about it, in The Intercept. August 2015. SEC Admits It’s Not Monitoring Stock Buybacks to Prevent Market Manipulation. https://theintercept.com/2015/08/13/sec-admits-monitoring-stock-buybacks-prevent-market-manipulation/

Andrew Anderson said...

Capitalism isn't the cause, as if the system of earning income from the fruits of your labor has an inherent flaw. MRW

Yet government subsidies/privileges* for private credit creation are inherently flawed - on their face - since those violate equal protection under the law in favor of the richer, the more so-called credit worthy, at the expense of the poorer, the less so-called credit worthy.

*E.g. government insurance of private liabilities, including privately created liabilities ("loans create deposits"). Of course (duh, Auburn Parks), the insurance is NOT paid out to the depository institution but to the depositors but it is nevertheless a subsidy of depository institutions since otherwise the banks would be much more susceptible to bank runs.


Bob said...

People forget that US public corporations were created, or allowed, initially to benefit the public. Public corporations. CEOs and upper management had a public responsibility to their workers, and the concept of labor sharing in the profits with management or owners was almost a sacred trust.

How did that "sacred trust" come about?

Magpie said...
This comment has been removed by the author.
Magpie said...

MRW said...

I call that feudalism.

Fair enough. Call it feudalism if you like. Call it (*bU&tgg^f if that makes you happy.

The problem with capitalism is not what one wishes to call it, but that some must work so that others don't.



So you ask: Could government intervention ameliorate that?

Bet your ass. That’s its responsibility. What it’s doing now isn’t amelioration enough.


You just twisted my arms! :-) We are in furious agreement on that, MRW! :-)

After I asked that question, MRW, I'm sure you've noticed, I wrote:

Sure it could, within limits: too much amelioration destroys the system. There cannot be capitalism without capitalism, just like there cannot be slavery if one sets slaves free.

Yes, there was that wonderful age of enlightened capitalism when everything and everybody was perfect. It was the Garden of Eden. Fine.

But it did come to an end, didn't it? Humanity did fall from grace, no? There even were serpents involved: Reagan and Thatcher.

Well, guess what, it ain't coming back. But even if it came back, how would you stop it from happening again?

Jeff65 said...

MRW,

Consider that the amelioration you speak of was in reaction to the depression and then WWII. The post war period was not the normal state of capitalism. What is happening now is a reversion to normal.

Dave said...

Great article. Prof Wolff hits the nail on the head in an a clear and understandable way.

Dave said...

"Yes, there was that wonderful age of enlightened capitalism when everything and everybody was perfect. It was the Garden of Eden. Fine.
But it did come to an end, didn't it? Humanity did fall from grace, no? There even were serpents involved: Reagan and Thatcher
Well, guess what, it ain't coming back. But even if it came back, how would you stop it from happening again?"

Right. If you reform the system, it will fight for years to undo what you've accomplished. That fight will pit capitalists against workers in a life and death struggle. And since the government is paid for by the capitalists, it will tend to support them, causing rising pain and anger in the working class. This is why the west is in decline.

Penguin pop said...

"Right. If you reform the system, it will fight for years to undo what you've accomplished. That fight will pit capitalists against workers in a life and death struggle. And since the government is paid for by the capitalists, it will tend to support them, causing rising pain and anger in the working class. This is why the west is in decline."

I've thought about this too. Even if the politicians we like the most get their changes implemented and we were to get all these services we want like single-payer, what's to do stop the opposition from trying to scrap it despite the will of the people? The whole system needs to be transformed, scrapped and built up again from top to bottom. Elitism in the US is a feature, not a bug. Even what Bernie Sanders would have tried would have been a big band-aid over the larger underlying problem, and of course, a lot of what Richard Wolff is saying is also true.

GLH said...

Magpie: "The patient is not dying of cancer, no siree. What's killing him is bowels cancer."
There is a difference in industrial capitalism which made this country rich and financial capitalism which is extracting the wealth out of the economy to make a few rich. I agree that after WWII the country changed but the big changed came with Reaganomics and neoliberal financial capitalism.

MRW said...

Bob,

How did that sacred trust come about? Here’s the history.

Whose Corporations? Our Corporations!
The idea that corporations are obligated only to shareholders is a dangerous fad. Law and precedent say they owe a strong duty to the 99%.
http://www.alternet.org/story/154789/whose_corporations_our_corporations!/

3 Corporate Myths that Threaten the Wealth of the Nation
It’s time to restore corporate power to the people by blasting through the myths about how corporations should be run, and for whom.
http://www.alternet.org/story/154873/3_corporate_myths_that_threaten_the_wealth_of_the_nation/

MRW said...

If you reform the system, it will fight for years to undo what you've accomplished. That fight will pit capitalists against workers in a life and death struggle.

Which has been the last 40 years. But that’s what I’m watching to see if Trump can pull off. He can’t do much as Prez, and Congress can kill him. But if he goes to the people as he does and keeps up the conversation with them, the people have the power to kick Congress out.

That is what is giving TBTB diarrhea. Trump is going to prevail if he can keep the conversation up and influence the midterms. That will eventually dawn on our congressmen. If Trump maintains his popularity with the people, it will trump that capitalists against workers fight. I'd keep my eye on that.

Matt Franko said...

Maybe the PPP is a better institutional organization as under those, the govt still retains 80% ownership... and the desire for greater "return on investment" under a PPP keeps the cronyism out and further means that 80% of the surplus USDs collected by the PPP gets returned to the govt Treasury immediately...

MRW said...

There is a difference in industrial capitalism which made this country rich and financial capitalism which is extracting the wealth out of the economy to make a few rich.

Exactly.

I agree that after WWII the country changed but the big changed came with Reaganomics and neoliberal financial capitalism.

Well, the monster change came after WWII, which created the middle class from the prudent fiscal management by government. Reagan’s deregulation ushered in its demise.

Actually, my personal thinking on the matter is that it was Nixon taking us off the gold standard internationally in 1971 that marks the dividing line. Because only a few picked up on its propensity for untold prosperity for Americans; namely the bankers, aided and abetted by the oil crisis/inflation that fueled their search for solutions.

HOWEVER. And this is my fucking however. It was the media’s job during that time immediately following Nixon’s action to explain it to the American people, to learn what the fuck it meant and explain it in policy terms. Instead, Watergate intervened and then every single journalist wanted to be Bernstein and Woodward, be famous and rich.

The media didn’t change to what it is now until 1985 when CAP Cities took over ABC after Reagan deregulated the biz, and suddenly news became a number-crunching game and entertainment, infotainment.

MRW said...

Matt, what's PPP?

Bob said...

The idea that corporations are obligated only to shareholders is a dangerous fad. Law and precedent say they owe a strong duty to the 99%.

Well I could argue that the 8 hour day is a dangerous fad, and have the laws changed or revoked. There is precedent for a workday that is significantly longer with fewer restrictions. The article does not examine the history of this "sacred duty", as you put it, far enough.

Public corporations may have believed they had obligations to society, but that changed when politics changed. Once social pressure is removed, owners revert true to form. Public or private status wouldn't affect the incentive to keep all profit for themselves. If they are in a competitive market, they are driven to cut costs whether they want to or not.

Shareholder value is a myth in the sense that a corporation is under no obligation to provide any return to holders of its shares. Since most shares are non-voting, there is zero recourse to management's decisions. The only reason shares receive returns is for the purpose of selling more shares. A share is a piece of paper that allows the issuer to get free money.

Six said...

Matt, PPP is crony capitalism.

Dave said...

MRW I think the worker angle is the most interesting part of the Trump phenomenon. My hope is that workers stop trying to see Trump as a messiah and start to recognize their own ability to change circumstances and begin reorganizing.

Six said...

"Capitalism isn't the cause, as if the system of earning income from the fruits of your labor has an inherent flaw."

First sentence, and you've already lost the plot. The problems seem to arise when you receive income (fruits) from the labor of others. A little fruit seems to be okay, but eventually you want the bounty of the entire orchard and the fruit pickers get peeved.

#sixlikesgoofymetaphors

Schofield said...

It's all very well knocking the current disfunctional form of free market capitalism and getting all excited about Mr and Mrs Joe Soap rising up and over-throwing it but the same like the democracy inherent in the current form. They like the the "democratic voting" for the goods and services they want when they have the money and who can blame them survival's always about making the right "arrangements."

Magpie said...

@ GLH and MRW

GLH said...

There is a difference in industrial capitalism which made this country rich and financial capitalism which is extracting the wealth out of the economy to make a few rich.

MRW said...

Exactly.

I agree that after WWII the country changed but the big changed came with Reaganomics and neoliberal financial capitalism.


Sorry, folks, there's no big difference. It's not for nothing that we are living through the so-called Second Gilded Age: the first Gilded Age was the "industrial capitalism" you guys want to see now, 100 years after it ended as the good capitalism before the golden age.

Ask the Chinese drones assembling iShit for Apple how good this industrial capitalism is.

Magpie said...

Piketty and co-workers created the chart below. It has been around for a while and I'm sure all of you have seen it. It looks like a valley surrounded by two mountains, yes? The left mountain is the First Gilded Age, the Belle Epoque. The second mountain, to the right, is where we are.

http://www.newyorker.com/wp-content/uploads/2014/03/chart-01.jpg

The valley is what you people call "social democracy", "industrial capitalism" or God knows what else. Piketty called it "les Trente Glorieuses".

However you call it, the valley is the exception. It took two world wars, a Great Depression, and a Cold War to carve that valley. For Keynes' devotees: it took the Messiah of capitalism to create that valley.

Whatever the causes, something is pretty clear: you won't see that happening again.

The mountains are the rule.

The age of enlightened capitalism is gone, gone-diddly-on. Get over it.