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Welcome friends, to another edition of Economic Update, a weekly program devoted to the economic development dimensions of our lives and those of our children. I'm your host, Richard Wolff. Before we begin today's program, I want to remind you that we now have made available recordings of the online course taught by Professor Shahram Azar and myself, Marxian Class Analysis. If you were unable to attend for any reason, each course session is available for a small fee and you can view them then, however and whenever you wish. If you're interested, there will also be a Q and A with Professor Azar and myself in a few weeks. Please go to our website democracyatwork.info where you can get our newsletter plus all the details about the these classes, the availability of the recordings, the Q and A session, and all that. Please remember to like subscribe and share this video with others. That's why we make them for those of you who have not yet signed up for our Members Only Patreon. By doing so, you can gain access to additional materials that we make available there. Go to patreon.com democracyatwork or you can find the link in the description below. Today's program is divided into two parts. The first half will be devoted to one standard justification of capitalism, and the second to another, a second justification. I'm going to show you how and why you need to criticize these justifications and not accept them as if they were somehow necessary or logical or unavoidable. Capitalism is a system that has developed an elaborate ideological justification. Many of you write to me at various times asking me to offer criticisms of those justifications because you've encountered them in your own life, your work, your reading, your thinking, and so on. So rather than ad hoc, I thought I'd take a few sessions and give you condensed criticisms of these ideologies that are fundamental to keeping capitalism going. What do I mean? I mean, these are things people believe, and because they believe them, they don't question, let alone act to do better than capitalism. They think they're stuck with it, or even worse, that it's really a good system that's reasonable and fair and therefore appropriate. It isn't. And here are two examples to show you that the first has to do with the concept called risk. Here's the idea, and it is pushed in countless textbooks, in countless speeches given by CEOs on the 4th of July, and so on. And the idea is capitalists. You know, the people, the rich people who own and operate the factories, the offices and the stores that comprise our economy. These Capitalists are doing us a huge favor. They are risking their money, you know, after all, it's theirs. They could hold it back, they could not invest it. And by invest I mean go into business, hire workers, buy machines, produce a product, a good or a service, and to sell it. We're all supposed to be grateful because we have goods and services which only exist because they risked investing their money. And we have jobs which exist because they risked investing their money. So for the products we enjoy and depend on, for the jobs we depend on, we appreciate the risk that investors took to create the enterprises that give us the jobs and the products. But they all go further, don't they, these capitalists and the people who justify for them. They explain that the profits accruing to the capitalists who invest is a reasonable reward for their taking the risk. In other words, we show our appreciation for the jobs and products we get because they risk making investments. We show our appreciation by giving them a nice cut of the revenue that comes in when workers use raw materials and tools to produce products. In other words, profit is the reward to those who take risks. Now, I want to show you what's wrong with this argument. And I'm only laughing because part of me can never understand why people fell for this in the first place. And it's an old idea. This is nothing new. First you ought to wonder, ask yourself the all of this argument depends on something, doesn't depends on whether the capitalist who has money has the right to withhold it. Think with me for a minute. If the capitalist's risking his money, if the capitalist doesn't have to, if the capitalist could hold it back, well, then we wouldn't have a job and we wouldn't have the products and we'd suffer. And so we say thank you and give them profits as a reward. But suppose they didn't have that right. Suppose they didn't have the right to withhold what the whole community needs. Remember, capitalists are small in number three, 4% of our population. That's it. So we're saying, in effect, without admitting it, that with this risk story the 3 or 4% who have so much wealth can decide to withhold it from us, denying us jobs, income and the products we literally depend on. A small minority is in that position with a great majority. There ought to bother you something about that doesn't love democracy, is it? Think. Suppose the money that they have, they stole. Now the money they stole can be withheld by them and they get a reward only if they invest it. But wait A minute. We're giving the reward for people who've invested money they stole or money they inherited. By rewarding the risk taking, we make sure not to ask where the money came from. But there's a greater issue of risk that I want to bring to your attention. And that is that the risk taken when we have an enterprise that produces something, a good or a service, is not just the risk of the person who invests the money. This is crucial to understand. Does that person risk the money? Yes, they do. But that's no different from what the worker does. Who takes the job in that factory, office or store. What are they risking? They may have moved a long distance to get the job, to take the job. They may have yanked their children out of school to move them at a time which is not good for those young people's development in order to take that job. If they have a family, they have a spouse and children, maybe elderly, who also depend on the income from the job. They all took a risk by having someone take a job. In other words, workers take risks too. When they take a job, so does the family of the worker, so does the community of the worker. The local mom and pop restaurant depends on those workers taking the job, having the income to pick up a hamburger if they don't have the job, if the job disappears, the risk that they took in setting up the little mom and pop restaurant will be a destruction of their lives. In other words, lots of people take risks, not just the capitalist. So if you're going to reward the capitalist with profit, then you got to reward, at least with some of the profit, the other people taking risks. If those workers didn't risk coming to work for this capitalist, he couldn't do anything. If the community didn't support it, he couldn't do anything. Wow. But we don't pay workers for risk. We pay them for the labor they do. That's their wage. But they ought to get a cut of the reward to risk if we're going to work like that. Capitalism doesn't do that. It pretends and hopes. You don't catch them in imagining that the risk is just taken by the capitalist. That is bs. It is true that the capitalist takes all the profit. But the nonsense about risk is intended to have you not ask the question, why should that be the way it is now? Of course there's other ways of thinking, aren't there? And I'm going to end with that one of them, because it's so important. Here's an alternative way to understand what the Capitalist, the guy with the money, confronts a mass of people who don't have enough money to live, whose only way of surviving, really is by going to work. They have to work for someone. They don't have a lot of money. The capitalist has a lot of money, Might have stolen it, might have inherited it. Who knows how he got it? We don't ask in capitalism, when you walk into the store to buy something, all they want to know is, do you have the money? Not how did you get it. So suppose the people who have a lot of money, 4, 5%, confront a mass of people who don't have enough money to live. They strike a deal. The ones with the money say to the ones who don't have anything, come to work for me. And when you work for me, you'll produce a whole bunch of stuff. I'll buy the raw materials and the machines. I'll take care of that. And we're going to produce a whole bunch of stuff. And when we sell it, I'll have enough money to replace the tools and equipment you used up. I'll have enough money to pay you a wage, enough to get by, you know, beer, pretzels, pizza, an apartment, and then there'll be the profit I get, and that'll make me even richer than I started out. But you, you'll still have to come tomorrow and work for me, because you never can accumulate enough to become a capitalist. Very, very few workers ever become capitalists. So I keep you in a perpetual condition of having to sell your ability to work to me. And I keep in my hands the growing wealth needed to hire a growing number of you. That's an alternative view. I think it's more accurate and more appropriate. But whether you do or not, the alternative argument that what we are seeing here is an appropriate payment for the risk the capitalist takes, that is an outrageous crock. But it is one of the founding ideas that keeps capitalism going, because an awful lot of people still believe it. We've come to the end of the first half of today's program. Stay with me. We're going to come right back and I'm going to show you a second major support for capitalism that doesn't hold water. And it's all about technology and about artificial intelligence. Before we jump into the second half of today's show, I wanted to thank you for your very generous response to our fundraising efforts this year, and in particular in the last couple of months. And in part responding to that, we are extending the availability of our limited edition linen covered hardcover version of Understanding Capitalism, the book I wrote and that we have been making available now for quite a while. If you are interested, I will be signing copies of that hardcover and they will be available to you as they have been over the last few weeks. Just simply send an email to us@infodemocracyatwork.info and put in the subject line limited edition. We will send you all the information you need to order and receive your copy signed copy of Understanding Capitalism in its hardback. And thank you again for your kind attention to the fundraising dimension of what we do. Welcome back, friends, to the second half of today's economic update. We're going to be talking in this second half about another supportive idea of capitalism. Here it's not so much a question as it was in the first half of the show, the theory of risk and why that's really an empty idea. Here it is an analysis of capitalism. As if to get the good things capitalism is going to give us, we have to suffer a little. And the interesting thing once you start thinking about it is, is that when you look closely, the winners from all of this are mostly the capitalists, the 4 or 5% of the people who are the employers in our culture in a capitalist system. And the sufferers are an awful lot of the working class. That's a kind of sign that we're talking here less about an understanding than than about a make believe designed to justify capitalism. So what I'm talking about is technology, and particularly technologies that cost a lot of people their jobs. And the one that's in everyone's mind these days is artificial intelligence, AI. But you know, it's not different from what was thought about the computer at the end of the last century, 20th century, when the computer was the big technical breakthrough and we had it earlier with the loom, with atomic energy, with jet engines. Whenever there's a big technical breakthrough, you notice something it's brought into being. It's installed in a factory or an office or a store by the capitalists. They're the only ones who have the right to do it. The workers don't have the right. So you know, the capitalist who installs the new technology, the new machine, the new process, the new AI these days must be doing it because it's good for its business. It's not doing it to do the working class any favor. So now let's take a look at what people are saying about AI. Well, it's being installed everywhere. We are being told that an enormous amount of money is going into installing it in virtually every industry, we are told, enormous investments are made to generate the electricity that we need to run AI. In other words, the whole economy, we're being told, is being redeveloped, taken in new directions in order to install AI. And then comes the clue that we're in la la land of justification. Serious looking people tell us that they are very concerned that AI will replace ready millions of workers who won't be needed anymore now that we have a new machine, the AI machine that is going to do all these things that you used to need working men and women to do. And those people will be thrown out of work and we should be concerned about them. Wow. Let's take a look at this idea. Is it possible that AI will be installed and that capitalists will fire a lot of people now that they have the AI machine? Absolutely. Of course, it's already happening. No one's denying that. But when the capitalist does that, who do you blame? The machine. No, stop. It's not the machine that's the problem here, it's the capitalist. And I'm going to show you that in very simple detail and to do it. And I've done this with you before, but I want to do it again because so many of you have been writing to us asking us to do this. I'm going to use a simple example. A Little Enterprise has 200 workers and they produce 1,000 something. It doesn't matter what it is. Could be software programs, could be haircuts, could be ice cream cones, it doesn't matter. And we're going to assume that the thousand things are worth a buck each. So the revenue of this enterprise is 1000. And they got 200 workers working there. And our capitalist, here's what he has to do. He has to spend $100 on tools, equipment and raw materials for those 200 workers to work on and work with. And he has to pay them. We're going to assume $2 a worker. So that's $400 for the worker, 200 workers, $2 each. 400. So 100 for tools, equipment and raw material, plus 400 for the labor for the workers. And then he sells the 1,000 units for a buck. He gets $1,000. And what does our capitalist do? He takes 100 of the thousand he gets from selling the product and replaces the tools, equipment and raw materials so he can keep production going. This is a good production system, as you'll see. So he wants to keep it going and he'll take out of the 1000 he gets from selling the product. He will give 400 to the workers. He promised them a wage he has to deliver. But that will leave him $500 out of the thousand that he gets to keep. That's his profit. And he has a big smile because he's made such a nice profit. Okay. Now, AI comes along and it says to him, we got a deal for you. You buy this new machine, cost next to nothing, some software for your computer. And it'll make every one of your workers twice as productive. Great, says the capitalist. He buys the AI and he says to his 400 workers, excuse me, his 200 workers, I only need half of you. Because with half of you I will have a thousand output. Because each of you is twice as productive working with AI. So I don't need 200 of you. I only need 100 of you. I'll pay you what I paid before, $2. So you're going to get the same wage. You're going to come to work. You're just going to be working with an AI machine rather than with a fellow worker. I'm going to fire half the workers. We had 200 to start. Now I'll have 100. I'll get the same thousand bucks because we're producing the same thousand units. That hasn't changed. I have half the workers, but each of them is twice as productive. But that means my payroll. I only have to pay 100 workers, not 200. I pay them the same. So my wage bill goes from 400 bucks to down to 200. I only have to pay half the workers. And the 200 I don't have to pay to the half workers I fired, I keep for myself. My profit has gone from 500 to 700. You can play with the numbers all you like. The reality is, AI is wonderful. For the capitalist, it boosted his profits. That's why we're going to have lots of AI. We're going to have it exactly to the extent that it is profitable for capitalists to use it. Now, the capitalists have no responsibility in our strange system called capitalism. For the hundred workers they just fired, what happens to them? What happens to the families that are dependent on their income? What happens to the local community that's dependent on the money that those hundreds spent in local stores? They're not going to be there anymore. Answer somebody else. The capitalist who made the decision to unemploy those people bears no responsibility for the social consequences of his decision. Wow. That ought to make you wonder. Where's the democracy here? A tiny group of people, remember capitalists. Five or six percent of the people are making a decision that impacts large numbers of people, hurting those people and everyone who depends on them. And yet the people who make the decision that causes the problem have no accountability, no responsibility to deal with it. Either nobody deals with it, or maybe those people can go stand on a line outside of the local church or synagogue or mosque, hoping for a bag of food. Maybe. Or maybe there's a government agency somewhere that'll help them. The capitalist doesn't know, and the capitalist doesn't care and has no responsibility. Wow. As if this weren't enough, let me show you. As we did in the first hour with the Risk story, let me show you what. What an alternative would be. Easy, obvious once you think about it. Here's what the workers could say to the. Wait a minute, Jack. We don't want you to install AI that way. We like AI because it makes us all more productive. So how about, here's what we do. You don't fire anybody. You keep laying out 100 for the tools, equipment and raw materials you use up. And you keep paying the workers to 400, just like you did at the beginning. And you keep the same number of workers working. But here's what you do with AI. You make the working day not eight hours, but only four. Why? Well, if every worker becomes doubly productive with AI in four hours, they can do what it used to take, eight hours. You'll get 1,000 units because you got 400. You paid 400. You got 200 workers working half time and still producing the same thousand output. That's what AI gets you. Your profit will be the same. 100 for tools, equipment, raw material, 400 for your workers. You haven't fired anybody. You haven't cut their pay. What you have given to the workers is half of their time. They will love you. Mr. Capitalist, that is a gift far greater than anything you've ever thought about, let alone done. It produces the same output for the community. It keeps everybody working, which is way better than firing half the people. Since the vast majority of us are workers. Your AI has done what it promised, made the life of the people better. Their workday went from eight hours to four. Now they have time for their family, for their hobbies, for their passions, to go back to school, to do all the things they had wanted to do all their lives. That's using new technology to help people rather than new technology to provide profits to the richest people who. Who are already in our society. It would be much better, much more ethical, and much more socially productive. Don't fall for it. The people with the crocodile tears about unemployment coming from AI want you to think the problem is AI. It isn't. The problem is capitalism and how and why it makes capitalists behave the way they do. They're the ones who produce the unemployment, not the technology. And don't let them fool you. Thanks again for your attention. I hope you found these criticisms of foundational ideas supporting capitalism worth thinking about, and I look forward to speaking with you again next week.