Economic Update: Capitalism is the Problem
Podcast: Economic Update with Richard D. Wolff
Host: Richard D. Wolff
Episode Date: February 22, 2016
Overview
In this episode, Richard D. Wolff critiques global capitalism, focusing on why capitalism itself—not mere policy failures or mismanagement—is at the root of contemporary economic and social problems. Drawing from recent economic news and historical trends, Wolff explains why attempts at reform consistently fall short, ultimately advocating for a structural transformation of the workplace and broader economy through democratization.
Key Discussion Points & Insights
1. Slowing Global Economic Growth
- [04:23] The OECD revised its growth forecasts for 2016–17 downward for the US, Europe, Brazil, and more.
- Implication: Even mainstream economists foresee persistent stagnation or decline.
2. The Role of the Wealthy in Politics: Michael Bloomberg
- [06:00] Michael Bloomberg’s vast fortune ($38.5B) gives him unprecedented political power—he considers a $1 billion self-funded run for president.
- Quote:
"Please notice that...politicians felt the need to go to the rich people for the money required to win. Apparently, the rich people don’t want that system anymore. They just want to avoid the middleman and go right in and get it themselves." – Wolff [07:16]
3. Negative Interest Rates as a Sign of Economic Desperation
- [09:00] Central banks in Switzerland, Denmark, Sweden, and the European Central Bank have adopted negative interest rates; the US may follow.
- Explanation:
- Banks hope to force lending by penalizing idle reserves.
- Also aims to devalue currencies and bolster exports.
- Quote:
"It’s a sign, in short, of desperation....trying to cope with a capitalist downturn without touching the capitalists." – Wolff [12:30]
4. Oil Politics: Saudi Arabia and Russia Cooperate
- [13:40] Rival nations attempt to halt the collapse in oil prices by capping output, highlighting their economic vulnerability and how a small elite controls global energy.
- Insight:
"A tiny number of big oil companies and politicians...set the price, a tiny number of people who could fit in an auditorium for the entire 7 billion of us on this planet." – Wolff [15:42]
5. Puerto Rico’s Debt Crisis and Regressive Taxation
- [17:00] Puerto Rico’s government, facing a $72B debt, increases its sales tax to 11.5%—the highest across US territories—hurting the poorest residents most.
- Quote:
"The poorest part of the country pays the highest sales tax. What justification for that could exist that isn’t repugnant?" – Wolff [19:10]
6. Continued Offshoring of American Jobs
- [19:30] Companies like Carrier, Ford, and Nabisco are sending jobs to Mexico. Appeals to corporate ethics are futile under capitalism’s profit motive.
- Quote:
"This has got nothing to do with ethics...This is about profits. This is about how capitalism works." – Wolff [21:56]
7. The Limits of Financial Regulation: Too Big to Fail
- [23:00] Neel Kashkari (new Minneapolis Fed president) calls for breaking up big banks or converting them to public utilities, recognizing market failures even from within the establishment.
- Quote:
"Some people think only Bernie Sanders wants to break up the banks, but no, even some of the biggest insiders...understand that...are socially dangerous to permit to continue." – Wolff [24:32]
8. Corporate Tax Avoidance and Shareholder Returns: Apple Example
- [25:00] Apple borrows $12–20B for buybacks instead of repatriating $216B in overseas cash (to avoid US taxes), illustrating how capitalism rewards financial maneuvers, not productive investment.
- Quote:
"That’s not producing anything. That’s how capitalism works. And if it strikes you as crazy, good, then you understand pretty clearly what’s happening." – Wolff [27:40]
9. Worker Cooperatives as a Democratic Alternative
- [29:30] Worker co-op conversions are feasible, legal, and already happening, providing a model for democratic economic organization.
- Quote:
"It’s really important that we all understand that this is...already a reality...If you hadn’t heard about it, that’s because it represents a challenge and an alternative to capitalism." – Wolff [31:18]
Major Segment: Approaches to Capitalism’s Problems
[33:30 – 50:00]
A. Capitalism’s Global Crisis
- Signs of crisis and discontent: Sanders in the US, Corbyn in the UK, new left governments in Greece and Portugal.
B. Three Responses to Capitalist Crisis
1. Laissez-Faire Boosters
- Capitalism is perfect; market self-corrects; government intervention harmful.
- Noted explosion of inequality:
"...62 people, the richest 62 on this planet, now own more wealth than the bottom half of our planet’s population..." – Wolff [37:12]
2. Reformers
- System can be fixed through regulation and social programs (minimum wage, progressive taxes, antitrust, etc.)
- Historical failures of reform:
- Glass-Steagall Act (1930s) repeatedly undermined, eventually repealed (1999).
- Minimum wage undercut by inflation, political resistance.
- Progressive income tax burden shifted from the wealthy to the middle/lower classes via loopholes and payroll taxes.
- Key Insight:
"Those at the top use their wealth to stay that way...they use a portion of their wealth to preserve, to protect and enhance the rest of their wealth. That is how it works." – Wolff [46:20]
3. Structural Change Advocates
-
Liberals propose more/stronger regulation, but this falls prey to "regulatory capture".
-
State socialism as in USSR or China gives too much power to the state, with its own problems.
-
Proposed Solution: Democratize workplaces and the economy through worker co-ops.
-
Quote:
"If you want the economy to serve the people, put the people in charge." – Wolff [49:00]
-
Vision:
- Enterprises, collectively owned and managed by those who do the work
- Democratic decision-making over pay, production, resource use, and sharing profits with local communities
- Direct structure prevents both capitalist exploitation and the episodic undoing of reforms
Notable Quotes & Moments
-
On Corporate Power:
"It is outrageous to have this dependence of the mass of people on a tiny, undemocratically accountable elite who make these decisions, usually in the fanciest hotels in the fanciest centers of the world..." – Wolff [16:53]
-
On Reform's Limits:
"Regulating these big industries hasn’t worked very well. That’s why we have the history in 2008 of a banking collapse eerily familiar in terms of what happened in the 1930s." – Wolff [44:15]
Summary Table of Key Segments
| Timestamp | Subject | Key Point/Insight | |------------|-------------------------------------|--------------------------------------------------------| | 04:23 | Global Growth Decline | OECD warns of deepening stagnation | | 07:16 | Bloomberg Presidential Ambitions | Wealth directly buying political power | | 12:30 | Negative Interest Rates | Desperate policy moves of capitalist states | | 15:42 | Oil Price Collusion | Energy as example of elite control | | 19:10 | Puerto Rico Sales Tax | Poorest pay the most regressive taxes | | 21:56 | Corporate Offshoring | Capitalism's logic: profit, not ethics | | 24:32 | Too Big to Fail Banks | Insiders acknowledge dangers, need breakup | | 27:40 | Apple and Tax Avoidance | Financialization over productive investment | | 31:18 | Worker Co-op Conversions | Existing, practical alternative to capitalism | | 37:12 | Global Inequality | 62 people own as much as half world’s population | | 44:15 | Reform Reversal | Systematic undermining of reforms by wealthy interests | | 49:00 | Democratized Workplace | People must control enterprises for real change |
Final Thoughts
Wolff’s central argument is uncompromising: capitalism’s central flaws—instability, deepening inequality, and systemic injustice—cannot be permanently fixed through reform. He insists only workplace and economic democratization represent a viable path forward, illustrated by the growing but underreported movement for worker cooperatives and conversions. The episode is a call to recognize both the limits of existing approaches and the potential of deep structural change.