Economic Update with Richard D. Wolff

Episode: Economic Change, Economic Disorder
Date: February 15, 2016
Host: Richard D. Wolff

Overview

In this episode, Richard D. Wolff examines the ways economic change and disorder are impacting societies worldwide, focusing on the ascent of China, drug shortages in the U.S., austerity and public services in Ireland and the United States, and how monetary systems are structured and managed. Wolff critiques the underpinnings of capitalist economic models and calls for systemic solutions—particularly in public health, higher education, and banking.

Key Discussion Points and Insights

The Rise of China as a Global Economic Power

• China's Unprecedented Growth
  • In 40 years, China’s share of global GDP (measured in Purchasing Power Parity) rose from less than 2% to 16% ([01:55]).
  • Per capita output increased from $250 in 1980 to an expected $16,000 by 2020.
• International Recognition
  • The IMF included the Chinese Renminbi in its basket of world reserve currencies, joining the USD, Euro, Pound, and Yen ([02:25]).
  • Symbolic shift: The launch of the Asian Infrastructure Investment Bank, designed as a counterbalance to Western-led institutions.
• Geopolitical Implications
  • "China has to be dealt with, has to be understood that it is an economic powerhouse. It has accomplished that in literally 30 to 35 years." – Richard D. Wolff ([04:25])
• China and Oil
  • Unlike Russia or Venezuela, China benefits from being a major consumer (not producer) during oil price collapses, increasing its global leverage.

Drug Shortages in the U.S.: Capitalism vs. Public Health

• Critical Drug Shortages
  • Ongoing shortages of life-saving medications, as reported by the New York Times ([07:32]).
  • Ethical dilemmas for doctors: "Who gets the medicine and who doesn’t… who waits, maybe never to get it in time before the disease becomes much worse or death arrives?" ([08:00])
• Profit Motive at Odds with Public Need
  • Shortages often stem from low profitability for manufacturers. "We permit drugs to be made by for-profit corporations who can decide… to produce fewer or none at all… because it isn’t profitable." ([09:15])
• Alternative Approaches
  • Wolff suggests, "Maybe drugs should be produced by planning the production, charging a price that simply covers the cost of doing it, not the profit to somebody we don’t need that. Organize… as a public service." ([12:00])
• Public Goods Analogy
  • Compares drug production to maintaining public parks, which are operated for public well-being, not profit ([12:35]).
• Economic Reality Check
  • "A profit-based capitalist system for producing drugs is creating ethical disasters and public health losses that we don’t need." – Richard D. Wolff ([14:12])

U.S. Healthcare Insurance: Blame and Responsibility

• Case: UnitedHealthcare and the California Exchange
  • UnitedHealthcare lost money through "a whole series of investment blunders," but shifted the blame to Obamacare when reporting losses ([16:37]).
• Political Dynamics
  • Warns listeners to scrutinize critiques of the Affordable Care Act, as they may mask corporate mismanagement rather than system flaws ([18:22]).
• Memorable Quote
  • "When you hear a critique of Obamacare, you got to look real carefully at who's making it and why they're making it." – Richard D. Wolff ([18:00])

Ireland and Austerity: The Myth of the “Success Story”

• Bank Bailouts and Public Cost
  • Ireland is held up as a model of successful crisis recovery, but the reality is continued austerity and public suffering ([19:05]).
  • Senior bondholders were protected; ordinary citizens bore the burden.
  • "The average people in Ireland had to pay the full freight for the banks they didn’t own, for the banks they didn’t run, for the say they didn’t have." ([20:55])
• Lingering Economic Hardship
  • Hospitals are underfunded, unemployment hovers at 9%, and many young people are emigrating ([21:48]).
• Critique of Austerity
  • "Austerity has devastated Ireland. That’s why it’s losing its people. It hasn’t been a success. You saved the wealthy..." ([23:28])

Wealth Tax Initiatives in the U.S.

• Progressive Taxation Developments
  • Massachusetts considers a 4% tax on millionaires and renews debate on taxing wealthy private universities ([24:10]).
• Shifting Public Attitudes
  • Commentary by Boston Globe writers calling for taxes on billionaire colleges ([25:05]).
• Societal Implications
  • "The inevitable is coming, which is the desire of the mass of people to use politics to correct an economic system whose inequality is not acceptable." ([25:47])

Public Higher Education and Disinvestment

• Endowment Tax Debate
  • Renewed calls in Massachusetts to tax billion-dollar endowments at elite private universities ([29:17]).
• Downsizing and Defunding of Public Higher Education
  • 47 out of 50 states cut per-student spending since 2008. Only Alaska, North Dakota, and Wyoming did not ([31:11]).
  • Average state funding per student fell by $1,805; tuition at four-year public schools rose by 29% (average $2,068 per year) ([32:51]).
• Systemic Inequality
  • "You are savaging the place where three-quarters of our young people get their education." ([34:00])
• Contradiction in Priorities
  • Rich private universities remain untouched while public institutions are gutted, compounding social inequities.
• Impact on Life Choices
  • Student debt pressures young people to take less fulfilling jobs, delay marriage, and postpone having families ([35:31]).
  • Irony: "The very same conservative forces who talk endlessly about family values are the same ones cutting allocation to higher education that makes young people decide not to have a family at all." – Richard D. Wolff ([35:58])

K-12 Education: The Struggle in Chicago

• Chicago School System Under Siege
  • Recap of 2012 teachers’ strike and ongoing financial stress; further budget cuts proposed amidst chronic underfunding ([37:29]).
• Decision to Preserve Wealth at the Top
  • "This is a school system that isn’t up to snuff already and it wants to make cuts. Damaging the quality and quantity of education makes this country worse." ([38:21])
• Broader Pattern
  • "Take care of those at the top... even though these taxes on them wouldn’t stop them from still being rich. Just not quite as rich. Wow." ([39:21])

How the Monetary System Works (and Fails)

• Money Creation: A Basic Primer
  • Explains that most money is created by banks as loans—that "magically" appear as deposits ([41:20]).
  • "Money is either paper or a screen version of that paper." ([43:01]).
• The Bank Lending Cycle and Risk
  • Banks make money by issuing loans, which incentivizes risk-taking; insufficient regulation leads to cycles of defaults and crises ([44:20]).
• Central Banks and Perpetual Instability
  • Central banks were established to “monitor” but face conflicts of interest since banks themselves sit on oversight bodies ([46:12]).
  • "It’s a mess. Banking is a mess. This is no way to run a monetary system." ([48:35])
• Call for Reform
  • "Money is too important to be subordinated to the profit strategies of individual banks. That’s why the supervision doesn’t work real well. That’s why the periodic explosions and meltdowns happen." – Richard D. Wolff ([49:11])
• Looking Ahead
  • "If you think the monetary system is under control, you’re not paying attention. It’s always been out of control, periodically. It’s not explosive. But that never lasts very long." ([50:25])

Notable Quotes & Memorable Moments

• On Public Services and Profit:
  "Organize the production of medical equipment, the production of drugs, the production of everything having to do with health. Make it as cheap as you can by simply covering the cost of doing it… No profit because it’s done as a public service." ([12:00])

• On Redistributive Policies:
  "You can’t oppose redistribution only when it goes in a direction you don’t like and not when it goes in the direction where you’re the beneficiary." ([29:55])

• On Higher Education Cuts:
  "In a period that is one of the most difficult economic times for the American mass of people… the states of this country lowered the support… They added a burden to the families… of $2,068 per student per year." ([33:00])

• On Systemic Contradictions:
  "We live in a society in which those people cause most of the problems and then are exempted from suffering the results. That’s our job. If you accept that, it will continue." ([40:11])

Timestamps of Important Segments

• [01:55] - The rise of China: GDP and economic power
• [07:32] - U.S. drug shortages and ethical dilemmas
• [12:00] - Proposing a non-profit model for drug production
• [16:37] - UnitedHealthcare and Obamacare blame
• [19:05] - Ireland’s austerity after banking collapse
• [24:10] - Massachusetts wealth tax proposal
• [29:17] - Renewed debates on taxing private university endowments
• [31:11] - State disinvestment in public higher education
• [35:31] - Life consequences of student debt
• [37:29] - Chicago schools and austerity
• [41:20] - How money is created by banks
• [46:12] - Central banks: conflict of interest, regulatory limits
• [49:11] - Profit motive distorts the monetary system

Final Thoughts

Richard Wolff’s analysis in this episode underscores not only persistent economic disorders but also the underlying ideological struggles over profit, public good, and who bears the costs of crisis. He continually draws attention to the structures that perpetuate inequality—encouraging listeners to reconsider the logic of markets, policy, and public priorities, and to support alternatives that champion broad well-being over private gain.