Economic Update: "Economics as Deception"

Podcast: Economic Update with Richard D. Wolff
Date: August 17, 2017
Host: Richard D. Wolff
Guest: Michael Hudson (Economist and Author)

Episode Overview

In this episode, Richard D. Wolff explores how mainstream economics can serve as a form of deception, justifying existing power structures rather than genuinely analyzing or improving economic realities. The episode consists of two main parts: Wolff's economic updates on current events (with an emphasis on how profit motives shape outcomes) and a deep-dive conversation with economist Michael Hudson regarding the purpose and pitfalls of academic economics.

Key Discussion Points & Insights

1. Intergenerational Economic Decline for Millennials

(Begins ~02:00)

• Millennials' Economic Struggles:
  Millennials today earn 20% less (inflation-adjusted) than their parents did at the same age, with less homeownership, more student debt, and less retirement security.
  • Quote:

    "The notion that hard work and studying will get you ahead of where your parents were, that's not true anymore." – Richard Wolff (04:13)

• Collapse of Upward Mobility:
  The idea that each generation does better than the previous one has been reversed since the 1970s.
  • Quote:

    "That was true for much of American history until the 1970s. It's over. It's not coming back, and the direction is the opposite." – Richard Wolff (06:08)

2. The U.S. Healthcare Crisis and Exploitative Profiteering

(Begins ~07:10)

• Disparity Between Cost and Care:
  The US spends more on healthcare than any other country yet ranks poorly in life expectancy (27th in the OECD), with high rates of infant/maternal mortality and diabetes.
  • Notable Moment:

    "88% of Americans say they are in good or very good health... only 35% of the Japanese [do]—and they live longer. It's a wonderful testimony to what you can make people believe..." – Richard Wolff (12:57)

• Monopoly Power in Medicine:
  Drug companies use deals and kickbacks to keep profitable brand-name drugs in use, driving up costs for patients, while four interconnected industries—hospitals, doctors, insurers, and pharmaceutical/device makers—reinforce a medical monopoly.
  • Quote:

    "Medical care in our country is a monopoly operated by four industries... and together they make the cost of medical care higher in the United States, even though the quality of the medical care we get is mediocre or poor." – Richard Wolff (16:00)

3. Profit Over Public Good: The German Car Emissions Scandal

(Begins ~17:28)

• Corporate Malfeasance:
  German auto companies (Volkswagen, Mercedes-Benz, etc.) were caught installing software to cheat emissions tests, prioritizing profit over public health.
  • Quote:

    "They put profit above human health. There's no nice way to say it and why should one bother?" – Richard Wolff (20:10)

• Government-Business Collusion:
  Cozy relationships between politicians and carmakers protect profits at the expense of citizens’ health.
• People Power:
  Public outrage pushed cities like Athens and Madrid to ban diesel vehicles, demonstrating the ability of mass mobilization to counter corporate wrongdoing.
• Systemic Solution Proposed:
  Advocates having companies run by "a kind of mixed board—people who work in the company and the people they're supposed to serve"—the basis of the cooperative model.
  • Quote:

    "Let the people who have a stake in what these companies do run them, the stakeholders, all of them. Not a tiny group who can profit at the expense of everybody else." – Richard Wolff (23:26)

4. Automation, Globalization, and Public Subsidies: The Case of Little Rock, Arkansas

(Begins ~24:45)

• Plight of Deindustrialized America:
  After jobs left Arkansas for China, the return of a Chinese-owned, fully automated T-shirt plant is celebrated—despite bringing only 400 jobs at $14/hr and relying heavily on public subsidies.
  • Key Statistic:
    Plant will produce 800,000 T-shirts per day, but at minimal benefit for local workers.
  • Memorable Quote:

    "Even the cheapest labor market can't compete with us with this technology." (Chairman of Tianyuan Garments, as quoted by Wolff at 26:56)

• Critique of Corporate Subsidies:
  The state's subsidies to attract the factory come at the expense of public services and represent a transfer of public wealth to produce more private profit.
  • Quote:

    "The people of Arkansas are paying really well. Not just the 20 years of economic decline with the interrupted lives and the interrupted educations and the collapsed infrastructure and the poor schools that that meant. But now they're looking forward to having to spend money, taxpayer money... to give a subsidy to a company that's going to bring them maybe in four years, 400 jobs paying $14 an hour. It takes my breath away." – Richard Wolff (27:57)

• Broader Lesson:
  The drive for profit—through outsourcing, automation, or subsidies—determines outcomes, not the needs or well-being of people and communities.

Main Interview: Michael Hudson on Economics as Deception

(Begins ~32:17)

5. Economics as Ideological Justification

• Hudson’s Critique:
  Mainstream economics education provides an elegant, mathematically cloaked justification for the status quo and for rentier interests, rather than an honest study of how the economy really works.
  • Quote:

    "The universities did not teach how the economy worked. ... There was a money and banking course and I was working as Chase Manhattan's balance of payments analyst. And I found that everything that was in the textbook was exactly the opposite of what happened." – Michael Hudson (33:10)

• Real-World Disconnect:
  Academic economics diverges from practical financial realities, e.g., false textbook claims about bank lending, denial of economic rent’s significance, and ignorance of actual power dynamics.

6. Exclusion of Dissident and Historical Perspectives

• Suppression of Economic History:
  Schools have dropped history of economic thought from curricula and replaced it with mathematical modeling, removing critical and alternative viewpoints (including Marx and classical economists).
  • Quote:

    "Now that they've got rid of the history of economic thought, they can pretend that Adam Smith was for this kind of free market ... and that's not the case at all." – Michael Hudson (43:00)

• Consequence:
  Economics becomes a discipline that describes a fantasy world—internally consistent but detached from reality.

7. Economics as Lobbying and Ideological Control

• Discipline as a Defense of Elites:
  Wolff and Hudson discuss how modern economics faculties, dominated by donations and influence from the wealthy, function as "lobbyists for the Koch brothers, for the rentiers, and for the bankers."
  • Quote:

    "The economics discipline has turned into a lobbying effort for the Koch brothers, for the rentiers and for the bankers... This was true above all at the University of Chicago..." – Michael Hudson (48:57)

• Enforced Conformity:
  Control over university curriculums and academic journals ensures only pro-market, status-quo affirming ideas are promoted, while dissent is silenced.
  • Quote:

    "You can't have a free market economics unless you have totalitarian control of the economy and of the educational system." – Hudson, referencing Milton Friedman’s insight (49:40)

  • Wolff adds:

    "The economics department teaches the joys, the efficiency, the, the perfectness or the optimality...But in their own economics department, absolute control, no free market, no chance for students to taste the different economic theories..." (50:44)

8. What a Real Economics Curriculum Would Look Like

(Begins ~53:19)

• Hudson’s Prescription:

  • Start with history of economic thought (including Marx).
  • Teach the concept of economic rent and multiple forms of exploitation.
  • Familiarize students with real-world government statistics (e.g., Federal Reserve data), not just theory.
  • Shift from abstract mathematical modeling to dynamic, historical analysis of how economies change.
  • Recognize and incorporate debates about the transformation of capitalism and competing socialisms.

• Memorable Quote:

  "I would like to call economics futurology or future studies... Instead of beginning with Paul Samuelson or Gregory Mankiw or today Mathematic... I want to get it back to a historical basis and to discuss how the economy is changing. The problem with mathematics is it's statistical and you assume the environment is constant. If the environment changes, if there's a change in the structure, then the formulas don't work anymore." – Michael Hudson (55:05)

Notable Quotes & Memorable Moments

• On the disconnect between statistical self-ranking and reality:

  "It is a wonderful testimony to what you can make people believe and how different it can be from what they actually experience." – Richard Wolff (13:10)

• On profit as the systemic driver:

  "It's a system that is driven by profits. What the consequences are. What are you saying about the future of Arkansas?...You must be kidding. If this is the best you can do, Mr. Governor of Arkansas, you've basically thrown in the towel on the future economic development of your state..." – Richard Wolff (28:10)

• On academic economics as science fiction:

  "It's really... a form of science fiction. It's a parallel universe... You don't want someone who wants to become an economist have anything to do with talking about the real economy." – Michael Hudson (38:11)

• On economics as an Orwellian enterprise:

  "That's the genius of free market economics, that you have to have totalitarian control so that this is the only concept of freedom that people can have. This is Orwellianism." – Michael Hudson (49:14)

Important Segment Timestamps

• [02:00] – Millennials’ worsened economic prospects compared to parents
• [07:10] – US health care spending and outcomes
• [17:28] – German auto industry emissions scandal and profit motive
• [24:45] – Arkansas case study: automation, globalization, and public subsidy
• [32:17] – Michael Hudson interview begins
• [33:10] – Hudson critiques academic economics and discusses real finance
• [43:00] – Loss of history of economic thought in universities
• [48:57] – Economics as lobbying and institutional control
• [53:19] – Hudson details an alternative economics curriculum
• [57:01] – Closing remarks

Tone and Style

Richard Wolff and Michael Hudson speak in a direct, clear, and occasionally sardonic tone, unafraid to challenge prevailing narratives and expose contradictions in both economic policy and academic orthodoxy. The discussion is scholarly yet accessible, full of sharp analogies and moral clarity.

Summary prepared for listeners seeking both a comprehensive guide to the episode’s arguments and a curated path to the most significant sections and quotes.