Economic Update with Richard D. Wolff

Episode: Good for Profits, Bad for Society

Date: February 29, 2016

Episode Overview

In this episode, Richard D. Wolff critically examines the disconnect between a profit-driven economic system and the wellbeing of society, highlighting how recent events—ranging from recession warnings and tuition migration, to pension cuts and the perils of corporate-driven decisions—underscore the social costs being shouldered by everyday people. Wolff details illustrative stories from the U.S. and abroad, explores systemic inequalities exacerbated by capitalism, and discusses alternative, cooperative models to address unemployment and economic instability.

Key Discussion Points & Insights

1. Citibank’s Global Recession Warning

[00:40–03:48]

• Citibank reduced its 2016 global growth estimate from 2.4% to 1.6%, signaling a potential global recession.
• The so-called recovery after 2008, Wolff argues, was a "mirage": “A recovery only for big banks, for the top 1 or 2% who are major players in the stock exchange, etc.—everybody else has been bypassed.” — Richard Wolff [02:37]
• The absence of mass purchasing power, especially among lower and middle-income Americans, is undermining the economy: “You’ve savaged them… They can’t buy anything. They’re terrified of what will happen to them with the debts they have." — Richard Wolff [03:06]

2. Permanent Economic Stagnation & Inequality

[03:50–06:38]

• Wolff references Robert Gordon’s book, The Rise and Fall of American Growth, which argues the U.S. is facing "permanent economic stagnation" and growth of poverty and inequality.
• Reviews by Paul Krugman and others, while unhappy about Gordon's conclusion, agree with its accuracy and worry about resulting political and social instability.

3. American Students Fleeing to Europe for Free College

[06:40–09:13]

• 47,000 Americans left the U.S. in 2012 to study for free in Europe, particularly in Germany, Iceland, Norway, and Finland, all of which offer 100% tuition-free public colleges.
• Motivations include avoiding student debt and, for some, intentions to remain in Europe post-degree—a “profound sign” of shifting migration patterns, according to Wolff.

4. Profits vs. Social Responsibility in Corporations

[09:15–14:30]

• Johnson & Johnson’s Baby Powder Case

  • Ordered to pay $72 million in damages after a jury found a link between its talc products and a woman's ovarian cancer.
  • “Johnson & Johnson knew as far back as the 1980s of the risk and yet resorted to... lying to the public, lying to the regulatory agencies.” — Attorney Jerry Beasley [11:23]

• Genetically Engineered Salmon

  • The FDA approved AquaAdvantage salmon—the first genetically engineered animal for U.S. human consumption—primarily for the profit of corporations, not consumer need.
  • Initial refusal to require GMO labeling stirred consumer protest; some major retailers refused to carry the product.

• Wolff’s Critique:

  • These examples illustrate how, in capitalism, the profit motive often incentivizes actions “socially the opposite of useful.” [10:02]
  • "[...] being profit driven is not only no guarantee that you'll do something socially useful, it is often incentive to do something socially the opposite of useful." — Richard Wolff [10:01]

5. Hypocrisy and Influence in Politics

[14:32–17:00]

• Trump’s Outsourcing:
  • Exposed for manufacturing ties in Mexico and China while decrying lost U.S. jobs.
    • Notable moment: “He was suitably embarrassed when David Letterman... showed on the back of the tie, made in Mexico, wow. Or in China.” — Richard Wolff [15:02]
• Wall Street Contributions to Candidates:
  • Chris Christie received significant funding from billionaire Steven Cohen, whose firm was fined $1.8 billion for illegal behavior.
  • Irony that Christie's campaign, funded by Wall Street, attacked rival John Kasich as a “Wall Street banker.”

6. Pension Crisis: U.S. and Greece

[17:02–20:37]

• U.S. Pension Cuts:
  • New laws allow pension funds, like the Central States Pension Fund, to cut benefits if facing insolvency.
  • Wolff highlights the injustice of punishing workers for poor management or market crashes: “That’s punishing the victim.”
• Greece's Austerity:
  • Greek workers have seen pensions cut by up to 40% since 2010; more cuts spark ongoing protests.
  • Parallels drawn between American and Greek working class—both suffering for crises they did not cause.

7. Small Business Revolt Against Big Corp Tax Avoidance

[20:39–22:45]

• Case study of Crickhowell, Wales, where 50 small businesses, led by Stephen Lewis, protest the disparity in tax treatment compared to global corporations.
• Call for alliances between small businesses and workers against a system favoring the biggest firms.

8. Iron Mining Downturn Tied to Global Demand

[22:46–25:00]

• Minnesota’s iron mining communities suffer as slowed Chinese demand means reduced need for U.S. iron.
• Wolff cautions against scapegoating China, pointing instead to the U.S.'s own decline in purchasing power and middle class stability as root causes.

9. Unemployment Insurance and Racial Disparities in Employment

[29:50–37:04]

• Only 25% of unemployed in the U.S. now receive unemployment insurance—a massive drop since the post-2008 crash.
• Disproportionate unemployment among young Black men, especially in Chicago, where 50% are out of work and school.
• Critique of proposed employer subsidies to temporarily address youth unemployment; highlights risk of discriminatory hiring shifts.
• Alternative Model:
  • Italy’s Marcora Law supports the formation of worker cooperatives for the recently unemployed, a model Wolff advocates as more empowering and systemic.

10. The Profit Motive: Inherent Limitations

[37:06–44:50]

• Corporations calculate only the costs they bear personally, not the social costs they impose (environmental, health, traffic, etc.).
• Profits do not account for broader social benefits or costs: “[Profit-driven] decisions... have outcomes that are not good for us. Outcomes that we would not have endorsed had we counted all the costs that we could identify and all the benefits." — Richard Wolff [43:49]
• The current system allows decisions that are “good for them, serves their needs... but it does not serve society’s needs.” [44:16]
• Call for recognition that corporate profit-seeking undermines the societal good and democracy.

Notable Quotes and Memorable Moments

• “We've savaged [lower and middle-income Americans]. Your capitalist system has... They can't buy anything.” — Richard Wolff [03:07]
• "It's a sign of something profound in a society when... tens of thousands... are leaving the United States for economic reasons to save on an overpriced, over-indebted cost of college education." — Richard Wolff [08:10]
• “Being profit driven is... often incentive to do something socially the opposite of useful.” — Richard Wolff [10:01]
• "That's punishing the victim... To add, cutting their pensions is outrageous." — Richard Wolff [19:52]
• "Leaving things to the private profit-driven decisions of corporations is good for them... but it does not serve society." — Richard Wolff [44:16]

Segment Timestamps

• Recession Warnings and Economic Recovery Myths: [00:40–03:48]
• Stagnation & Gordon’s Book: [03:50–06:38]
• Americans Moving for Free College: [06:40–09:13]
• Corporate Profits Hurting Society (J&J, Salmon): [09:15–14:30]
• Election Economics, Trump, Christie: [14:32–17:00]
• Pension Crisis – U.S. & Greece: [17:02–20:37]
• Small Business v. Big Corp Tax: [20:39–22:45]
• Minnesota Mining & Global Economy: [22:46–25:00]
• Unemployment Insurance & Racial Disparities: [29:50–37:04]
• Profit Motive & Social Costs: [37:06–44:50]

Takeaways

• The pursuit of profit, when unchecked by broader social priorities, can foster systemic inequality, disempower workers, degrade public goods, and erode economic stability.
• Alternative economic models—like worker cooperatives—offer evidence-based solutions for crises of unemployment and beyond.
• Real solutions require political will to question the assumptions of capitalism and to demand reforms that serve the needs of society, not just shareholders.

Final Thought

“Put that demand on our political system, and maybe more of the candidates will address it than currently do.” — Richard Wolff [46:26]