Economic Update with Richard D. Wolff
Episode: How Capitalism Works
Date: November 9, 2015
Host: Richard D. Wolff
Producer: Democracy at Work
Episode Overview
In this episode, Richard D. Wolff critically examines several aspects of how capitalism operates today, focusing on the impacts on education, inequality, technology, housing, and even sports. Drawing on recent statistics, personal experience, and listener questions, Wolff exposes the systemic roots of economic challenges and suggests potential pathways for change. The episode delivers a passionate and accessible macroeconomic analysis, making complex issues tangible for everyday listeners.
Key Discussion Points & Insights
1. The Crisis in Higher Education
(00:10 – 14:59)
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Transformation of the Teaching Profession:
- Colleges are increasingly run like businesses, prioritizing cost-cutting (primarily labor costs) over educational quality.
- Adjunct (part-time) faculty now teach the bulk of classes for a fraction of the pay and with none of the job security or institutional involvement of tenured professors.
“Adjuncts get paid exactly the same in 2015 for each three credit course they teach as they were paid in 1991. That’s right. For 25 years, the pay for that teaching... is $2,400.” (08:04)
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Declining Value of Tuition:
- Despite stagnant or falling faculty wages, student tuition at places like Youngstown State has quadrupled over 25 years, delivering less educational quality for more money.
“So the students are paying more and more, but they’re basically getting less and less.” (11:50)
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City University of New York (CUNY) Case:
- CUNY’s full-time faculty have received no pay raises since 2010, amounting to real wage cuts due to the rising cost of living.
- CUNY was once celebrated for its free, public education, which has now shifted to a model in which students pay nearly half the costs.
“Once upon a time, City University was famous around the world for being free...But now that we run schools as a business, we don’t do that.” (13:45)
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Global Parallel: South Africa
- Universities there hiked tuition by double digits despite 53% official poverty, leading to massive student protests that successfully blocked the increases.
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Student Activism in the U.S.:
- Announcement of the “Million Student March” on Nov 12, with demands for tuition-free public universities, cancelation of all student debt, and a $15/hour minimum wage for campus workers.
- Reference: studentmarch.org
2. The True Costs of ‘Cheap’ Apps and Tech Disruption
(18:24 – 22:14)
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Food Delivery Apps:
- Apps often tack on 20–30% premiums vs. in-person purchases, a hidden “convenience” cost rarely disclosed upfront.
“Is it convenient? Perhaps. But it’s very expensive. And if you’re going to use the convenience, be aware, because they don’t tell you very clearly.” (20:08)
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Uber, Airbnb, and the Gig Economy:
- These platforms cut costs by sidestepping insurance, regulation, and labor protections—passing risks and losses onto both workers and consumers.
- Displacement of traditional jobs and public safety/infrastructure is a hidden cost.
“You are taking chances. Look, that’s why... the cab industry and the hotel industry, which used to save money by providing things cheaply, now have to charge more because they have the expenses... None of this applies.” (21:30)
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Online Voting Risks:
- New apps for online voting threaten election integrity, susceptible to hacking and manipulation.
- Recommends verifiedvoting.org for more information.
3. On Economic Predictions and Impending Downturns
(28:44 – 34:00)
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Skepticism Toward Forecasting:
- Critiques the practice of economic prediction, calling it “childish” and primarily a tool for corporate risk deflection.
“If you encounter an economist who tells you with real confidence and certainty that such and such will happen next year… Talk to somebody else. This is not serious. It’s a kind of fakery.” (29:43)
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Warning Signs for the U.S. Economy:
- Deepening inequality, stagnant wages, and over-borrowed consumers create risks of slow growth or recession.
- Export markets are weak (oil-exporting countries, austerity-hit Europe, and a slowing China), stifling American manufacturing and growth.
- International Labor Organization projects global austerity (spending cuts and regressive taxation) in 187 countries, implying more global contraction.
“This inequality is literally killing us.” (33:07)
4. How Capitalism Drives Inequality: The Piketty Thesis and Housing
(34:01 – 41:49)
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Fundamental Mechanism:
- Cites Thomas Piketty’s work showing capitalism inevitably breeds and intensifies inequality, relieved only temporarily by major social upheaval.
“Capitalism as a system produces and intensifies inequality. It makes the gap between rich and poor larger. It keeps doing that until the gap becomes so enormous that there’s a kind of upsurge of resentment and bitterness...” (36:55)
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The Housing Crisis and Gentrification:
- Rising wealth among the rich drives up property values in desirable cities (e.g., New York, San Francisco), displacing middle and working class residents (“gentrification/yuppification”).
- Homeownership rates are falling; more people are forced into renting, deepening polarization.
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Limits of Redistributive Solutions:
- Rent control and taxes on the rich are only stopgaps to undo the inequality capitalism produced.
- Argues the superior long-term solution is to prevent unfair initial distributions, suggesting worker-controlled cooperatives as antidotes.
“Redistribution is bitter and hard... Therefore, the better way to go...is to not distribute it unfairly and unequally in the first place.” (41:48)
5. Capitalism and Sports: Inequality, Instability, and Public Goods
(41:50 – 48:37)
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Economic Instability’s Social Costs:
- Capitalist downturns happen every 3–7 years, causing unemployment, reducing government revenue, and sparking cuts to public programs—including sports and recreation.
- This leads to fewer public spaces and opportunities for physical activity, contributing to social issues like obesity.
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Private Profit from Public Loss:
- As public facilities decay, private gyms and fitness centers fill the gap—for profit and at a price, which many can’t afford.
- Sports arenas are subsidized by public funds but return profits to private investors and corporations (luxury suites, advertising).
“Who goes to the ballpark? Who gets the best seats? The biggest corporations… It’s a profit-driven system at the cost of the mass of the people.” (47:28)
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Media and Advertising:
- Televised sports are funded by advertising, the cost of which is ultimately borne by consumers through higher prices for advertised goods.
“You pay extra in order to have the advertisement flashed in front of you that you don’t even want to see. That’s how capitalism works.” (48:27)
Notable Quotes & Memorable Moments
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On Education Decline:
“This is a betrayal of the American dream that these young people had—that if they go to a good school and get a good education, it will transform their lives.” (12:36) -
On Economic Forecasts:
“Nobody can tell the future. And that’s true for economists.” (29:21) -
On Global Inequality:
“For the first time in recorded history, the richest 1% in the world now own more than half of the wealth in the world… 1% own half of it, and the other 99% scramble and struggle with one another over the other half.” (33:03) -
On Systemic Solutions:
“If workers democratically in every business decided how to divide the profit they all helped produce...they would never give a tiny amount to a handful of people...” (41:15) -
On Capitalism’s Sports Impact:
“You wouldn't accept a roommate as unstable as capitalism is, but that's another story.” (43:07)
Key Timestamps
| Time | Topic/Quote | |-----------|---------------------------------------------------------------------------------------| | 00:10 | Introduction & purpose of Economic Update | | 02:29 | Overview: the value and ideal of college education | | 08:04 | Youngstown State: 25 years of stagnant adjunct pay | | 11:50 | Tuition up, faculty pay stagnant—students pay more for less | | 13:45 | CUNY: from free public university to high student share | | 16:17 | South African student protest blocks tuition hike | | 18:24 | App “convenience”—hidden fees and cost of digital services | | 21:30 | Uber/Airbnb: deregulation, risk, hidden social costs | | 22:10 | The risks and critiques of online voting | | 28:44 | Dismissal of economic predictions as “fakery” | | 30:46 | Structural sources of potential economic downturns | | 33:03 | The global 1% now own over half the world’s wealth | | 36:55 | Piketty: how capitalism guarantees inequality | | 39:09 | The mechanics and consequences of gentrification/yuppification in housing | | 41:48 | Redistribution vs. fair initial distribution, call for worker cooperatives | | 43:07 | “You wouldn’t accept a roommate as unstable as capitalism is...” | | 47:28 | Who benefits from sports arenas? (corporate boxes, private profit, public costs) | | 48:27 | Consumers pay for their own advertising: “That’s how capitalism works.” |
Summary & Takeaways
Richard D. Wolff’s analysis in this episode demonstrates how deeply capitalism determines the conditions of education, work, consumption, housing, and even play in sports. The episode spotlights the system’s tendency toward wealth concentration, declining public goods, and a fragile social contract. Wolff leaves listeners with food for thought: rather than constantly fighting over how to redistribute what capitalism has skewed, why not democratize economic life—at work, in institutions, and in policy—to produce better outcomes and more equitable lives from the start?
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