Economic Update with Richard D. Wolff

Episode: "How Markets Fail"
Date: February 1, 2016

Episode Overview

In this episode, economist Richard D. Wolff critically examines widespread faith in market systems by highlighting how markets often fail to serve the common good. He uses contemporary news stories and global examples—ranging from corporate tax inversions and France’s labor strikes to urban housing, healthcare shortages, and industrial pollution—to illuminate systemic flaws in markets and capitalism. Wolff also explores alternatives, particularly worker cooperatives, and signals emerging shifts in international political discourse.

Key Discussion Points and Insights

1. Corporate Tax Inversions and Their Fallout

(Begins ~03:00)

• Johnson Controls’ Merger with Tyco in Ireland
  • Johnson Controls plans to merge with Tyco and move its headquarters to Ireland to reduce its tax rate from 19% to 14%, saving $150 million per year in taxes and another $500 million in duplicated costs.
  • Wolff: “That’s money not going to be paid to Uncle Sam … That’ll be many Americans losing their jobs, et cetera. This is all about what we call in economics an inversion.” (05:00)
• Broader Trend
  • This is the 13th such deal in 16 months, including Pfizer’s $152 billion inversion.
• Impact on Society
  • Reduced corporate tax revenues force government either to tax individuals more or cut public services.
  • “This kind of game...is a wonderful windfall for the corporations as the countries compete and working people everywhere either face higher taxes or lower government services while the corporations are laughing all the way to the bank.” (07:45)

2. Worker Displacement and Visa System Abuse

(09:32)

• Disney Workers Forced to Train Replacements
  • Former employees sue Disney for requiring them to train foreign replacements hired under the H1B visa program.
• Wolff: “Many corporations have been...abusing this law. And the workers at Disney provide evidence of having been required to train the very people that replaced them.” (10:15)
• Broader Systemic Pattern
  • The abuse of labor—both by offshoring jobs and importing cheaper labor—is another facet of corporate pursuit of profit at public expense.
  • “Corporations leave to get advantages...and they don’t care what the suffering they leave behind is all about. When did they ever?” (11:23)

3. France’s National Strikes Against Austerity

(12:10)

• Black Tuesday, January 26:
  • Large-scale strikes across public sectors and taxi drivers in protest of austerity.
  • Workers protest against reduced wages, higher taxes, and unfavorable rule changes.
• Resistance to “Uberization”
  • Taxi drivers protest Uber’s competitive practices, demanding respect for labor and negotiation.
• Wolff: “Here’s a working class in France that is fighting back … choosing to go into the street to make it clear they will not tolerate that the difficulties of capitalism...be solved at their expense.” (16:35)
• Significance of Socialist Party Rule
  • The strikers protest a Socialist Party government, highlighting the disconnect between political promises and enacted austerity.
  • “We are disappointed in you. We are not satisfied having voted you in, that you ended up imposing the austerity that we voted you in to not do.” (20:49)
• Takeaway for US Unions
  • Unions may need to reconsider their relationships with political parties if promises are not fulfilled.

4. Public Subsidies for Religious Institutions

(24:00)

• Tax Exemptions and Subsidies
  • Religious organizations avoid income, property, and sales taxes, with donors enjoying tax deductions.
• Societal Implications
  • The broader populace subsidizes religious bodies and loses services or pays higher taxes as a result.
  • “If you’re subsidized by the community, then...the community has some say about what goes on there … If you want to be free to do whatever you want, then getting public money is a question.” (26:30)
• Possible Reforms
  • Graduated or capped exemptions for poorer institutions, progressive taxation on wealthier ones.

5. The Case for and History of Worker Co-ops

(32:00)

• Listener Question: The Israeli Kibbutzim
  • Do the decline of worker co-ops in Israel prove co-ops can’t work?
• Wolff’s Response:
  • No; all systems—slavery, feudalism, capitalism—rose and fell based on historical conditions. Worker co-ops might succeed under supportive conditions.
  • “The fact that they arise and fall is not a sign that they can’t be a sustained system … Worker co-ops are on the agenda and nothing about kibbutzim in Israeli history changes that.” (34:25)

“How Markets Fail”: Five Modern Examples

(Begins 30:00; Main Segment 30:00–54:00)

1. Shortage of Geriatricians

(32:00)

• Despite an aging population, few US medical students choose geriatrics due to poor reimbursement—an outcome of leaving health care to the market and underfunding Medicare/Medicaid.
• “We need more geriatricians. We’re getting less of them … That’s not working well.” (33:41)

2. Fracking, Oil Prices, and Economic Instability

(35:15)

• High prices lead to a fracking boom, causing environmental disaster and oversupply, which collapse oil prices and threaten bankruptcies and job loss.
• “The market efficiency? Are you kidding?...The reactions of people who are driven by the market did all that.” (38:22)

3. Manhattan Real Estate and Global Inequality

(41:00)

• The super-rich park wealth in NYC apartments, 1/3 of which stay empty while homelessness rises.
• “The market produces vast numbers of beautiful empty apartments that are looked at from across the street by homeless people who have nowhere to sleep...That’s not a good thing. That’s an awful demerit.” (43:37)

4. Walmart’s Community Impact

(45:00)

• Walmart’s arrival destroys local business and jobs; when stores close, communities are devastated, with no local control or recovery plan.
• “Profit for Walmart is one thing. The needs of the community are something else. The market is not an institution that makes those two things the same thing.” (47:15)

5. Pollution and the “Market Solution” in India

(49:00)

• India’s most polluted cities are the result of market-driven industrialization. Market “solutions” (gas masks) are unaffordable for most citizens.
• “That’s not a market success. That is a screaming failure of the market—a failure on a grand scale.” (52:22)

Political Shifts: Labour Party in the UK Advocates Worker Co-ops

(54:00)

• New Strategy:
  • The Labour Party (UK) under John McDonnell proposes government policies to foster worker co-ops, rather than merely expanding state ownership.
  • “They believe now that the more important thing is not to...replace private enterprises with government enterprises. Instead...replace capitalistically organized enterprises with worker co-ops.” (54:20)
• Rationale:
  • Workers and the public may prefer democratically run businesses; if government help is extended to co-ops as it is to capitalists, a fair comparison is possible.
  • “Let’s see if you help them both equally which one wins in the competitive struggle. Will workers prefer to work in a worker co-op?...You bet they will.” (55:45)

Notable Quotes

• “[The market is] a kind of mask because the market really serves the rich, as I’m going to show you...They say instead the market is this engine of efficiency, this magnificent system of economic perfection. Well, it isn’t.” – Richard Wolff (29:57)
• “The question is whether those of us who are left holding the bag...will do something. And that brings me to the third update today, and it’s about the country of France.” (11:22)
• “If you’re subsidized by the community, then...the community has some say about what goes on there.” (26:44)
• “Profit for Walmart is one thing. The needs of the community are something else. The market is not an institution that makes those two things the same thing.” (47:15)
• “That’s not a market success. That is a screaming failure of the market—a failure on a grand scale.” (52:22)

Structure & Flow

• Tone:

  • Clear, direct, and often wry or acerbic; Wolff employs vivid examples and rhetorical questions to engage listeners, while championing systemic critique and alternatives to market capitalism.

• Segments Covered:

  • News updates with economic analysis (tax inversions, labor issues in France, religious tax exemptions)
  • Listener questions (about tax, churches, historical co-ops)
  • Main analysis: five detailed case studies of market failures
  • Closing with political developments (UK Labour’s new approach to economic democracy)

Recommended Timestamps

• 03:00 – Corporate tax “inversions” & Johnson Controls
• 09:30 – Disney workers & H1B visa issues
• 12:10 – France’s national strikes (“Black Tuesday”)
• 24:00 – Religious institutions & public subsidies
• 32:00 – Kibbutzim, co-ops, and historical dynamism
• 33:41 – Example 1: Geriatricians and market failures in healthcare
• 35:15 – Example 2: Fracking, oil, and financial instability
• 41:00 – Example 3: NYC real estate, inequality, homelessness
• 45:00 – Example 4: Walmart closures & community impact
• 49:00 – Example 5: Indian air pollution and the limits of “market solutions”
• 54:00 – UK Labour Party: from public ownership to supporting worker co-ops

Summary

Richard D. Wolff’s “How Markets Fail” exposes the repeated inability of free markets to meet social needs, highlighting the resultant inequalities and destructive patterns—both at home and abroad. Using pointed examples and global references, Wolff critiques the deference shown to markets in public discourse, demonstrates the necessity of collective action and alternative economic systems, and draws attention to political momentum for worker-controlled enterprises. The episode is both an indictment of market fundamentalism and a call for economic democracy—presented in Wolff’s signature incisive tone.