Economic Update with Richard D. Wolff

Episode: What Capitalism Is

Date: January 11, 2016
Host: Richard D. Wolff (Democracy at Work)

Overview

This episode is dedicated to demystifying and critically assessing the concept of capitalism—what it is, how it differs from other economic systems, and why commonly used definitions are inadequate. Richard D. Wolff aims to shift the discussion from misleading narratives (like "free enterprise" or "market systems") to focus on the defining relationships that structure economic life under capitalism—the employer-employee relationship and how it contrasts with alternatives like worker cooperatives.

Key Discussion Points & Insights

1. Failures of the Current System: Updates on U.S. Economic Scandals

The True Cost of Obamacare

• [06:30] Wolff reviews how Obamacare expanded health coverage to about 15 million Americans since 2013 but criticizes the system for failing to address "the outlandish expenses and costs of medical care in the United States.”
  • Insurance companies responded by raising deductibles and copays, meaning affordable access remained out of reach for many.
  • “We pay more than anybody else and we get mediocre outcomes... It is a scandal.” — Richard D. Wolff [07:45]

The Medical Industrial Complex

• [11:00] Wolff explains how four major players—doctors, hospitals, drug/device manufacturers, and insurance companies—maintain a “cozy monopoly” supported by governmental inaction or collusion.
  • Monopolies in medical care reflect capitalism’s ability to transform social needs into sources of profit rather than addressing those needs equitably.
  • “That’s how capitalism works, when you get right down to it... getting a cozy monopoly, getting the government to either look the other way or help you and then take as much as you can for as long as you get away with it.” — [13:25]

Bank ‘Bail-Ins’ and Risks to Depositors

• [15:00] Wolff shares a warning about "bail-ins"—the policy, implemented after the Cyprus banking crisis and now embedded in U.S. financial law (Dodd-Frank), that allows troubled banks to seize depositor funds to cover their own losses.
  • Depositors now risk being treated as creditors who may have to bear losses before large financial institutions do, especially in a crisis involving risky derivative investments.
  • “Depositors are being looked at under this legislation as if they were just more creditors of a bank—as if they had lent their money to the bank rather than deposited it in there.” — [19:40]
  • Capitalism’s instability is not a bug, but a feature: “Capitalism has a notoriety as a fundamentally unstable system. It has an economic downturn every three to seven years.” — [21:25]

Pension Fund Scandals

• [24:00] Case study: Public pensioners in Rhode Island lose promised benefits not because of lack of worker contributions, but due to a “much too cozy relationship” between political decision-makers and financial managers who extract high fees.
  • This is not an isolated incident but endemic to pension systems across states.
  • “There has been, in short, for decades, a kind of sophisticated behind-the-scenes looting of pension funds.” — [25:30]

Subsidies to Religious Institutions

• [29:40] U.S. taxpayers effectively subsidize religious institutions through a host of tax exemptions—including exemptions on property and investment income—potentially amounting to $40–50 billion annually.
  • Raises the question: Would religion have the same social presence if required to truly “pay its own way” like ordinary citizens?

2. What Is Capitalism? Rethinking Popular Definitions

Common but Inadequate Definitions

• [39:45] Most mainstream commentary equates capitalism with “private enterprise,” “free enterprise,” or “market system.”

  • Wolff critiques these: Private ownership and markets have existed (for example, in slavery and feudalism) without being “capitalist.”
  • The concept of “free” labor is also misleading: workers may be formally free, but, lacking independent means, are compelled to sell their labor.

  “A worker in a modern capitalist business isn’t a slave, and he or she isn’t a serf. But are they really free? ... The claim that these are free people might make sense if you compare them to slaves and serfs. But it makes a mockery of the term free if you think about it.” — [44:20]

The Employer-Employee Relationship as Defining Feature

• [48:30] The distinctive hallmark of capitalism is neither markets nor private property alone, but the relationship:

  • In slavery: master/slave; master owns the output.
  • In feudalism: lord/serf; mutual obligations, serfs tied to land.
  • In capitalism: employer/employee; workers produce more value than they receive in wages/salaries (the source of profit).

  “The condition of your employment is that you produce more for the employer than he gives you, which is why the rich get richer and everybody else doesn’t. That’s how the system is set up. Capitalism is about a relationship.” — [53:00]

• Markets, planning, public/private ownership are secondary to this core social relationship.

The Marriage Metaphor

• [58:00] Wolff uses the analogy of marriage to demonstrate how institutions’ meanings and internal relationships evolve over time.
  • Complaint: Defining capitalism by markets is like defining marriage by household formation—missing the essential social relationship.

Why This Matters: Real Alternatives

• [60:30] It’s historically contingent to believe employer/employee is the "natural" order—just as previous eras assumed lord/serf or master/slave.

• Viable alternative: Worker self-management and cooperatives, where production and rewards are democratically organized by the workers themselves.

  “Suppose we have democratic, cooperative. That’s a different relationship. It isn’t capitalism, it isn’t feudalism, and it isn’t slavery.” — [64:00]

• Debates of public vs. private ownership, or markets vs. planning, miss the most meaningful distinction: who holds power and how relationships are structured in production.

  “You’re not going to solve the problems of capitalism as a relationship by changing whether the employer is private or state, by changing whether goods and services are distributed by market exchange or by planning. ... You don’t change that relationship and whatever else you do will not solve the problems you’re trying to solve.” — [67:00]

Notable Quotes & Memorable Moments

• On medical care monopolies:

  “It’s a kind of monopoly in its very existence. We don’t want to get sick, we don’t want to die ... and that system has organized itself to rip us off.” — [12:30]

• On bail-ins:

  “A bail-in is when a bank treats the money folks have deposited into it ... as if they had lent their money to the bank rather than deposited it in there.” — [18:54]

• On the essence of capitalism:

  “Capitalism is about that arrangement where the mass of people come and produce more than they get paid. And that difference is the profit. That difference is what capitalists go into business to get.” — [53:00]

• On misguided debates:

  “That was a debate over the wrong topic. Because what distinguishes a society where the government runs it and where the private sector runs things isn’t a distinction about capitalism versus socialism. It’s a distinction between an employer who’s private and an employer who’s the government.” — [66:00]

Key Timestamps

• 01:00 — Opening remarks and upcoming events
• 06:30 — Analysis of Obamacare’s effects and medical insurance system
• 11:00 — Introduction of the “medical industrial complex”
• 15:00 — The Cyprus bank crisis and ‘bail-ins’
• 21:25 — History of capitalism's instability
• 24:00 — Rhode Island pension fund scandal
• 29:40 — Subsidization of religious institutions through tax exemptions
• 39:45 — Beginning of the main segment: “What Is Capitalism?”
• 48:30 — Core critique: Employer-employee relationship as defining feature
• 53:00 — Real-life implications of profit extraction
• 58:00 — The marriage metaphor for social institutions
• 60:30 — Presentation of the alternative: worker cooperatives
• 66:00 — Why changing ownership (private/public) doesn’t resolve capitalism’s real issues

Final Reflections

Wolff concludes by urging listeners to look beyond superficial reforms (like changing from private to state ownership or from markets to planning) and focus on the fundamental social relationships—in particular, the opportunity to build real alternatives based on workplace democracy and cooperative organization.
He challenges the audience to imagine—and work toward—an economic system not grounded in domination and extraction, but in genuine, democratic collaboration.