Economic Update with Richard D. Wolff

Episode: Why Capitalism Demonizes Government
Date: November 22, 2018
Host: Richard D. Wolff (Democracy at Work)

Overview

In this episode, Richard D. Wolff scrutinizes the contentious relationship between capitalism and government, exploring why private capitalists simultaneously depend on and denounce government. He delves into topics such as economic crime and wealth laundering, the contradictions of minimum wage policy, and the persistent myth of market efficiency. Wolff also traces the historical oscillation between nationalism and internationalism within capitalism, identifying systemic flaws and their consequences for working people.

1. The Economics of Crime and Unexplained Wealth

[00:10 – 08:40]

• Examination of Wealth Laundering:
  Wolff details how figures like Zamira Hajiyeva (Azerbaijan), whose husband embezzled massive funds, moved unexplained wealth from corrupt origins abroad into British assets—including a $15 million London home and lavish spending at Harrod’s.
• Role of the UK's National Crime Agency:
  The UK’s investigative office issues “unexplained wealth orders” to crack down on dirty money being funneled into British assets—a process largely absent in the US.
• Contrast with the US:
  In America, there is no equivalent mechanism. Wolff observes the prevalence of empty high-end apartments in New York, often serving as “storage lockers for ill-gotten gains.”
• Systemic Impunity:
  Wolff highlights a global pattern: “When you add up all the relatively minor characters like this one in all of the 195 countries of the world... we’re talking massive amounts of money. And that money is typically hidden.” (05:24)

Notable Quote

“A government that really wanted to do the people's work of getting that money back so it is in the hands of the people from whom it was ultimately stolen would be busy on the case. Ours isn't.” (07:40)

2. The Contradiction: Why Capitalists Demonize Government

[08:40 – 16:25]

• Government’s Essential Role:
  Historical examples such as the Louisiana Purchase, funding exploration (Lewis and Clark), currency management, tariff wars, and corporate bailouts demonstrate that capitalist leaders repeatedly rely on the state.
• The Contradiction Explained:
  Capitalists call upon government’s power but publicly deride it as inefficient or burdensome, fearing the potential of majority rule through universal suffrage.
• Instability of Wealth and Power:
  The majority, who are not capitalists but wield the vote, could use the state to redistribute wealth—so elites seek to keep the government weak or controlled.
• Self-Preservation vs. Dependency:
  “So you denounce the government, keep it weak, lest the people with their vote use it against you. But at the same time, your system has so many problems...that you need the government to come in and rescue you.” (12:55)
• Systemic Inefficiency:
  This “contradiction...can flop either way under the pressure of circumstance. It’s not an efficient or effective system.” (15:31)

3. The Minimum Wage in the U.S.: Stagnation and Inequality

[16:25 – 22:00]

• Current Wage Landscape:
  • Federal minimum wage: $7.25/hr (non-tipped); $2.13/hr (tipped).
  • 39 states have higher minimums than the federal rate.
  • Highest state minimum: $11.50/hr in Washington.
• Real Wage Trends:
  • Low wages are lower today (adjusted for inflation) than in 1980.
  • Middle wages flat; high wages up 40%.
  • “The majority of people have not been made better off over the last 40 years.” (19:54)
• Political Silence:
  Despite the dire situation, minimum wage is absent from major national debate.
• Moral Indictment:
  “We have treated the wage earners of this capitalist system horribly. There’s no other way to say it.” (20:41)

4. Corporate Failure: The Carillion Collapse and Big Four Accountancy

[22:00 – 24:35]

• Carillion Debacle in the UK:
  When major corporation collapses, the Big Four accounting firms (Deloitte, Ernst & Young, KPMG, PricewaterhouseCoopers) are implicated for giving erroneous assurances.
• Failed Lessons from 2008:
  The system allows firms to pay for favorable credit evaluations, making true accountability impossible, thus repeating past failures.

5. Capitalism’s Oscillation: Nationalism vs. Internationalism

[24:36 – 38:20]

• Historical Patterns:
  • 19th/Early 20th c.: Nationalist protectionism reigned outside steely British support for free trade.
  • World Wars: Competition among national economies turned into catastrophic wars, sparking attempts at international cooperation (League of Nations, then the UN).
  • Post-WWII Internationalism: U.S.-led globalization is championed as the key to peace and prosperity (General Agreement on Tariffs and Trade, “the GATT”).
• Broken Promises of Globalization:
  • Corporations move production abroad (China, India, Brazil), enriching themselves but depressing wages at home.
  • Rising inequality, disillusionment with “globalization” as a panacea.
• Nationalist Resurgence:
  • Example: Trump’s trade wars, Brexit, and Italy’s turn inward.
  • Warning: “This is going backwards historically, and it’s going backwards to something we left behind for a very good reason.” (36:25)
• Systemic Critique:
  • The real issue is not nationalism vs. internationalism, but how capitalism weaponizes both phases to serve its interests.
  • “We would be better to move forward by changing systems than backward to a nationalism that we left for very good reasons after World War II.” (38:04)

6. The Market Myth: Efficiency and Morality

[38:21 – 46:00]

• Market Inefficiency:
  • Markets do not count all true costs, such as environmental harm; profits go to owners while social and ecological costs are externalized onto society.
  • Example: Pollution from a laundry affects health, car tires, house paint—costs never borne by the business.
• Distribution by Wealth, Not Need:
  • Markets ration goods to the wealthy. Scarcity yields higher prices, shutting out those who need goods but lack money.
  • “Markets allocate scarce goods and services to those with the most money. That’s what they do. That isn’t efficient, that isn’t moral, that isn’t ethical.” (42:03)
• Ethical Challenge:
  • Wolff urges listeners to examine if distributing goods solely to those with money, regardless of need (“should an older person who doesn't need it but has the money get [milk], while a child who needs it to grow is denied it?”), is truly acceptable.
• Markets as Biased Instruments:
  • The market “is a highly partisan, biased service to the rich.” (45:35)

Notable Quotes

• On government’s neglected duty:
  "A government that really wanted to do the people's work of getting that money back so it is in the hands of the people from whom it was ultimately stolen would be busy on the case. Ours isn't." (07:40)
• On capitalist contradiction:
  “You denounce the government, keep it weak...But at the same time, your system has so many problems...that you need the government to come in and rescue you.” (12:55)
• On wage inequality:
  “We have treated the wage earners of this capitalist system horribly. There's no other way to say it.” (20:41)
• On reverting to nationalism:
  “This is going backwards historically, and it’s going backwards to something we left behind for a very good reason.” (36:25)
• On market morality:
  "Markets allocate scarce goods and services to those with the most money. That’s what they do. That isn’t efficient, that isn’t moral, that isn’t ethical." (42:03)
• On systemic reform:
  “We would be better to move forward by changing systems than backward to a nationalism that we left for very good reasons after World War II.” (38:04)

Key Timestamps

• 00:10 – Introduction; unexplained wealth and economic crime
• 07:40 – Government’s role and inaction (quote)
• 08:40 - 16:25 – Capitalist contradiction: dependency and demonization of government
• 16:25 - 22:00 – Stagnation of minimum wage; rising inequality
• 22:00 – The Carillion accountability failure
• 24:36 – Nationalism vs. internationalism in capitalism
• 38:21 – Debunking market efficiency; market as a tool for the rich
• 42:03 – Market allocation and morality (quote)
• 45:35 – Markets as partisan service to the wealthy

Episode Tone and Style

Wolff’s tone is blunt, analytical, and often sardonic. He employs concrete historical and contemporary examples, challenges conventional wisdom, and persistently focuses on the contradiction and inequity at the heart of capitalist systems—urging listeners to question inherited economic dogmas and aspire to systemic change.