Economic Update with Richard D. Wolff

Episode Summary: "Europe’s New Internationalist Left"

Air Date: July 2, 2020

Overview

In this episode, host Richard D. Wolff provides a critical analysis of the current state of the American economy, focusing on "zombie corporations" and the fragility of the banking sector amidst mounting debt. The episode’s second half features an in-depth interview with Yanis Varoufakis—economist, former Greek finance minister, and founder of DiEM25—exploring the development of Europe’s transnational left, the impact of austerity, COVID-19, and the need for a new internationalist political movement. The discussion offers both a diagnosis of economic crises and an urgent call for global progressive unity.

Key Discussion Points and Insights

1. The Proliferation of Zombie Corporations (00:10–06:30)

• Definition and Scope:

  • Zombie companies are businesses unable to generate enough profit to pay interest on their debts, surviving only by borrowing more.
  • The phenomenon has become alarmingly widespread—1 in 5 publicly traded U.S. companies now qualify as zombies, double the rate from 2013.
  • Example companies cited: J.C. Penney and AMC Theatres.

• Quote:

  "It's no longer for most American large corporations a matter of making profits. That’s not how they survive. ... It is debt-driven capitalism."
  —Richard Wolff (05:22)

• Systemic Risk:

  • The amount of new debt taken on by corporations skyrocketed to $3 trillion in Q1 2020—ten times the previous quarter.
  • The Federal Reserve has begun directly purchasing corporate bonds, blurring the lines between public and private enterprise.

2. The Precarious Banking Sector (06:31–11:42)

• Stress Tests and Federal Reserve Measures:

  • The Federal Reserve’s recent stress tests revealed that banks' reserves might not be sufficient to cover losses if companies default en masse.
  • Banks are now restricted from share buybacks and raising dividends; some, like Lael Brainerd, argue they shouldn’t pay dividends at all. Profits should be retained as capital buffers.

• Quote:

  "If you have a corporate sector that is becoming zombified and banks without enough backstopping ... you are in the late stages of economic disintegration."
  —Richard Wolff (11:24)

• Implications:

  • A cycle of corporate insolvency threatens banking stability; both sectors appear dangerously interdependent and fragile.

3. Interview with Yanis Varoufakis: Europe’s Transnational Left and Internationalism (12:45–28:12)

Formation and Purpose of DiEM25 (12:51–16:20)

• Background:

  • Varoufakis helped lead anti-austerity efforts in Greece and saw defeat due to internal political divisions and external pressure from oligarchs and financial institutions.
  • DiEM25 was formed to unite progressive forces across Europe, transcending the limits of national politics.

• Quote:

  "The bankers and the fascists are very good at uniting transnationally across frontiers. Unless we do the same thing ... there is no chance that any nation state based movement can defeat them."
  —Yanis Varoufakis (14:35)

• COVID-19 Context:

  • The pandemic magnified existing economic inequality and exposed the fragility of corporate capitalism.
  • Central banks’ interventions “zombified” the corporate sector further, but COVID-19 risked collapsing the entire bubble.

• Notable Insight:

  • Varoufakis considers the 2020 crisis a continuation (“the same crisis”) as that of 2008—only more severe and more encompassing.

European Disintegration and U.S. Nationalism (16:21–22:05)

• Impact on European Unity:

  • Rather than unifying Europe, the Eurozone crisis and successive challenges have accelerated its political disintegration.
  • Believes American influence shaped the European Union, and recent U.S. policy (under Trump) capitalizes on European weakness.

• Quote:

  "Europe is at an advanced stage of disintegration. And every new initiative you hear ... is another nail in the coffin of unification."
  —Yanis Varoufakis (17:50)

• U.S. Geopolitical Strategy:

  • Varoufakis rejects the idea that the U.S. is retreating into isolationism; rather, he sees a new strategy to preserve U.S. hegemony by undermining multilateralism and treating other nations as “spokes” to America’s “hub.”

• Quote:

  "This is not a retreat from globalism. It's a way of maintaining hegemony while the United States’ share of global GDP is shrinking."
  —Yanis Varoufakis (21:54)

Relationship with the Traditional Left & Building a Broad Movement (22:05–26:49)

• Coalitions and Challenges:

  • DiEM25 sought to be a “broad church” uniting Marxists, ecologists, and progressives, with an initial goal of developing a cohesive policy platform (e.g., a Green New Deal for Europe).
  • Found that factionalism and party interests of traditional left organizations blocked deeper integration.

• Quote:

  "Unity is not enough. You need unity and coherence ... because our opponents do have a single answer. It's liquidation, liquidation, liquidation of the working class, of smallholders, and so on."
  —Yanis Varoufakis (24:15)

• Electoral Efforts:

  • Despite minimal resources, DiEM25 and its national manifestations secured 1.5 million votes and seats in Greece, showing grassroots appetite for a new approach.

Building a Progressive International (26:50–28:12)

• Urgency of Internationalism:

  • Varoufakis calls for progressive movements—especially those in the U.S. inspired by figures like Bernie Sanders—to join forces globally in a coordinated, programmatic alliance.
  • Warns against repeating old mistakes of weak confederacies; advocates “one program for the planet.”

• Quote:

  "We need to have one program for the planet. We have to have one internationalist New Deal, Green New Deal for the planet and its people."
  —Yanis Varoufakis (27:55)

Notable Quotes & Timestamps

| Time | Speaker | Quote | |--------|---------|-------| | 05:22 | Wolff | "It's no longer for most American large corporations a matter of making profits. That’s not how they survive. ... It is debt-driven capitalism." | | 11:24 | Wolff | "If you have a corporate sector that is becoming zombified and banks without enough backstopping ... you are in the late stages of economic disintegration." | | 14:35 | Varoufakis | "The bankers and the fascists are very good at uniting transnationally across frontiers. Unless we do the same thing ... there is no chance that any nation state based movement can defeat them." | | 17:50 | Varoufakis | "Europe is at an advanced stage of disintegration. And every new initiative you hear ... is another nail in the coffin of unification." | | 21:54 | Varoufakis | "This is not a retreat from globalism. It's a way of maintaining hegemony while the United States’ share of global GDP is shrinking." | | 24:15 | Varoufakis | "Unity is not enough. You need unity and coherence ... because our opponents do have a single answer. It's liquidation, liquidation, liquidation of the working class, of smallholders, and so on." | | 27:55 | Varoufakis | "We need to have one program for the planet. We have to have one internationalist New Deal, Green New Deal for the planet and its people." |

Additional Memorable Moments

• Varoufakis' anecdote about the 2015 Greek referendum: Personal recount of “five month insurrection” and betrayal by his own government (13:45).
• Wolff's skepticism about mainstream economic narratives: “The next time someone tells you the American economy is doing great again, it’s not just tens of millions of unemployed…” (11:35).
• Collaboration with Bernie Sanders and hope for U.S. progressives: Varoufakis' gratitude and forward-looking appeal to internationalize efforts (27:08).

Timestamps for Important Segments

• Zombie Corporations and U.S. Debt Spiral: 00:10–06:30
• Banking Sector Vulnerability/Fed Restrictions: 06:31–11:42
• Introduction to Yanis Varoufakis/DiEM25: 12:45–13:30
• Formation of DiEM25 & Impact of COVID-19: 13:11–16:20
• European Disintegration & U.S. Hegemony: 16:21–22:05
• Leftist Unity and Strategic Challenges: 22:05–26:49
• Toward a Progressive International: 26:50–28:12

Tone and Final Thoughts

The conversation is urgent, challenging, and hopeful—Wolff and Varoufakis do not mince words about the depth of crisis facing both American capitalism and European unification. Yet, Varoufakis repeatedly stresses the necessity and possibility of a new, truly internationalist left movement, anchored not in slogans but coherent policy and cross-border solidarity.

This episode is essential listening for anyone interested in understanding the interconnected crises of neoliberal capitalism, the limitations of state-based leftism, and the future direction of progressive international politics.