Economic Update with Richard D. Wolff

Episode: Exposing Economic Myths
Date: January 30, 2020

Episode Overview

In this episode, Richard D. Wolff, host and economist, critically examines several pervasive economic myths in the United States. With a focus on employment, wages, minimum wage, markets, and corporations, Wolff dismantles commonly held beliefs that shape public policy and perception, arguing that many of these myths hide economic realities that are detrimental to the majority of Americans. He illustrates how these misconceptions perpetuate inequality and obscure viable alternatives for organizing the economy, such as worker cooperatives.

Key Discussion Points and Insights

1. The Employment Myth: Beyond the Unemployment Rate

• Overreliance on Statistics:

  • Wolff criticizes the focus on the unemployment rate as the sole indicator of economic health, likening it to a doctor assessing health by only taking a patient's temperature.
  • Quote:
    • “To look at one statistic is an act of economic incompetence.” (02:55)

• Labor Force Participation:

  • The reported low unemployment rate hides the reality that many people have stopped looking for work and are no longer counted as unemployed.
  • Understanding the Data:
    • “What we have today is a much lower than we used to have. Labor force participation rate… that last one is the one that's gotten quite big. And that helps account for the low number of people unemployed.” (04:10)

• Quality of Jobs:

  • Many who are employed have shifted from good jobs with security and benefits to low-wage, insecure jobs.
  • Quote:
    • “You’re not going to have good jobs anymore, so you got a choice. You can have no job at all, or you can take a job with low pay, no benefits, and little security.” (06:00)

2. Wage Stagnation and Declining Buying Power

• Historical Wage Comparison:
  • Wolff compares the average hourly wage in 1973 and its purchasing power to today, finding that today’s average wage buys less than it did nearly 50 years ago.
  • Quote:
    • “The average wage in America today, in terms of what it can buy, is less than what it was 50 years ago.” (09:16)
• Productivity vs. Wages:
  • While worker productivity has increased by 25–35%, real wages have remained flat or declined. The benefits of this productivity have gone to employers.
  • Quote:
    • “What the employer has been giving you for the last 50 years has gone nowhere, but what you give to the employer has zoomed up by a third.” (11:00)
  • Resulting Inequality:
    • This growing gap is at the root of rising inequality in America.

3. The Myth of the Minimum Wage as Decency

• Erosion of Minimum Wage:
  • The federal minimum wage has remained $7.25 since 2009, while prices have steadily increased, resulting in declining real earnings for minimum wage workers.
  • Quote:
    • “In terms of what the minimum wage can buy, the last 10 years have seen a steady year by year decline in what the minimum wage will do for the people.” (13:45)
• Historical Context:
  • The 1968 minimum wage, adjusted for today’s prices, would be $12 per hour, highlighting the drop in standards.
  • Quote:
    • “We have really shafted the people at the bottom. And that's an achievement of the capitalist system even with a minimum wage.” (15:45)
• State Action vs. Federal Inertia:
  • Many states have raised minimum wages above the federal level in response to inaction.

4. The Market: A Flawed Institution

• Market’s Real Results:

  • Extreme wealth concentration is not a coincidence but a product of market economies.
  • Statistics:
    • 2,000 billionaires own more than the bottom 3.5 billion people globally.
    • In the US, the three richest individuals have more than the bottom half of the population.
  • Quote:
    • “That’s a level of inequality that, that any system should be deeply ashamed of.” (19:32)

• Market-Driven Problems:

  • Gentrification:

    • Markets allocate housing by wealth, resulting in displacement of lower-income residents.
    • Quote:
      • “If the rich want it, they get it and the middle and the poor get thrown out.” (23:10)

  • Access Inequality:

    • Scarce resources always go to those who can pay the most, as illustrated by the $3 ice cream bidding example.
    • Quote:
      • “Whatever is scarce in an economy goes to the people with the most money. And I ask you… is it ethical, is it moral?” (25:25)

  • Rural Decline:

    • Market decisions leave rural areas unserved due to lack of profit incentive.

• Non-Market Solutions:

  • Historically, government intervention—not markets—created the middle class and essential social programs (e.g., jobs programs, Social Security, minimum wage, unemployment insurance).
  • Quote:
    • “The market was the problem, not the solution.” (29:17)

5. Globalization & Markets: Offshoring Example

• Corporate Moves to China:

  • Corporations relocate to maximize profits, motivated by lower wages and larger markets.
  • The technology-sharing arrangements with China were a fair exchange, not “intellectual property theft” as sometimes claimed.
  • Quote:
    • “That's the market, friends. Nobody forced them... They were doing what a market capitalism has, maximizing profits and that was what was good for the corporation. Not good for this country, not good for most people.” (36:40)

• Contradictory Government Response:

  • Policies like tariffs are now used to counteract market outcomes, implicitly admitting market failures.

• Historical Lesson:

  • During WWII, rationing (not market allocation) ensured equitable distribution—showing the limitation and dangers of relying solely on markets.

6. The Corporation Myth vs. Worker Cooperatives

• Corporations Aren’t Inherently Efficient:
  • Research by Professor Virginie Perotin (University of Leeds) consistently finds that worker co-ops are more efficient, grow faster, and are more successful than traditional corporations.
  • Quote:
    • “Her research shows that worker co ops are more efficient, grow faster and are more successful as businesses than corporations.” (41:05)
• Lack of Exposure:
  • The reason corporations prevail is not efficiency, but their control over information and policy.
  • Alternative Models:
    • Regions like Emilia Romagna (Italy) demonstrate large, successful worker co-op economies.
    • Wolff argues for a mixed economy where citizens can choose between corporate and cooperative workplaces.

Notable Quotes & Memorable Moments

• On Unemployment Numbers:
  • “To look at one statistic is an act of economic incompetence.” — Richard D. Wolff (02:55)
• On Real Wages:
  • “The average wage in America today, in terms of what it can buy, is less than what it was 50 years ago.” — Richard D. Wolff (09:16)
• On Productivity Inequality:
  • “What the employer has been giving you for the last 50 years has gone nowhere, but what you give to the employer has zoomed up by a third.” — Richard D. Wolff (11:00)
• On Minimum Wage:
  • “We have really shafted the people at the bottom. And that's an achievement of the capitalist system even with a minimum wage.” — Richard D. Wolff (15:45)
• On Market-Driven Inequality:
  • “That’s a level of inequality that, that any system should be deeply ashamed of.” — Richard D. Wolff (19:32)
• On Market Allocation:
  • “Whatever is scarce in an economy goes to the people with the most money. And I ask you… is it ethical, is it moral?” — Richard D. Wolff (25:25)
• On Historical Creation of Middle Class:
  • “The market was the problem, not the solution.” — Richard D. Wolff (29:17)
• On Corporations vs. Co-ops:
  • “Her research shows that worker co ops are more efficient, grow faster and are more successful as businesses than corporations.” — Richard D. Wolff (41:05)

Timestamps of Important Segments

• 00:10 – 06:00: Myths about employment statistics and labor force participation
• 06:00 – 12:00: Wages, productivity, and the roots of income inequality
• 13:00 – 17:00: Minimum wage stagnation and its societal impacts
• 18:30 – 22:00: Wealth concentration, market outcomes, and inequality
• 23:00 – 29:30: Gentrification, market flaws in housing/access
• 30:00 – 35:00: Offshoring, globalization, and government interventions
• 36:00 – 40:00: Historical non-market solutions—WWII rationing
• 41:00 – 45:00: The myth of corporate efficiency and the case for worker co-ops

Concluding Reflection

Richard D. Wolff’s “Exposing Economic Myths” asks listeners to reconsider taken-for-granted ideas about employment, wages, markets, and corporations. He encourages a shift from myth-based policy making toward a reality-based, critical understanding—rooted in data and alternative models like worker cooperatives. He closes with an invitation to further explore these ideas and look to examples abroad and research that challenge the status quo.