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Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host, Richard Wolff. Quickly, before we jump into today's program, I want to remind you that we have a companion book that goes very well with these presentations, gives you a kind of in depth or background to what we do in each weekly program. Its book is called Understanding Capitalism and you can find out all about it by going to our website and democracyatwork.info books. And I want to also again, remind you that Charlie Fabian is awaiting your words about things you'd like to see on the program, problems you see that we could address, and so on. You can reach him at charlie.info438mail.com I want to jump in today to a program you have asked me to do about the theory that lies behind much of the work that we do on this program. How do we get to collect the information, to assemble it, to organize it, to make the presentations that you get as a finished product? I'm glad you asked that question. I should have done more in the way of theoretical explanation than I probably have done. So I stand corrected and I appreciate it and I'm going to do it today. But I'm going to do it around a remark made not so long ago by President Trump. He was repeating his often stated denunciation of the socialist candidate for mayor of New York, Zoran Mamdani, who the polls were indicating at the time of Mr. Trump's speech would be the likely winner. And Mr. Trump went out of his way to denounce him, to say things like he would not permit, he did not like, he wouldn't allow, as if a democratic decision requires him to allow anything in the first place. But put all that aside. He had been denouncing Mr. Mamdani as a socialist. And then on this occasion, that caught my attention. He corrected himself right in the glare of the TV lights and said he's not a socialist, he is a communist. And he said it with as much gusto as he could apply to the world, as if the mere saying of the word would send people rushing for shelter. And I realize that he has no idea what the difference between these is, or if he has an idea it's wrong headed, doesn't apply to Mr. Mamdani. In any case, these are all signs of something that I've also noticed as a teacher. American schooling does not teach people about, about the differences between socialism and communism and Marxism and so on. They're all collected into a bag called bad. And that's apparently all most folks are asked to learn. Oh, it's bad. Well, given how much of the world takes these concepts very seriously, it is childish to treat it in this way, and I'm not going to do that. And I'm assuming you don't want to do that either. So here we go, a discussion of the theory. Because one of the things that theory does, beside enabling this program, is it will Clarify, clear up Mr. Trump's confusion, which will be the last thing I talk about at the end of our time together today. Here we go. The concept I used the key concept to understand an economy does come from old Karl Marx. He was the one who developed it. There were earlier formulations of ideas similar didn't come fully formed out of Mr. Marx's head. He was dependent on Adam Smith and David Ricardo and many of the great economic thinkers before him. But the name of the concept, as it has come to be translated into English, Marx, originally working in the German of his native country, is the concept of the surplus. So I want to begin by making sure we all know what the surplus means, and then we're going to use it to make sense of things, including the difference between socialism and. And communism, which will come as a surprise to Mr. Trump. A surplus is very simple. It's the difference between what any community produces and what is consumed by the people engaged in production. Let me unpack it briefly. In most communities, adults, most of them work. That is, they use their brains and their muscles to transform items given in nature to items suitable for our consumption. They convert a tree into a chair, they convert a woolen sheep into a sweater. They convert the soil into food, and so on. But when human beings in communitiesand here they differ from many animals, not all, but many. When human beings do this in a community, we notice if we pay attention, that in all human communities, whoever the adults are who are doing the work, they always produce more than what they themselves consume. That more is what we mean by surplus. Real simple. In ancient society, adults produced more, for example, to feed their children. Children need to be fed even before they're old enough to do the work themselves. Elderly can be sustained by a surplus by having the adults who do the work produce more than they themselves consume. Sick people can get that. Civilization is sometimes understood as a process in which we become more and more able to produce a surplus. Over time, we become more productive, we can produce more surplus. We learn how to use machines and technical and chemical processes and so on. And with More and more surplus. We can sustain more and more people who don't have to work, but who can live off of a distribution of the surplus. Now, human societies have organized the production and distribution of surplus in a variety of ways. Here's one you've heard slavery. In slavery, a portion of the adults, the slaves, do the work. They use their brains and muscles to produce food, clothing, shelter and everything else. Above them is a group of people, masters they're called, who get the surplus. It's produced by the slaves, but delivered by them to the master because that's how slavery works. They want the approval of the master. They believe it is perhaps their duty to do that. It is perhaps God's will that they do that. They're perhaps afraid that their master will hurt them if they don't do it, and so on. Slaves produce a surplus that masters get. Feudalism, a completely different system, doesn't have slaves. Nobody can be the property of anybody else. That's what you have in slavery. You don't have it in feudalism. Feudalism exists in Europe from about 500 AD to about 15, 1600 thousand years. In that arrangement, the mass of people doing work were called serfs. They weren't slaves. Nobody owned them. Nobody could buy and sell them. They were serfs. They had a right to be on the land where they were born. They had to work on a piece of land assigned to them. By whom? By the lord of that piece of land. By the way, the land was called the manor, the lord of the manor, the man in charge. And then the serfs who did the work. And yeah, once again, the serfs who did the work produced a surplus. And they delivered that surplus to the lord. And it had a name. The name given in feudalism was the word. You'll find it familiar. Rent. It's something you give to a land of lord, isn't it? And now we come to capitalism. Our system, the one we've been living under for the last two or 300 years and that most of the world lives under now. And it isn't like slavery. There are no slaves. Not allowed. 13th amendment of the United States Constitution outlaws it. Most countries do. And we don't have serfs. We have very interesting. We have people who are employees, a new term. Those people sell their ability to work. That's what happens when they go to work. They say to the employer, I'm going to give you my capacity to work my brains, my muscles, from 8 o' clock in the morning till 5 o' clock in the afternoon, Monday Through Friday, I sell you my labor power, my ability to work. And at the end of the week on Friday, you give me an envelope with money. You buy what I sell. You buy my ability to work, and I sell you my ability to work. Where's the surplus? Here. Here we go. When you take a job, think of it this way. Let's imagine a job. You're working in a factory that makes ladders. The employer buys wood, glue, hammers, nails, whatever goes into the ladders that are to be made. And he spends, let's say, $100 to get all those things, the raw materials and the tools. Then he comes to you, the worker, and he says, I want to buy your labor power. I want you to come here 9 to 5, Monday to Friday, and I want you to work with the tools I provide on the raw materials, the lumber and the glue, et cetera, et cetera. And I want you to make ladders. During your work, you add value to the product. In other words, there's $100 worth of glue, metal, lumber in that ladder, plus, let's say, another hundred dollars worth of value added by your labor. Because your labor does something. It takes the wood and makes it into something else, the glue into something else. You're making something more valuable than the components that went into it. The worker adds value by his or her work. Here comes the surplus. At the end of the week, the employer takes all the ladders and and sells them. He uses part of the money, say the $200 per ladder, 100 for the raw materials and stuff in it, and another hundred of the value added by the worker. He uses 100 to replace the tools, equipment and raw materials he used up. That leaves him 100 out of the hundred left. He takes. Here we go now, 50, and he gives it to the worker. That's your wage, he says to the worker. That's what your labor power is worth. That's what you have as the money to go and buy the food, clothing, shelter. You need the remaining 50 value you added, but that I don't give back to you, that's mine. That's the surplus. And I'm the employer. I get it. In capitalism, there's a surplus, just like slavery and feudalism. It's just organized differently. We've come to the end of the first half of today's program. In the second half, I'll show you how it all works. To clarify Mr. Trump's confusion, Before we jump into the second half of today's show, I wanted to thank you for your very generous response to our fundraising efforts this year and in particular in the last couple of months. And in part responding to that, we are extending the availability of our limited edition, linen covered home hardcover version of Understanding Capitalism, the book I wrote and that we have been making available now for quite a while. If you are interested, I will be signing copies of that hardcover and they will be available to you as they have been over the last few weeks. Just simply send an email to us@infodemocracyatwork.info and put in the subject line limited edition. We will send you all the information you need to order and receive your copy signed copy of Understanding Capitalism in its hardback. And thank you again for for your kind attention to the fundraising dimension of what we do. Welcome back, friends, to the second half of today's economic update. We're talking about the surplus, and we're now going to see how the surplus in capitalism, how it works to shape our society. And to clarify that confusion of Mr. Trump's here we when workers work in a private enterprise, they produce a surplus. The value added by their labor each day is greater than the value given to them to pay for what they do. If workers understood this, they might very well demand the full value back, saying, I added it by my labor. You gotta give it to me. If they did that, capitalism would come to a screeching halt. And that's something to think about. But they don't. A lot of forces are at work in capitalism to make workers believe that there's something necessary, something maybe even fair about them getting the wage they get. They listen when the employer says, well, that's really all you contributed. That other part that those other people call a surplus, that's me. I'm an entrepreneur. I make great decisions and that's why I get paid. Sure you do, Jack. That's like the master telling the slave, I'm getting money for being a master. Really? Or the landlord, I'm getting money for lording it over the land. The capitalist gets money for nothing. And you know how you know that? You do all know it. Most of the surplus, or a huge part of it in any case, ends up being distributed to people called shareholders. Now those are people all over the world who get a check four times a year with their cut of that surplus. Do they help produce anything in that company? Not at all. They don't even know where it is. They've never visited it. They have nothing to do with that. They inherited money from their grandmother, bought shares of stock, and so they get A cut. They don't contribute any effort to producing what the company produces. Think about it. But while you're thinking, let me explain. The surplus is what the employer uses to pay taxes to the government, if there are taxes on their profits. To hire all kinds of people who don't work, not in the way we're talking about here. For example, they hire people who are supervisors. They, they don't help make the ladders or whatever the company makes. That's not their job. Their job is to hound and bother the workers who do make what is made so that they don't spend time in the bathroom and they don't spend time watching porn on the Internet, etc. Etc. The company needs that surplus. If they have to hire a guard to go around the factory at night so nobody breaks in and, and disrupts it, they've got to take a portion of the surplus and pay the guard and buy the jeep that the guard uses and the outfit that the guard wears. That guard doesn't help make ladders or anything else the company does. But you have to do that to make the system work. That's what the surplus is always for. In slavery, in feudalism, in capitalism, the surplus goes to keep this system going. And that's how capitalism works. And when they've used up as much of the surplus as they need to keep themselves in the dominant position, you know what those capitalists do? Those employers, they take the money and give it to themselves. That's why the people who run the factories, the live in the big mansions and have 20 cars and 3 yachts and 2 homes in every state, etc. Etc. You want to know why we have inequality of wealth and income? It's because the employers are a tiny part of our community. According to the US census, employers, including the self employed, are 3% of our people. The other 97% are not employers. So if employers get the surplus and give it to themselves and they are the few and we who produce the surplus are the many. Now you can understand how the many who do the work live on the edge, week to week, paycheck to paycheck, why, they like to make a joke about there being too much month at the end of the money. But the people at the top don't worry. They don't worry because they get the surplus. They distribute it to keep their system going and you can see why. But they keep a big chunk for themselves to become super wealthy, as wealthy as they can. Look at Mr. Trump and his entire family if you want an example. Okay. Now let's take it one step further. Part of the surplus is used by these employers to grow the company, to hire more workers, to buy more raw materials into grow even larger. Because with more workers, there's more surplus that those more workers will. The system grows if and when the capitalists decide to use their surplus to grow the business. If they do, we all get jobs. Employment is good, unemployment is rare. If they decide not to, to hold back because they're not so sure the economy's in good shape, we won't have a lot of jobs. Having a job in capitalism is held hostage to the profit calculations of those who get the surplus. They'll hire us. If making more surplus is the result, and they won't. If they don't see it that way. We may need a job, but that's not important to them. They want surplus. If you can help them make a surplus, you'll get the job. If you can't, you won't. Now they're a tiny minority. The people looking for work is the vast majority. So the vast majority depend on a tiny minority who's not even interested in that majority unless it can be a surplus generating employment for them. Okay. The problem with capitalism has always been therefore, that it produces incredible inequality. Why? Because the less the capitalist has to pay the worker, the more the surplus he gets out of what the worker produces. Remember, he returns to the worker the payment for his work or her work. The less you can get away with paying them, the more surplus for you. Now you know why American companies went to China over the last 40 years. Cause they could get the work done and pay much less. Leaving them with the surplus which made them super rich wasn't very good for Americans who didn't have a job anymore. Because making surplus for the rich capitalist American was, was done by the Chinese worker, not by the American anymore. And we're still living with that problem. And then capitalists periodically think the future doesn't look so good, so they hold back and they don't hire. Then we have a recession or a depression, they're the ones calling the shot. The masters ran the slave system, the lords ran the feudal system, and the capitalists run the capitalist system. So long as the mass of people are content to produce the surplus that that tiny minority decides how to use and how to consume. Now we come to Mr. Trump and the whole question of socialism and communism. In every system, slavery, feudalism and capitalism, it was normal, common, seen all the time that some of the masters were the governments. Ancient Rome was a slave Society. Some of the slaves were owned by private individuals, some were owned by the government. That would be stated slavery. Nobody, nobody thinks that because the government also had slaves, it therefore wasn't slavery anymore. Ridiculous. It's slavery whether the private have it and the government doesn't, or the government has it and the private don't, or they both do. Same thing with feudalism. Were there governments that had serfs? Loads of them, all the time. So now in capitalism, we get to the funny, weird. When the government hires people, the government is the employer, you know, like the post office or whatever else. There are people who come up with a different name. It's not capitalism, they say it's socialism. Wait a minute. Is it employers and employees? Yup. Is it the usual relation between them? Yup. Well, then why? Because it's the state. Do you call it a different name? You didn't do that when the state had slaves, and you didn't do that when the state had serfs. So why are you doing what the state has? Employees. And the answer is you shouldn't do it because it's confusing. It certainly confused Mr. Trump. It confuses a lot of Americans more than will admit it. Why? Because capitalism, like slavery and feudalism, has always had this state doing things. In many countries, they do many more things than they do in the United States to this day. In Europe, the utilities are often owned by the government, airlines are owned by the government, and on and on. Well, then, what is communism? Well, the first thing to understand is we have no experience of communism on a national level because there's never been a communist nation. What am I saying? Well, let's take a look. The two biggest examples are the Soviet Union and. And the People's Republic of China. What does the Soviet Union call itself? USSR Union of Soviet Socialist Republics. The Communist Party of Russia presided over, had created and was proud of its socialist economy, where the government had a big role. What do the Chinese call their economy? Socialism with Chinese characteristics. Communist Party runs it. Socialism is what they've created. None of those countries ever claimed it was a communist country. That was a decision made by the Americans in the process, like Mr. Trump, of demonizing. It's all bad. It's all bad. Here's what Marx meant by communism. And we're going to use the concept of the surplus. Communism will exist, he says, if and when the people who produce the surplus, the workers, the slaves, the serfs, the employees, are the same people as those who get it. They don't give it to anybody else. When the workers themselves take, decide what to do with the surplus they've produced. Then Marx said, you have a communist, you've gone beyond capitalism. You haven't done that. When the state takes a major role, that can be an interesting decision that can have all kinds of interesting or not so interesting consequences. But if you want to understand the difference, then you must understand it's all about the surplus. Mr. Mamdani doesn't discuss the surplus, doesn't advocate that the workers take over and run the enterprises. The closest he comes is talk a little bit about worker co ops and I want to end with that too, because a worker co op is the attempt inside capitalism to get closer to the idea of a genuinely democratic workplace where the workers who do the work and produce the surplus are the ones who decide who gets that surplus and why. Then you have a radically different system that may come in the years ahead, but Mr. Trump clearly hasn't got a clue. Thank you for your attention. I hope you found this theoretical discussion. Excuse me, interesting and as always, I look forward to speaking with you again next week.