Democratic economics—now

 

Democracy Now! has been investigating democratic economics in the last couple of days.

Here’s a link to the transcript for the interview with Richard Wolff [ht: ja] above.

AMY GOODMAN: So what do you think needs to be done?

RICHARD WOLFF: A radical change in the policies. And I think it has to go far beyond simply reversing this austerity program, which, again, just for a word about history, back in the 1930s, the last time we had a breakdown of our capitalist system like this, we didn’t have austerity, we didn’t have cutbacks. We had the opposite. Roosevelt, in the middle of the ’30s, created the Social Security system, went to everybody over 65 and said, “I’m going to give you a check for the rest of your life.” He created the unemployment compensation system, giving all the unemployed for the first time checks every week for a year or two. And he created a public employment program and hired millions of workers. It’s the opposite of austerity. So any politician who says, “We must do this, because there’s no option,” has forgotten even the American history of not that long ago.

So, the first thing I would do is go in that direction—not austerity, but its opposite. But I want to go further, because I think our problem is deeper. This crisis wasn’t supposed to happen. When it happened, it wasn’t supposed to last a long time. All of that has been proven false. The problems run deep. And I think what we have to do, and what that book tries to do, is to talk about reorganizing our economy so that for the first time we can say we’re not only going to get out of this crisis, we’re taking the kinds of steps that can prevent us from having them over and over again as our unstable business-cycle-ridden economy keeps imposing on us. So, for me, it’s the more profound change that we finally have to face, painful as it is. After 50 years of a country unwilling to face these questions, I think we need basic change. And that’s what I spend most of my time stressing.

And here’s a link to a web-only interview with Wolff about his life and how Marxism influences his work.

AMY GOODMAN: The New York Times has called you “probably America’s most prominent Marxist economist.” Can you talk about Marx’s influence on you?

RICHARD WOLFF: Sure. I’m a product of the elite top of the American university system. I went to Harvard as an undergraduate. Then I went to Stanford in California to get my master’s degree. And then I went to Yale to get my Ph.D. So, by the normal standards of this profession, I’m the elite product of these institutions.

I was always struck that as I went through these schools, studying history, politics, economics, sociology—the things that intrigued me—I was never required to read one word of Karl Marx. And I remember telling that to my father, who looked in stunned disbelief at the very possibility that an educated person going to such august universities would not be required to at least read people who are critical of the society, simply as a notion of proper education. So with a father like that, it wasn’t so surprising that I went and found ways that individuals who were on the faculty sometime could, out of the classroom, teach me, take me through the great classics of critical literature, whether it was Marx and Engels themselves or Antonio Gramsci or George Lukács or all of the other—Rosa Luxemburg, the great thinkers of the critical perspective. So, I got excited about learning that on my own.

Then I discovered that these people are full of interesting insights about our society, and I should have been asked to read them. And the more I read it, the more I realized that I wanted to be an economist, but one who had a toolbox not only with the conventional stuff that I was learning in my university classes, but also with the nonconventional stuff. And, you know, over the last 40 years in America, it’s a sort of a sad comment, but if you’re interested in Marxism, then people look at you as if you either are a Marxist, or worse, some sort of caricature of a Marxist. So I always have said I use Marxist theory, I find it very insightful, I think it’s a shame that other people don’t have it, and I think it’s made me a better economist when it comes to writing and teaching than I would have been without that. And I think that would be the same for my colleagues, and that it’s a deficiency of theirs that the education didn’t do it.

I use a metaphor to get it across. If you wanted to understand the family down the street that had mommy and poppy and two children, and you wanted to really understand that family, and you knew that one child thought it was the greatest family the world had ever seen and the other child thought it was a psychologically dysfunctional group of people, what would you do? Would you talk to only one child, or would you talk to two? Clearly, you’d make up your own mind. You’d draw your own conclusions. But why in the world wouldn’t you speak to both of them, if you wanted to understand the family? Capitalism, our system, is the same. It has the people who celebrate and love it—and I, by all means, think you ought to read what they have to say. But you also have a large group of people who are very critical, and it is self-destructive of your own understanding not to expose yourself to what they have to say.

I would even go so far as to say one of the reasons this crisis we’re in now is as bad as it is and is lasting as long as it does, despite everyone’s prediction we wouldn’t have this again, is precisely because the people in charge of doing something about it, Republicans and Democrats alike, have no clue about the long, critical literature. Had they studied it, they would have been aware of the flaws and the faults in the system, would have been thinking about how to fix and improve upon them. We’d be in better shape to manage the crisis of capitalism if we hadn’t blinded ourself to the whole critical tradition, the chief of which is Marxian theory.

And, finally, here’s a link to a 2012 interview [ht: ra] Democracy Now! host Amy Goodman did with Mikel Lezamiz, director of Cooperative Dissemination at the Mondragón Cooperative Corporation in Spain’s Basque Country.

Lemon socialism

Back in the day, we called it lemon socialism—when workers were allowed to take over or at least own some stake in enterprises that were failing. And we never thought it was a particularly good test of whether or not worker-owned enterprises were a viable alternative to capitalism.

I was thinking about this after I heard one of the exchanges between Bill Moyers and Richard Wolff last evening:

BILL MOYERS: But how do you answer this viewer? “In 1994 when United Airlines was on the brink of financial collapse a deal was made creating the biggest employee-owned company in the US. In 2002 the airline filed for bankruptcy.”

RICHARD WOLFF: My answer is the following and it’s very important. For workers to own something is one thing. For workers to become the directors of their own enterprise is something else. Worker ownership means for example, and we have lots of examples both in the United States and around the world, that the workers become in a sense shareholders. They are the technical owners.

But if the workers who become owners, and I’m not against that, but if the workers who become owners don’t change the way the enterprise is operated it remains a capitalist enterprise. It still has a board of directors, a handful of people who make all the decisions. It’s true that the workers may vote for who those people are, but they’ve left the structure of the enterprise in the old form, hierarchical, top-down. That’s what was done in United Airlines. I was involved in that. I actually know.

BILL MOYERS: How so?

RICHARD WOLFF: They called me in at a couple points to participate in some of the discussions, the International Association of Machinists, which was the union that was part of that. So they left the old capitalist structure, they weren’t willing to go beyond saying, “We, the workers, become owners, but we leave the running of the enterprise, the directing of it, the day to day decisions in the old form made by the old experts.” Part of a movement away from capitalism to a cooperative enterprise requires that the people of the United States stop believing that the folks at the top have some magical entitlement to give them that position.

To give a bit of history: United Airlines was losing a great deal of money in 1991 and 1992 (after taking over some of Pan Am’s operations during the 1980s and as a result of increased competition from low-cost carriers). So, in 1994, it created an Employee Stock Ownership Plan, through which United’s pilots, machinists, bag handlers, and non-contract employees came to own 55 percent of United’s stock in exchange for 15–25 percentage salary concessions, accompanied by a mountain of tax breaks. In May 2000 United went through a bitter contract dispute with its pilots’ union over pay cuts and concessions to fund the ESOP and overtime work. And it continued to lose money ($2.14 billion in 2001), leading to Chapter 11 bankruptcy in December 2002, when the ESOP itself was terminated.

Now, it’s probably true the unions could have done much more with their ownership share in United. But United created the ESOP not to make the transition to an employee-controlled enterprise but in order to raise capital to run the airline much as it had before, although on a lower-cost basis (because of employee concessions and the tax advantages associated with ESOPs). And, because of its finances, it was heading toward bankruptcy anyway. No employee decisions, at least in a short period of time, were going to overcome that.

So, in my view, United isn’t a particularly good example of the potential success but actual failure of democratic enterprises. It’s just an example of why the possibility of workers owning and controlling the places where they work needs to encompass much more than lemon socialism.

Economist of the day

Economist Richard Wolff returns to Bill Moyers’s television show (as a follow-up to his previous appearance) to discuss a democratic alternative to capitalism.

BILL MOYERS: Here’s a synopsis, Richard, of a lot of similar questions that bring us to your book,Democracy at Work: A Cure for Capitalism. A viewer who identifies himself as a longtime fan of Dr. Wolff writes, “You’re passionate about workers’ self-directed enterprises. Can you explain briefly why you think these are the way to save capitalism? Critics say your alternative may work in theory but not in practice.”

RICHARD WOLFF: My point is that workers ought to be– all of us who work in an office, a factory or a store—ought to be in the position of participating in the decisions governing that enterprise. And I do that not only because I believe in democracy. And let me say that if you do believe in democracy, it’s always been a mystery to me why that democracy that you believe in doesn’t apply to the place where you work. After all, five out of seven days of every week, most of your adult life, you’re at work.

So if democracy’s an important value it ought to be at your job because that’s where you are most of the time. And democracy at the job means the following. If you have to live with the decisions that are made in a job, what you’re producing, what technology’s being used, what the health conditions of your workplace are, what’s done with the fruits of your labor, literally whether your factor or your office continues, since you have to live with those decisions you ought to participate, the basic idea of democracy.

So I like the idea of cooperative enterprises because it fulfills my value commitment to democracy. Whereas a capitalist enterprise doesn’t because it keeps all the decision making in a tiny minority. We all who go to work have to live with their decisions, but we don’t participate in them, not even to speak of the community that has to live with the decisions.

But the second reason is I see concrete results coming from an enterprise that was run by the workers collectively, and let me give you a few examples. First, most of us believe that if the workers themselves made a decision that they would close the enterprise and move it to China, I don’t think so.

I think that the whole running away of enterprises out of the United States was made possible because the decisions to close enterprises here and to open them in another part of the world where you could get away with paying workers much less was a decision that was very good for the folks who make the decisions, but not for the average workers there.

So if we had decision making made by the workers in place they wouldn’t undo their own jobs and they wouldn’t move. And that would make a very different economic system from the one we have today. Second example, suppose a technology was being considered by the corporate heads who make the decision, the board of directors, and it was one that wasn’t safe, it created too much noise, too much air pollution, despoiled the water, whatever. If it’s a bottom line decision of the typical sort the board of directors and the shareholders seeing profit using that technology might go ahead and use it because it’s profitable and that’s what they’re called upon to do, make profits.

If the workers collectively made the decision knowing that they had to breathe that air, they had to hear that noise, they had to live with that water and so did their spouses and their children and their neighbors, I bet you you’d get a different decision because they would weigh the costs and benefits of that decision differently. And my third example, although I could give you many, Bill, if you want them.

The third example, when it comes to deciding what to do with the profits, suppose instead the workers themselves made that decision democratically, how do we divide the profits?

You think they would give a handful of top officials wild sums of money to buy $40 million apartments on Fifth Avenue while everybody else was having to borrow money to get their kids through school? I don’t think so. I think that people collectively would distribute the wealth more to some than others for all kinds of reasons, but they would do it in a much less unequal way than we have in a capitalist system.

So I challenge all of those who are concerned with a more equal system, with less inequality, to come up with a better way of achieving it than having workers be in a position to make the decisions as to how we divide the profits because that is the single most important determinant of the inequality of income in our society.

 

Economist of the day

 

Economist Richard Wolff will be appearing on “Moyers & Company” TV show airing across the country starting Friday, 22 February [ht: ja]. The focus is on the Great Recession and is Part I of a 2-part series on what went wrong and how to fix it.

It’s great to see the kind of critical analysis offered by Wolff getting some well-deserved national media attention.

Overdetermined election

This morning, Nate Silver argued that Obama’s recent gain in the polls cannot be attributed to any single cause or event. Instead, it is “overdetermined.”

While Silver provides a link to the mathematical definition of overdetermination, his use of the term—”there are lot of variables that might have contributed to the one result”—actually has a more interesting lineage, as a challenge to cause-and-effect notions of causality.

The term first appears in Sigmund Freud’s Interpretation of Dreams. There, Freud argued that, because of the processes of condensation and displacement, there is no one-to-one relationship between dream-thoughts and the dream-content. Instead, Freud argued,

The formation of the dream does not, therefore, take place in such fashion that a single one of the dream thoughts or a group of them furnishes the dream content with an abridgment as its representative therein, and that then another dream thought furnishes another abridgment as its representative—somewhat as popular representatives are elected from among the people—but the whole mass of the dream thoughts is subjected to a certain elaboration, in the course of which those elements that receive the greatest and completest support stand out in relief, analogous, perhaps, to election by scrutins des listes. Whatever dream I may subject to such dismemberment, I always find the same fundamental principle confirmed—that the dream elements are constructed from the entire mass of the dream thoughts and that every one of them appears in relation to the dream thoughts to have a multiple determination.

Needless to say, this made the work of free association important as a way of producing a particular interpretation of dreams, which however could never be constituted as the only possible interpretation.

This notion of overdetermination was, in turn, taken up Louis Althusser who, in such essays as “Contradiction and Overdetermination,” used it to criticize Hegelian notions of contradiction, in which everything can be reduced to a single or essential element. Instead, Althusser argued, a particularly Marxist notion is that of overdetermined contradictions. Thus, for example,

the Capital-Labour contradiction is never simple, but always specified by the historically concrete forms and circumstances in which it is exercised. It is specified by the forms of the superstructure (the State, the dominant ideology, religion, politically organised movements, and so on); specified by the internal and external historical situation which determines it on the one hand as a function of the national past (completed or ‘relapsed’ bourgeois revolution, feudal exploitation eliminated wholly, partially or not at all, local ‘customs’ specific national traditions, even the ‘etiquette’ of political struggles and behaviour, etc.), and on the other as functions of the existing world context (what dominates it – competition of capitalist nations, or ‘imperialist internationalism’, or competition within imperialism, etc.), many of these phenomena deriving from the ‘law of uneven development’ in the Leninist sense.

The concept of overdetermination is then taken up Stephen Resnick and Richard Wolff who, in a series of works (such as Knowledge and Class), extend the idea to criticize the kinds of essentialist theories—in both epistemology and methodology—that have haunted the Marxian tradition as well as non-Marxian approaches to economic and social analysis. Their view is that Marxist theory is based on a notion of causality radically different from the logic of cause and effect. Instead, everything can be seen as both cause and effect at the same time. Essentialist approaches (such as rationalism and empiricism in epistemology, or economic determininism and theoretical humanism in methodology), on the other hand, are based on the idea that what we’re trying to explain (knowledges or social events) can be reduced to a single element.

In my view, Silver’s use of overdetermination makes more sense in that lineage than in terms of the mathematical definition of overdetermination. As such, it is an important corrective to those who, now and in the coming days, will attempt to reduce Obama’s victory in tomorrow’s presidential election to one or another event or cause.

Richard Pryor, Karl Marx, and the critique of capitalism

Richard Wolff [ht: ja] explains, in an interview with the Guardian, how he has drawn inspiration for his critique of capitalism (from Marx) and for his speaking style (from Richard Pryor).

Anthony Arnove, an editor at Haymarket books, which is bringing out Wolf’s [sic] next work, Democracy At Work: A Cure for Capitalism, explained what he thought was behind Wolff’s remarkable rise. “He knows how to speak to people. He knows how not to speak over people’s heads. But he is also clear that that he comes from a Marxist framework,” Arnove said.

But Wolff, who speaks with a strong New York accent, also serves up his radicalism with humour. “I am an economist. I do apologise,” he said, opening his speech in a packed lecture hall at Columbia College to bursts of laughter.

That was a typical Wolff line. He went on to describe the inherent instabilities of capitalist business cycles with a parallel to a crazy roommate. “If you lived with with a person as unstable as this economic system, you would have moved out a long time ago,” he quipped.

Wolff’s inspiration for his speaking style is the famed comedian Richard Pryor. Wolff was a huge fan, and he studied Pryor’s delivery and technique and how he addressed taboos around race, sex and swearing. Wolff decided he would do the same but by tackling what he says is the true American taboo: the country’s political and economic system.

“What I do is half economics, half performance art. … I say the political sex words, the dirty political words, and they like it. They like a little radicalism. They have been waiting. They want this,” he said.

Marx online

A new course on Marx’s critique of political economy is available online.

The course is taught by award-winning University of Massachusetts Amherst Professor Stephen Resnick and is based on the popular undergraduate course in Marxian Economics that was developed by Resnick together with Professor Richard Wolff and taught by both of them over the last 25 years.

The course can be taking for credit, during the Summer Session (7 June-12 July or 13 July-16 August) by contacting www.umassulearn.net to enroll or email any questions to online@econs.umass.edu.

Otherwise, the series of 25 video lectures (some in multiple parts) is available on Wolff’s web site and on YouTube.

S#@t Hits the Fan

You’ve seen the clip or the movie. Now, read the book. . .

Capitalism Hits the Fan
The Global Economic Meltdown and What to Do About It
Richard Wolff

published 2009 • 6” x 9” • 256 pages • charts

ISBN 9781566567848 • paperback • $18.00
A breathtakingly clear analysis that breaks down the root causes of today’s economic crisis.

“With unerring coherence and unequaled breadth of knowledge, Rick Wolff offers a rich and much needed corrective to the views of mainstream economists and pundits. It would be difficult to come away from this… with anything but an acute appreciation of what is needed to get us out of this mess.”
—Stanley Aronowitz, Distinguished Professor of Sociology and Urban Education, City University of New York

Capitalism Hits the Fan chronicles one economist’s growing alarm and insights as he watched, from 2005 onwards, the economic crisis build, burst, and then dominate world events. The argument here differs sharply from most other explanations offered by politicians, media commentators, and other academics. Step by step, Professor Wolff shows that deep economic structures—the relationship of wages to profits, of workers to boards of directors, and of debts to income—account for the crisis. The great change in the US economy since the 1970s, as employers stopped the historic rise in US workers’ real wages, set in motion the events that eventually broke the world economy. The crisis resulted from the post-1970s profit explosion, the debt-driven finance-industry expansion, and the sequential stock market and real estate booms and busts. Bailout interventions by the Federal Reserve and the US Treasury have thrown too little money too late at a problem that requires more than money to solve.

As this book shows, we must now ask basic questions about capitalism as a system that has now convulsed the world economy into two great depressions in 75 years (and countless lesser crises, recession, and cycles in between). The book’s essays engage the long-overdue public discussion about basic structural changes and systemic alternatives needed not only to fix today’s broken economy but to prevent future crises.

Olive Branch Press