NEW YORK CITY, U.S.A. The economic crisis of 2008 has shown the dark side of capitalism. Due to irresponsibility and risky behavior at the most powerful financial institutions in the United States, thousands of people have had their homes foreclosed upon, income inequality between the rich and poor has dramatically risen, and thousands of people have defaulted on their debts. Clearly, capitalism is at a crossroads and is being questioned. One of the leading critics of capitalism is Richard Wolff, who has written extensively on its problems and has offered practical and innovative strategies and reforms for fixing its failures.
ROOSTERGNN had the opportunity to talk to Richard Wolff, author of many books on capitalism such as Democracy at Work: A Cure for Capitalism and is the co-founder of the project Democracy at Work, which seeks to create alternatives to capitalist mode of organization on a local level.
In a recent interview you stated, “capitalist organization of production has now finished its period of usefulness in human history.” Is capitalism at a crisis and why?
Richard Wolff: Capitalism is usually dated as having become a major economic and a dominant economic system in Britain in the 18th century more or less, and to have spread from that over the last two and a half centuries to Western Europe and to lands like the United States and Australia and so on that Europe settled in and from then over the last 100 years to pretty much the rest of world. So we have a system that has been around two or three hundred years and that has had in the last 75 years two global catastrophic collapses: the first one in the great depression in 1930s and the current which is not as bad as the one in the 1930s in some parts of the world but is getting close to getting just as bad in other parts. It seems to me that two major breakdowns in 75 years is a serious sign of exhaustion and of contradictions, which all systems have that are now coming to the floor. Out of the Great Depression of the 1930’s came a whole bevy of clear ideas that had figured out how to fix capitalism, how to make it work, how to make sure it didn’t have more of these kinds of breakdowns.
There is an unmistakable outcome which is that the current economic downturn, from which we still have not recovered from at least for most people, the one that began in 2007 proves that the so called lessons learned from the great depression proved to be inadequate to deal with the underlying instability and tendency of capitalism to produce these sorts of debilitating downturns. So in my judgment whatever the future may hold, were seeing a capitalism that is decreasingly able to deliver to people the goods as the defendants of capitalism used to say, and is increasingly delivering decline insecurity.
Is capitalism digging its own grave?
Yes, but that’s not peculiar to capitalism. Most systems come to an end when the accumulation of their own contradictions of their own problems and of their own blockages to resolving those problems come to a head and they implode and lose their capacity to solve the basic problem of an economy which is delivering to a mass of people the goods and services that they need and that they expect.
Income inequality has scarily risen over the years with the top 1% owning 40% of the wealth while the bottom 80% just own 7%. How did we get here and what are some ways to alleviate or fix this problem?
There are basically two ways. You can either put forward one or another proposal to redistribute the wealth, in other words take it from those who have a lot and redistribute to those who have nothing or a little. The alternative to redistribution is to not distribute the wealth unequally in the first place. I am a fierce partisan of the latter. I don’t not want to redistribute wealth because everything I know indicates to me that those who get it are very unhappy and unwilling to part with it and that the effort to make them do so whether it be through taxation whether it be through legislation and regulations of one kind or another is not only productive of enormous and dangerous social tensions but that long ago those at the top have learned countless stratagems for getting around these efforts at redistribution. For example, all wealthy people that I have met pay accountants and lawyers huge sums to figure out ways to avoid taxes, etc. So I prefer to avoid the redistribution battles and the many failures that go with them by distributing it more equitably in the first place.
The basic way to do that is to change the organization of our enterprises. They are currently organizing in such a way to favor inequality. Most business in capitalist economies is done by an entity called a corporation. In the United States they do about three-fourths of the basic business of our society and I am talking about a few thousand of them who account for all of that. A tiny group at the top make all of the decisions these are called the major shareholders those are the folks who hold a big blocks of shares and the board of directors who the major shareholders elect every year. These are a group of people numbering from 20-40 persons. They make the big decisions of what to produce, how to produce, where to produce and how to divide the net revenue of the business. Not surprisingly the major shareholders and the board of directors use those profits of the corporation mostly to pay themselves. They pay huge dividends to the shareholders who become very wealthy in that way and huge pay packages to the directors and top managers of the corporations. If you look over the last 100 years of American capitalism the overwhelmingly most important explanation for the growing gap between the rich and the poor is keeping a lid on wages, which is done by the directors and major shareholders and gathering into their own hands huge portions of the profits.
The way to avoid that kind of inequality that builds on itself is to change the organization of the corporation and here’s how you do it. You make it democratic. You convert corporations from the capitalist top-down hierarchical organization that they now display to what I would call a workers democratic co-op and the way this simply operates is that everybody at the corporation participates equally, one person one vote in deciding what should happen at the corporation: what should be produced, how it should be produced, where to produce and how to distribute the profits. After all they all they all help to produce and here is the outcome: If a democratic distribution of the profits they all help to produce were to be accomplished in this way you could be sure that they would never distribute it with huge amounts to the directors to the executives to the shareholders and everybody else scrambling to make ends meet and having a harder and harder time. We would have a much more equitable distribution in the first place and that would mean that the need for redistribution would be much more smaller and disappear.
You write a lot about co-operatives and economic democracy at the workplace. Talk about your involvement with Democracy at Work.
The basic idea of Democracy at Work is to make the argument as successfully as clearly and as persuasively as possibly as we could to why the time has come to be not only critical of capitalism but to actually come forward and say here is a way to overcome the problems of capitalism while holding on to those achievements that capitalism can rightly point to in terms of technological advance and in terms of increase in at least total output if not a proper distribution. It seems to us that now is the time because capitalism has had two or three hundred years and has shown the world what it can do but in the last 75 years with two basic breakdowns it has also shown the world what it cant do. Here’s a way to produce effectively but to do so without the kinds of problems that capitalism has displayed.
One factor you have mentioned to this problem is the decline of the labor movement. What happened to organized labor and what are some ways forward?
The explosive growth of the labor movement in the U.S. all happened in the decade of the 1930’s, at the worst moment in the history of American capitalism. The Great Depression that happened after 1929 is also the time when the labor movement explodes from the AFL which existed before the 1930’s with mostly craft skilled workers in small unions then in the middle of the Great Depression a wave of industrial unionism across basic industries mobilizes tens of millions of Americans who have never been in a union before. They joined the union because they thought it was a protection against capitalisms’ breakdowns of the 1930’s. So when the 1930’s are over and World War II ends you have a union movement that represents a third of workers in private enterprises in this country. An extraordinary testimony to how successful you can be when your not only a union that pushes for higher wages and working conditions for your members but you really are the vanguard of a social movement that is advocating and protecting the interests of a mass of people. Ever since then, unions have been squeezed back into a box instead of being a social movement. They were squeezed into being a service enterprise for their members instead of having an agenda to make society better for everybody. Part of that isn’t the unions’ fault. Starting after the war with the Taft-Hartley Act, which was passed in 1947, unions were blocked from all kinds of strategic options that they have successfully used, tactical availability that they have used and good alliances with Socialist and others on the Left that have helped them.
This was a massive retaliation against organized labor by the business community and its Conservative allies. Since that time unions have shrunk in the private sector today where they represent less than 7 percent of employees. That is a stunning fifty-year decline almost in a straight line. So then you have to argue that the unions have become complicit and unable to figure out a strategy to undo the Taft-Hartley Act. They have supported the Democrats all of those 50 years hoping that alliance would win them a different history and it has failed to do that. The only remarkable thing is their commitment to stay with the Democrats despite 50 years of disappointment. If what gave you your birth your surge your strength was not just being in a labor union but rather being part of a broad social movement with allies on the political Left that were advocating the kind of broad social changes that people could and would support, and that gave you strength, then that’s what you’ve got to go back and do. They have to reach out and once again become partners with others in the community to form a social movement.
A Socialist, Kshama Sawant, was just elected to City Council in Seattle who is pushing for a $15 minimum wage, higher taxes, and ending corporate welfare. Bill de Blasio was also just recently elected Mayor of New York City, who has also campaigned on a very progressive platform. With the surge of local progressive electoral victories do you think the ballot box is the way forward for the Left or are there any other more effective strategies?
The ballot box is fine and is a way for the Left to assert itself but frankly if you relied only on the ballot box what your doing is choosing a terrain of battle that overwhelmingly favors the other side. Elections are fought out with mechanisms that require money or at least the more money you have the easier it is to prevail. Since the Left is not equipped with large sums of money whereas the other side is, choosing to fight on that terrain is peculiar. It was as if you were an expert marksmen with a pistol but you were no good with a sword and you chose to fight a battle against your enemy with a sword, which would be a very strange way to go.
For me the biggest event for mobilizing the Left in the last twenty years was the Occupy Wall Street movement. It was not an electoral movement; it didn’t focus on winning votes. It was a way for people who felt strongly about what’s going on to express themselves clearly in a nonviolent way. Several polls taken in the autumn of 2011 indicated that more than 50% of the American people were sympathetic with the goals and means of Occupy Wall Street. While working in elections is fine as long as people don’t fetishize it and put all their eggs in one basket, which is so tilted against them, then I applaud Sawant in Seattle and De Blasio in NYC and many others we don’t hear about that are doing that sort of thing. But for me it must be part of a much more broadly based effort to change people’s thinking and assumptions and give them the kind of hope that makes a political movement possible.
Richard Wolff is an author of many books on capitalism such as Capitalism Hits the Fan, is a Professor of Economics Emeritus at the University of Massachusetts, Amherst and is the host of the weekly hour-long radio program Economic Update on WBAI, 99.5 FM. The New York Times Magazine has named him “America’s most prominent Marxist economist.”