Capitalism and Its Discontents

This is a very interesting interview with economist Richard Wolff (h/t to Ed Cone for the link).  A couple of excerpts provided below, but I highly recommend reading the whole thing.

Barsamian: There’s a certain market fundamentalism in the U.S. that equates capitalism with freedom.

Wolff: Yes, employers are free, in this system, to stop raising workers’ wages. But their exercise of that freedom has deprived the mass of Americans of a rising standard of living to accompany their rising productivity. Employers have kept all the benefits of the productivity increase in the form of profits. So one sector of our free economy has deprived another sector of its due. It’s the paradox of a democratic society: the freedoms of one group limit the freedoms of another. To face this fact requires a more critical notion of freedom and democracy than the happy, cheerleader mentality we have today.

How do you talk about freedom to the 20 to 30 million Americans who currently have no job? Are they free? They’ve been denied a living through no fault of their own. When 20 million Americans suddenly can’t find jobs, that isn’t a problem of individuals being lazy. That’s the problem of an economic system that isn’t delivering the goods…

Barsamian: You mentioned earlier that, although wages became stagnant in the 1970s, American workers continued to become more productive. So someone has benefited from the past thirty years.

Wolff: Yes, it’s been the best thirty years that employers in this country have ever had. More product was being produced, but employers didn’t have to pay workers more. This was impossible before the 1970s, because the labor shortage meant employers had to keep paying more, which is why we had that wonderful growth period from 1820 to 1970.

So after the 1970s profits went through the roof. What I find funny — because I don’t want to cry — is the story the business community told about these profits. They probably knew they were getting the benefit of stagnant wages and rising productivity, but they developed a kind of folklore that said the reason profits were so big in the 1980s and 1990s was that executives were geniuses. We made folk heroes of Lee Iacocca at Chrysler and Jack Welch at General Electric. They became icons, as if some mystical ability of theirs accounted for the profits.

Every economist who looks at the numbers knows executives didn’t suddenly become geniuses — as if they’d been dumb before. Shifts in the economy enabled them to stop raising workers’ wages yet keep getting more out of them. No mystery there. Of course, there was a reason for this fairy tale about ceos: if the executives could convince everyone that they were responsible for the profit increase, then they could demand higher salaries. 

 

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