Transcription
Hey everyone, my name is Anthony Fatsies and welcome to another episode of the What the Finance podcast. On this podcast, I have the pleasure of welcoming back Professor Richard Wolf. So, Professor Wolf is a well-known critic of the alternative contemporary economic system, host of the economic update and founding director of Democracy at Work. So, Professor Wolf, thanks so much for coming back on the podcast.
Well, Anthony, I'm very glad to be here and interested in talking with you about all these things.
Yeah, as I was saying before, there's definitely a lot happening in the world and the US at the moment. So, if we start very broad, what are you currently seeing in the economy? What's what are you watching?
Well, the broad perspective is the one that I'm uh mostly interested in and mostly called upon to talk about. So, uh I'm glad you asked. Here's my answer. I think the United States is in a period in which it's empire and I mean that empire in the sense that you will understand better perhaps than most in the sense of the British Empire whose decline is started much earlier. Uh the United States's rise is literally part of the British Empire's decline. uh but that we are now following you. We have peaked. The peak was about 10 20 years ago and we are now in full decline. And that most of what I'm about to mention in terms of the American economy overall is a reflection of an effect of a moment of that process of decline. So here we go.
The US dollar does not play the role in the world that it did 5, 10, 15, 20, 30, 40 years ago. Not in the reserves held by central banks, not in the transactions uh in the world economy that are done with dollars, not in the importance of the dollar as a way of holding wealth around the world. However you look at it, the decline is underway. It's not that the dollar has disappeared. It was so dominant after World War II when every other economy was basically wrecked and the American economy emerged in better shape than it had been in the previous generation. Uh nothing could have sustained the role of the dollar the way it came out of World War II. But it was sustained long enough. First when the United States had a net export surplus, then with the collapse of the gold standard when we went into a pos period of enormous deficits as we are in today. The dollar is simply not the currency it was. And with that, the American economy suffers because having the globe use your currency confers all manner of privileges, all manner of real income supports that are gone now that that empire is in decline. We The US does not account for the share of global trade it once did. It doesn't account for the share of global investment it once did. I could go on and on.
If you look at the GDP of the United States and you compare it for the first time in a century in a century, the United States has a real economic competitor and that is the People's Republic of China. an economy whose GDP, whatever you believe in these numbers or not, in the neighborhood of 18 19 trillion dollars, trailing the United States, but not by much and catching up each year. If you look at that, the rest of the world is a distant third uh after those first two. The world is now what it wasn't in the last 75 years. It is comprised of two major economic powerhouse cores. It's not a unicore economy. It was that for a while. It is now a dual core economy. If you take the United States together with the G7 and that is breaking up as we all know perhaps something you want to talk about uh the rejection by the United States of its G7 allies all of them and decision that they are more of a cost than a benefit but if you take them all together they account for about 28% of global GDP. If you take China and the bricks, they account for about 35% of global GDP. So if you're asking what's the biggest powerhouse economic unit in the world economy today, it isn't the United States anymore. It isn't the G7 anymore. It is China and the alliance it has so carefully cultivated and built up. And as recently as yesterday, news came out of China that they are now getting ready to offer their currency. there was only a matter of time as a global reserve currency, a global transactions currency. In other words, the dollar will not have that position virtually to itself the way it had. And the euro is not in a position to do much about that either. So, I mean, I could go on, but the big news, the central reality is that we're a declining empire, and it is costing the American economy, American capitalism, that it is without an empire, just as the fortunes of Britain or France or the Netherlands or any of the others was impacted in many negative ways. by the loss of their empires.
And one effect in particular might lead us into another discussion. When empires go down, one of the things you see very often is that those who had in their hands the concentrated wealth and power in an empire are in the best position to hold on to their wealth and power as the empire declines. And the corollary of that insight is that in order to hold on they must and they do offload the costs of a declining empire onto the middle and poor classes of this society. That's why here in the United States, you have a Trump firing large numbers of public employees, disbanding the subsidies for health care in a society that has no national health care, cutting back on every kind of social program with the exception of the military where he proposes the fantastic idea of an increase of $600 billion. So the the budget for defense this year, excuse me, we don't call it defense anymore. We call it war. That's what that is is an attempt to offset the decline of your empire by changing your terminology. We have a 900 billion war economy. We're going to raise it to 1.5 trillion. That's 600 billion on top of that yearly in order to what? Well, you might think it's in order to be more powerful around the world. And if you thought that, you'd be making a mistake because that military breed buildup is intended as a way to manage what is unfolding in this country in the terms of resistance to what is being done to poor people. Immigrants who are illegal because they're the easiest target. then immigrants, then everybody who is friendly with immigrants. And you can see how this evolves by watching Minneapolis over the month of January. That's the future of this country at this time. And the people of America know it and are forming themselves into the blocks that are going to fight this out in the months and years ahead.
Yeah, thanks so much for laying it out. as you said it's a bit of concerning times and there's lots happening um with in terms of the if we focus on the Chinese one and the you know trying to make that the global currency do you see that as achievable because I guess currently it's very low percentage of transactions I think it's only about 3% of global transactions at the moment and there's concerns about China having capital controls and whether that would be possible so how do you see that uh those I guess barriers helping or impacting that that aspiration
I think those are all valid concerns concerns and and speak to the difficulties the Chinese will have in reaching that goal. But it is a reasonable goal given the size and reach and importance of the Chinese economy already given their alliance with the world's other major nuclear power Russia which is closer than it's ever been. And I want to remind people 50 years ago, 40 years ago, which in historical time is nothing. If we had had this conversation, and we had spoken about China, which in that time was the world's largest country, India is now, but the world's largest country by population. Likewise, one of the world's poorest countries. If we had said that in 40 years they would be a middle inome country and the number one challenger of the United States for global dominance able to outperform the United States in high technology as well as everything else people would have said that's going to take centuries and by the historical example of the West. That would have been a reasonable thing to say. And by the historical examples of how long it took for the pound sterling to be an international uh currency or then for the dollar to do it, it's reasonable to think, oh, it's going to take a while for the Chinese. It will take a while. My guess is like everything else they're going to do it faster than anyone foresaw.
Yeah. Really interesting. And you said that you were concerned or you were saying that the G7 is sort of coming to Fray and as you said Trump has been quite aggressive towards a lot of allies and that seems to be pushing them away. So do you see that deterioration of relationship continuing or there's also the thinking that okay you just wait a couple years and he'll be gone and then things will be back to normal?
Yes, I can imagine [clears throat] my friends in uh in Europe crossing their fingers as we say here and and letting hope be the father of the thought. Uh I don't think so. I think the proof lies in the following. What Mr. Trump is doing is receive in terms of uh the European community or the G7 which is basically the European community, excuse me, plus Canada and Japan. If if you look at that, uh you might hope that it will not change, but there's very little opposition to what Mr. Trump is doing. And most of that is verbiage. You know, I watch very closely. I'm sitting here in New York City. I watch very closely what the Democratic Party, which is the major political other to the dominant Republicans who hold office now and they don't offer very much of a critique and very vague. And the business community who is in the end the arbiter here is absolutely okay with what Mr. Trump is doing. They are right now his strongest support. They and the MAGA community uh the the voting blocks to whom he has given more than any president Republican or Democrat has given his block. the white supremacist, the people who are in love with guns, the fundamentalist Christians, the people who hate abortion. If you group the voting blocks that the Republicans traditionally get, they were very alienated because they didn't get much but symbolism. They they might have liked Father Bush and son Bush to uh to get rid of abortion, but they never did it. They talked about it. They didn't do it. They talked about how much they loved the NRA, but they limited what the NRA could do. They went to church, but they were not supporters. And white supremacy, they pretended to be against and all of that. So, Mr. Trump has then the ones for whom he has done more than anybody else and the business community and why is the business community relevant to this question of the G7 because the business community led by Mr. Trump at this point agrees with him. They agree that we don't need we the United States, we don't need a partnership with Europe. What we need from Europe is tribute. That's all we want. We don't want partners. You're not very good partners for the business community. You're either competitors and we're going to beat you at it or you can pay tribute and then we can have a live and let live arrangement so long as the tribute is of the size we demand. And when uh Vanderland cuts a deal with Mr. Trump that if only he reduces the tariffs he imposed, Europe commits to investing $750 billion to buy American energy and another $750 billion to invest. That's tribute. That's money raised and built out of the taxpayers and others in Europe and not reinvested in Europe but shipped to the United States. When we read a headline last week about how close the Mercedes-Benz company came to moving its entire headquarters and operation from Germany to the United States. That's another form of tribute. So my my advice to the Europeans is it is already late in the day and you already have little in the way of resources to do what I'm about to say. But you better do it. You better figure out a way to rebuild the economic foundations of Europe, or else you will become a footnote to a a future that has the Chinese and the bricks on one hand and the United States and its tributaries, Latin America and Europe on the other. And that's the plan here. And that plan the business community here is okay with. They will support. They do support Mr. Trump and they are not going to be terribly interested if the Democrats propose a radical change to any of that. Oh yes, different verbiage or things that Mr. Trump says as a matter of course a Democrat won't say. But will the story be all that different? I don't think so. And when you understand that the Democratic Party is on the edge, on the precipice of a split as profound as that between the MAGA community that supports Trump and the old Republicans that don't or that are very wishy-washy, then the picture gets even murkier and waiting a couple of years is a very very long shot and a very dangerous bet for Europe.
Yeah, I do think in my opinion Europe has rested on its laurels as well. It has sort of you know gone very deep into welfare if you look at it. I can't remember the exact statistic but it was saying that um yeah I'm not going to say sort of 20% of the GDP globally is Europe but then they have 60% of welfare you know I guess that includes pensions and lots of liabilities as I guess that's the that's the challenge that they have is they very much their economy and their current system has been subsidized apparently by the US is what the US is saying and then so now they're going to have to shift to you know change in their economy but then that that's going to cost money and it's either they raise taxes or it comes from somewhere else.
Well, I think what the Europeans seem to have decided on uh and I don't mean to be facitious about this, I'm really quite serious, is that they are not going to look for ways to hold on to what is unique about Europe uh and that includes its social welfare uh systems. I want to remind people that those begin in most renditions with a deal made by Ottoon Bismar in the 19th century and the socialist party emerging as a power uh at that time late in the century uh in in Germany and then spreading all over the world that that was a way of stabilizing and supporting capitalism when its performance governments particularly in the two world wars and in the depression between them uh when capitalism was in the doghouse and needed desperately to find a basis on which to survive and that made Europe remarkable and a and a beacon of hope for workingclass people everywhere in the world uh as did the New Deal in the US in a different way. I I think what's going on in Europe is a desperate recognition that the United States not just isn't going to provide quite the defense or military protection that everybody talks about, but is not willing to be a partner anymore. is not con confronted by a Soviet Union where it feels it needs desperately to have a partner who's also a buffer against the Soviet Union. It doesn't need that. It feels it can cut a deal with the Russians one way or another. It's not afraid of the Russians. Now, the Europeans, in my opinion, and I understand I'm not in the majority here to say the least, but what the Europeans are facing is that if they're going to do anything of the nature of rebuild their economy and provide their own military defense, they are going to have to undertake two things. spend a lot of money on the military and spend a lot of money on reinvesting in their economy to modernize it. These are enormous expenditures, both of them, and not the military more than the other. In fact, they're not very separate. To have a sophisticated military, you have to have the manufacturing base to sustain it. The United States is discovering, in case you're not clear on it, that it made a terrible mistake in foregoing that. And the Chinese are discovering how advantageous it is to be the manufacturer of the world in military capability terms. So if you're going to have a serious military, you can't afford the economic development you have had in the United States in the last 40 years when you hollowed all that out. Europe can't do that. United States is discovering it can't do it. Trying to undo the economic development which it is having a hard time. Mr. Trump promised us that the tariffs would bring manufacturing back home. Reshoring, they call it. If you look at the statistics since Mr. Trump took office on the 20th of January to now, the United States has lost 70,000 manufacturing jobs. It's not that we didn't gain what he promised. We didn't gain anything. We lost a significant chunk of what was already an emaciated manufacturing sector. So then what is Mr. Mertz's buildup of the military in Germany or the promise to do something like it by Macron in France? I don't think that's a military to confront the danger of Russia, which has become a kind of hysteria in Europe. Bizarre in my judgment. The reason you need a military is you're going to have to face your own European working class as it experiences the reduction and the loss of the social welfare they had come to take for granted. You're going to see battles. You're going to see yellow vests only they'll be everywhere, not just in France. And they are going to confront the people who run European governments with a level of challenge for which they will need all the military and police might they can muster. Look, we already have a big buildup in our military and their capacity to control our cities as they begin to become rebellion centers, unwilling to accept the destruction of the less than European welfare state we have here. Look at Minneapolis. Look at the general strike of January 23rd and January 30th. Things are heating up and the military expenditures are more for domestic purposes than for anything else. And my suspicion is that's true for Europe as it is elsewhere.
Yeah. Really, really scary to think. And as you said, it seems like this volatility is continuing and there's going to be more um I guess you know there's going to be more of this um sort of public outrage and and public protesting. How do you see this being resolved?
Well, I think we're heading for a very crucial crunch time. I don't know how it will resolve, but we are moving in directions that are I don't want to over overstate this, but for lack of a better term, civil war, a a breakdown of the society where the opposition, the imagery the two sides each can uh have of each other are I'm watching it here from the United States. And I admit I am shaped particularly by what I'm living through here in New York City and here in the United States. The MAGA people live in a universe in which uh the two civilian people that were shot and killed by the ICE, a new homegrown Gestapo here in the United States. and to watch the president and the leader of the of the Homeland Security immediately say that the the the woman, the mother of three children, who's never hurt anyone in her life, was attempting to kill the ICE officers with her car. They are doing what psychologists call projection. That's what they do and they assume the whole rest of the world does it. a convenient assumption for every aggressor has ever existed. But the the proof which is there in videos for everyone to see is that they killed her and they weren't threatened by her. And I won't even raise that they are trained police and she's a civilian in a car. And the same is true of the young nurse Prey when they shot and killed him while holding him down on the ground. I mean, it's extraordinary. And I want to remind you, we just have been watching for the last five months as this country kills people in boats in the Caribbean and in the Pacific. The president calls them narco tra traffickers. No one knows what's in those boats because the old procedure was for the Navy to stop such a boat, to search such a boat if it's found to have contraband of any kind on it, to confiscate it, to arrest those persons, to give them a trial with access to a lawyer, to give them the constitutional rights. We afford people in a civil. We're not doing any of that. We have a president who simply says, "Go kill them." No lawyer, no trial, no judge, no arrest, no nothing. Just kill them. And when you're asked about it, justify it on the grounds that they're drug traffickers. And for those of you who don't know, let me make clear. Drug trafficking is a crime in the United States, but it is not a capital crime. We arrest people for that every day in the United States. And they are given lawyers and they have a trial. If they are found guilty, they are given prison sentences. We do not execute them. What in the world is going on? And again, please notice the president does it. He's been doing it every few weeks for at least five months now. And the Democratic Party does next to nothing about it. It doesn't stop. There isn't an outcry. And yet the people here are surprised when the chickens come home to roost. and the killing of Venezuelans or others, we don't know their nationality in those boats, comes home and becomes the killing of people who are protesting peacefully the development of a Gestapo in this country. So if you ask me where things are going to go, let me just tell you the presumption, not the guarantee and not a prediction. The presumption is they'll continue to go in the direction that is now pretty well established. And to give you an idea, there are serious conversations occurring across the United States in which local mayors of cities are sitting down with their chiefs of police to strategize on how to make sure that the federal Gestapo, the ICE as we call it, here if and when it were decided to come to this city or town. What will happen if they break the law? What will the local police and the state police do? We are setting up pitched battles between folks who look and feel very differently about such things as immigration, legal rights, trial by jury, limited police action, and so on. In other words, we are moving closer and closer to an explosion inside the United States. [snorts] And it would be naive for Europeans to pretend otherwise.
Yeah, it's really scary to think, but as you said, it's hard to see any other any other scenario. Um, how do you see AI impacting this? Because I guess that's something we haven't mentioned about. a massive uh trend that's occurring at the moment, massive sort of tailwind for the economy, but also you imagine that could be quite negative for for workers especially um you know and it's something that you can't really not um I I guess embrace otherwise your you know adversary may embrace it and may sort of vastly surpass you. So how do you see that?
Well my my first reaction is I find it in a peculiar way amusing. If you read the financial press, the great anxiety is that AI will prove to be an occasion for yet another stock market crash. Uh by that I mean something a little bit like the crash early in the year 2000. For those who know the history a little bit, that is often referred to as the dotcom crisis because the internet which was supposed to revolutionize everything uh had lent led it to companies having valuations in the billions of dollars even though they had never made any profit and there was no guarantee they ever would and many of them never did. And so there was a hype and there was a hysteria and there was a bubble and it burst. So the question is are we in that territory with artificial intellig excuse me which is another step in the role of the internet and the role of computers and so on. And the answer is nobody knows and everybody's worried. If you didn't know that, you should have learned it last Friday when the stock market collapsed because of anxiety about a number of things, including the AI bubble. Is it a bubble? How far into the bubble are we? And how near a crash might we be? and trillions of dollars are moving in and out of the stock market based on that shaky situation. The second way AI figuring is the question will it have a significant impact on employment? by which in simple English will it create enough new jobs to absorb the jobs it renders unnecessary or will there be a net loss of employment particularly for white collar workers. Now the answer to that question is not clearly understood and the answer will have to specify not only whether there's a net loss of jobs but which jobs and over what period of time and all of that is still unknown. So the most immediate problem is the risk that it produces a very destabilizing uh stock market bubble. Uh that's the most important thing as to whether or not it could affect economic relationships uh between countries. It already does. Part of the enormous achievement of China is to be right at the forefront of the technical development of and uses for artificial intelligence where it is exploring uses developing techniques improving the chips and the speeds and so forth. So it is already part of the global competition between the two superpowers. And given our conversation over the last 30 to 40 minutes, here is another illustration of what is lying before Europe if it wants to salvage anything because Europe is obviously missing. The great struggle is between the United States and China. There's where all the breakthroughs, all the big companies, all the excitement are concentrated. Europe is not there. And it, you know, let me be clear about something. My mother was born in Berlin and my father in France. I speak German and French. I am I was born in the United States but I have a family in Europe and I am half European. It is a painful thing to look at the history of Europe over the last four centuries. The rise of capitalism, the demise of feudalism, Europe was the center of the world. It literally created the world economy through its colonialism with all of the horrors associated with it. But it was the center and it isn't anymore. It isn't even a player anymore. And that is going to drag the the history, the culture, the language, the cuisine, all of it with it. That's what built it up and that's what's going to tear it down. And so one of the big issues, not yet explicit, but coming, is whether what you need in Europe is what you had in the past. You had a slave system before that. You had small independent peasant, then a slave system, then a feudal system, then a capitalist system. Maybe the future for socialism is to offer itself as an alternative way to rebuild a Europe but not under the rules of a capitalism but to jump over the leading countries that still hold on to capitalism and do it by means of a transformation from the bottom up. I know it sounds fanciful now. That's only because people are still reeling with the recognition of how bad the situation is.
Yeah, Richard, really, really interesting. So, thanks so much for your time today. We sort of covered on so many different aspects and we've gone into so many different uh you know important trends that are occurring at the moment. So, my last question is what is one message you want people to take away from our conversation?
I think, as you might have guessed, that the problem is capitalism, but I mean it in a way you may not have recognized. I don't mean the struggle between private and public. That has been a detour I regret having the last hundred years committed to. The problems aren't macro, they are micro. And the micro problem is this. Modern enterprises, factories, offices, and stores are run in autocratic ways. Tiny groups of people, the owners, the shareholders, the major shareholders, the uh top executives. They're a tiny group. The US census says 3% of Americans are employers. that group they run every enterprise almost everyone the mass of people are excluded from running the enterprise and therein lies the basic problem what's the solution democratize the enterprise if democracy is good in our political life why haven't we instituted in our economic enterprises we should have and if we did we would make radically different decisions and use our resources in radically different ways. Europe is at a radically difficult moment and ought to be thinking about these kinds of radical changes in order for the change to be adequate to what Europe needs.
Yeah, such a great message and very important as well. So, Professor Wolf, thanks so much for coming on. If anyone wanted to find out more about your work and what you do, where would the best place for that be?
Just as it says here on the on the screen, democracywork.info is our website. You can access everything. And we also maintain a very active social media presence, Substack in particular. You just go to Substack democracy atworksubstack.com and you'll find all of our work there.
Great. I'll put that in below. But thanks again for your time.
You're very welcome. Glad to talk with you.
Hey everyone, thank you for listening. I really appreciate the support. Uh if you've got value out of this, I I'd really appreciate if you could like, subscribe, or or comment, you know, good or bad [laughter] feedback. I'm always open to that. But it really helps with the channel. Uh as I said before, only about 14% of people actually subscribe to this channel. So if you were to that, it would really help. It could mean we could continue to grow. Um if not, thanks for watching and see you on the next show. And you also might like uh this video right here. All right. Thanks again.