Transcription
I asked professor Richard Wolf today why hyperinflation happened in Venezuela and what America had to do with it. Enjoy and subscribe.
But right now, Dr. Richard Wolf is with us, our old friend, the economist, the co-founder of Democracy at Work, the author most recently of "Capitalism's Crisis Deepens: Essays on the Global Economic Meltdown." His website is democracyatwork.info. You could tweet him at @profwolf. Dr. Wolf, welcome. Welcome back.
Thank you. I'm glad to be here. It is always great having you with us on the program. In Venezuela, I wanted to talk about Venezuela and hyperinflation and and and kind of tie it into the discussion of the the Green New Deal and how Republicans are saying that that would lead to hyperinflation here in the United States. They're saying, "Hey, if you want to, if you want to spend a couple trillion dollars doing something really cool, the government's gonna have to print money and you're gonna end up looking just like Venezuela. You're gonna have hyperinflation. You want to have a Venezuela? Do the Green New Deal. That's that's what these socialists trying to bring to you."
But my recollection, and please educate me about this, you're the professor of economics. My recollection during the 1970s when the Arabs cut off our oil supply and we saw inflation, you know, really just go through the roof. It wasn't hyperinflation, but I bought a house with a thirteen percent mortgage. You know, I remember that well. And and and I think they got as high as 18% at one point. That that what we learned, or what I learned then, was that inflation was not caused by the government printing too much money. It was caused by a lack of a commodity that is essential to the country, in this case, oil. And and what I understand is going on in Venezuela is the commodity that they are lacking that's essential to that country right now is American dollars. And and is that true? And can you explain that? And am I making sense here or way out in left field?
No, no, you're making perfect sense. You know, there's something absurd in these kinds of arguments. Hyperinflation simply means that prices are going up quickly. And these prices are going up quickly. It's usually a sign of a certain imbalance. Either there's more money chasing after insufficient numbers of goods, or there's not more money, but there's a drop in the availability of goods so that competing people wanting to get the scarce goods bid up the price because that's how markets work. If there's more people who want something than there is of that something, the people start bidding against each other, driving up the price. So in the case of Venezuela, they have a set of conditions that produces an excess of money on the one hand and a diminution of goods and services on the other. So you get a very rapid inflation. Other countries have had that. Countries that have nothing to do with socialism. It's really not relevant to that. It can happen in a socialist country, but it typically has happened much more often in capitalist countries when those conditions occur.
The argument that you can't have a New Deal, Green or otherwise, because the government will spend money to do it and therefore we'll have inflation. I mean, the way the best way to answer that is someone cold wrong and silly is to remind people that the Green New Deal is a play on the term New Deal. And in the 1930s, we had a New Deal in which the government spent an enormous amount of money putting fifteen million people to work, paying their salaries, giving, creating Social Security, which gave millions more money every month, creating unemployment compensation, none of which had existed before, pumping more money into the economy. Did we have the inflation that these worrywarts want us to think about? No. Prices fell in the 1930s. Not only didn't they go up quickly, didn't go up at all, they went down. And so the reality was putting all those people to work produced the goods and services so that the money the government spent was easily used up to buy those things, not only at no rising price, but actually the things were produced in such quantities that the prices went down, even though the government was spending more money.
So in order to answer these kinds of questions, you have to stop doing the kind of ideological quackery that you see that you hear about. This is the people who are against the Green New Deal don't want the government to be doing the things that they would prefer to make private profit on. The rest of it is a lot of BS to prevent that, to keep their privileges, to keep the very system that produced the inequality you were talking about before we began conversing. Beyond that, economics-wise, it's so yeah.
So when, and I see this a lot on television, I see it even on television networks where the hosts appear to be kind of leaning left, like, you know, MSNBC and some of the shows on CNN, where, "Oh yeah, you know, the Green New Deal is great and Bernie is great, but, you know, we really can't afford that." And I'm hearing this now from the presidential candidates. In fact, several of them have come forward and said, "No, you know, Green New Deal, no. I can't. You know, Medicare for All, we can't afford that. Education for All, we can't afford that." And and I keep banging my head against the wall, particularly when I hear like Democratic senators saying this kind of crap, forgive the word, because my recollection, and again, please fact-check me on this, is that during the GI Bill in the 1950s, 60s, and early 70s, for every dollar that we spent educating young men and women who came back from World War II, gave a college education, we got an additional $7 in government income. That is tax revenue that we wouldn't have otherwise gotten because they had higher incomes and so they paid higher tax rates. That that when we when we when we when Eisenhower borrowed money to build the interstate highway system, it produced way more in tax revenues than it cost us. That these things are actually revenue generators. They don't. It's to say that we can, and the same thing with, you know, having a healthy populace. If everybody had healthcare and we took the 20% bloodsuckers, you know, the health insurance companies out of the equation, we would save money and we'd have a healthier populace. How can anybody, including the Democrats, make the argument that we can't afford to give everybody college education, that we can't afford to have a national healthcare system, when in fact that we can't afford to have a Green New Deal, you know, new infrastructure, green new infrastructure, when in fact every single time in the past that we have done these things or things like these things, they have actually generated more wealth than they have cost?
Well, you know, it's 50 years of endless propaganda to make all of this seem reasonable, sadly, even to middle-of-the-road or even slightly left of center Democrats who have, you know, drunk the Kool-Aid and imagine that this sort of thing is what you have to say and what you have to kind of believe. Here's our still in this with the taxes. You're absolutely right. The top tax rates on really wealthy people were between 70 and 95% for much of the 1950s, 60s, and into the 70s. And that's one of the reasons why when you, the government spent money and put people to work or built the highways or built the, you know, the interstates and so forth, the money that was generated, the jobs that were generated, pumped a lot of money into the federal government, so you didn't have these kinds of problems. So it's bizarre to say we can't afford something at the end of a 40-year period when you have cut taxes on corporations vastly and you've cut taxes on the richest 10 or 20% of the people enormously. That's the reason we quote-unquote can't afford it. Of course, we can afford it, just like we once did afford it. But that would require jacking up the tax rates on the rich. And that's the real issue here. They don't want to do that. So they invent these other arguments because they haven't the courage or the honesty to say, honestly, I don't want to pay any more taxes and I'm going to do everything I can to prevent it.
If I could go back and one more point about Venezuela. Please. A nearby country like Venezuela, a socialist country, Bolivia, run by a leader who calls his country and himself a socialist, a man by the name of Evo Morales, who's roughly the equivalent in Bolivia of what Maduro is in Venezuela. They are both socialist countries. Is there a runaway inflation in Bolivia? Not at all. Are people leaving Bolivia for another country? Not at all. Bolivia had one of the fastest growth rates over the last few years of any country in Latin America. The point is not that socialism is always good or always successful. That would be silly. But it is just as silly to imagine that you can pick a country that is having a lot of difficulties for a whole host of reasons, happens to be socialist, and therefore allows everyone from Mr. Trump on down to carry out one of the dumbest moves any student ever had to be reprimanded for, which is don't make an entire case about a system dependent on one example that you happen to choose. That's not honest. You know, that that's really a kind of flim-flam economics, not a serious approach to what's going on.
Yeah, well, flim-flam and Trump, I mean, you know, should surprise us, I suppose. So the, what would you say is the biggest lesson? We had Greg Palast in the show last week. He used to report from Venezuela about Venezuela for the BBC, like, you know, a decade ago. And he pointed out that the Maduro government, and you, and he had sent pictures, right? The entire, the cabinet and all the members of Congress of his party, they were all people of color. And then you look at a picture of the guy, Guaidó, or whatever his name is, the Speaker of the House that Trump wants to be President, and you look at all the members of his party, and there was like 200 of them in this picture, they were all white European ancestry, all of them, right? And Greg was making the point that the reason that we have singled out Venezuela is twofold. Number one, we want their oil, the same reason we went after Iraq, you know, the old Dick Cheney thing. And number two, you've got a government, you know, in a majority people of color nation that is a majority persons of color government, and that that was intolerable to Trump and the white supremacists. We have a little less than a minute here. Thoughts on those things?
Yeah, I mean, the United States, it's again, a little bit like the earlier argument. United States has tried to get rid of Chavez. That's failed. And it's worked for the last 20 years trying to undo that government with trade sanctions, military interventions, freezing their assets. Number one. Number two, you have that minority sitting at the top of Venezuelan society, rich, white, etc., that doesn't want to lose its century-and-a-half of special privileges sitting on top of a very poor country. Then you have a revolutionary effort, Chavez and now Maduro, trying to undo that. They have two enemies: the hard core who controlled industry and banks inside their country, that white ruling class, and the Americans as their allies. The hard road, the halt, and a lot of their problems come out of that confrontation.