Transcription
Capitalism. I guess the reason why the word is so uncomfortable, it's also because it talks about this capital that in itself the word presumes non-democratic social relations. While if you talk about the market economy, you instead focus on this world of freedom that supposedly is all about our choice.
Americans and others had to be persuaded not to believe their own eyes. For example, if you have a bunch of $100 bills sitting there, that that can be called capital. People do that. But it's just money. Is it doing anything? No. It's sitting there. It isn't doing anything. It's just green pieces of paper. So when you say money begets more money, you're saying something that makes no sense. I've been watching this money on the table for two days. It hasn't begotten anything. It just sits there.
Welcome, welcome everybody to Free the Forum for Real Economic Emancipation podcast. I'm Clara Mate and I'm your host. So the real data about American people's economic reality is alarming. According to the recent data of MIT living wage calculator, 44% of full-time American workers do not make enough to meet their basic needs. This is almost one out of two workers. The new Urban Institute data tells us that half of all Americans lack economic security and 1% of Americans own more wealth than the bottom 90% combined. And globally, the situation is of course even grimmer. Oxfam reports that in 2024, world billionaires added two trillion to their wealth, while half of the world population lives in poverty with less than $6.85 a day. There are over 800 million people that go to bed hungry every night. This is very depressing data, but it's also data that really tells us the reason for our podcast, which is about real economic emancipation. Real economic emancipation is really about first of all finding the courage to explore conceptual tools that can really break us free from our mental traps that make it such that we passively accept this state of affairs. There's no better guest to really have our minds emancipated than Richard Wolf. Professor Richard Wolf is a world-renowned economist. He holds a PhD from Yale University, as is now professor emeritus from UMass Amherst, and is also a visiting professor at the New School for Social Research. Richard Wolf doesn't really need any presentation. He has written many, many very influential books. The latest one that we will take as the foundation for our conversation today is "Understanding Capitalism." A wonderful, brief, and extremely powerful pamphlet. Rick is also the founder of Democracy at Work and every Thursday hosts the Economic Update, that is live on many radio stations and also on his YouTube channel. Rick, it's such a pleasure to be here with you. I'm so excited that you can help us launch the first series of our podcast.
Well, I'm very glad to be here. I enjoy working with you, Clara, as we have done a bit already in our lives. I'm amazed that you are based in Tulsa. It gives me a chance to talk a little bit, or at least imagine myself in conversation with people in Tulsa. I like to remind people who don't know much about American history that I was astonished as an undergraduate when one of my professors said, "What was the state in America which at the beginning of the 20th century had the largest number of elected members of the state legislature who were elected as socialists?" And all everybody in the class guessed, everybody was wrong. And with a big smile, he said, "Oklahoma." And I realized right then that I had to change my thinking about Oklahoma because I had never imagined that.
Very true. It's a place with a lot of energy on the ground, and we're trying to make it explode through courageous knowledge. Rick, so I think what really is striking about your work is how you really show how the method and the lenses one uses to look at the world can really change our perspective about our possibilities for change. And I think the conversation that is rarely had in public debate is the role of economists and economic theories in actually preserving this unawareness, that then makes it hard for us to actually explain these data points that are really, really unbelievable. So I think with you, it would be really interesting to discuss, you know, the difference between what mainstream economics usually does, which is actually hide for us what really matters in terms of explaining away certain aspects, and instead really focusing on what Marxist theory can instead really go to the deep root of the problem to understand. And so the first question for me for you is, how come the word capitalism doesn't show up in any economic textbooks for students, or rarely shows up in the news, especially the mainstream news? And how is it that this lack of definitions, right, so this hiding of the very terms that matter, really, really means something in terms of how then we take it as an unavoidable economic system? And then when we do have definitions, as you show in your book, these definitions are extremely misleading. So if we talk a little bit about, you know, why is it that capitalism is rarely mentioned and what it is, it's wrongly understood, and how can we really understand it for what it really is as an economic system?
Okay, for me, I always find the best way into these kinds of discussions to be historical, to look a little bit historical. Well, modern capitalism, and let's hold for a moment what the definition is. Modern capitalism in the West comes out of the disintegration of a previous system called feudalism. And whatever we know more or less, feudalism was a situation which had lords and serfs. The bottom of the society, the mass of people were serfs on the land. They were serfs because their parents were serfs. They were on the land that their parents had farmed, and they were all part of a community run by someone above them called the Lord. One of the reasons we have the word Lord in the Christian religion is it comes out of that period of time. The way to help people understand the Lord in the sky was to project from the Lord that ran the show in your little geographic area.
Well, by the end of the 17th century, this system, which had existed in Europe particularly for a thousand years, disintegrated, fell apart, and the question was, what would come next? And there were groups of people who were very passionate about what ought to come next. These are the people who became famous in the French Revolution, which was a kind of culmination of the end of feudalism and the beginning of something different. And that something different was a situation where nobody would be stuck in the land on which they were born, stuck in doing what their parents did. It was a change that was celebrated by the people then as freedom. As important as the word freedom was to get rid of the old slave systems where people could be property of other people. So the end of feudalism, like the end of slavery, was celebrated as a step for human freedom. Indeed, the champions both in Western Europe and in the United States, because remember the French Revolution is 1789. The American Revolution was actually a few years earlier and had many of the same themes in it.
Well, the great slogan of the French Revolution was liberty, equality, and fraternity. These are very powerful words, and they were great motivators. Feudalism couldn't survive because it was the opposite of liberty. You weren't free to move. Equality. People would have laughed at that. The Lord lived in the mansion. If you've ever gone to Europe as a tourist, you visit the great chateaux, the great Schlösser in German, the great homes and mansions where the rich lords lived. The mass of people were in no way equal. They didn't have equal income. They didn't have equal standard of living. They didn't have equal political rights. They didn't have equal education. None of it. And so the whole idea was that a new system would be brought in to give people liberty, equality, fraternity, and what the Americans added, democracy. The people should rule, not the lords. The people should rule, and they should rule equally, not great Asian, not some people more equal than others. What a fantastic idea! And it was the idea that Thomas Jefferson thought was magnificent, and so he kept it, and so did Sam Adams, and so did many of the others who made the American Revolution, and so did Robespierre, Danton, and Marat, the great leaders of the French Revolution.
Well, why am I telling you this? Because they did usher in a new system. No more lords, no more serfs, no more masters, no more slaves. The new system organized people to produce goods and services, which they always had. But this time, the relationship between them was that of the employer and the employee. Some people would be selling their ability to work, and other people would be buying it. And that was a very different relationship from the slave and the master, or the serf and the lord. And they brought that system in, the new system. You would be free to go wherever you wanted. You could work for any employer who would hire you, and you would be part of this new economic system. They didn't call it capitalism. They didn't know what to call it. So some of them called it freedom. Some of them thought it's the people will finally be in charge, democracy. Okay. It came at the end of the 18th century. By the middle of the 19th century, 50 years, 75 years later, it was the new system established in Europe. And at that time, Karl Marx reached his adulthood. And so he was living in this new system. He loved the slogans of the French and American revolutions. They were his passion too: liberty, equality, fraternity, democracy. He was part of the generation that welcomed all of that. They were the generation that included Beethoven and the music he wrote to celebrate all that, the new novelists who talked about what it meant in daily life for people to go through the transition.
But here comes Marx's absolutely crucial contribution. He looked around him. He was born in western Germany, right near the French and German border, so it was already well along the way of capitalism had overthrown feudalism. He looked around and he said to himself and to those close to him, "We got capitalism. It's a new system. This employer-employee system. It's not feudalism. It's not slavery. But did we achieve liberty, equality, fraternity, democracy?" And his answer was a very honest, "No. No, we haven't." And by the way, he goes to London around the time of Charles Dickens. For those of you who've ever read a Dickens novel, Mr. Dickens was showing us how the following is true: equality, we don't have; liberty, not in a meaningful sense; fraternity, don't even imagine it. We got capitalism, this new system, and Marx was one of the early ones to use that kind of language. We got it. But what was promised to come along with it, we didn't get. And so the question becomes for Marx, why not? Why didn't we get it? Is it some special circumstance? Is it a bad leader? Is it any one of the details of life in Western Europe in the middle of the 19th century when Marx is doing his work? And Marx reached an answer to that question, and the answer was, no, it's not about this or that detail. Inside this economic system are the mechanisms, the relationships which prevent liberty, equality, fraternity, and democracy. And the corollary that comes from that recognition for Marx had two parts. Number one, I am now talking as Marx. I am going to explain to myself and to everybody else what it is about capitalism that makes it prevent liberty, equality, fraternity. The statistics that you, Clara, began with are the proof that not only in Marx's time but here, 150 or 200 years later, we still have grotesque inequality. Grotesque. No freedom. If you haven't got enough to have a secure job, if you don't have enough for a decent home, to give your children a proper education, we don't have the liberty. We don't have those conditions. We certainly don't have equality. And we certainly don't have brotherhood. Lord, help us in this country at this time where we are doing things to poor people, to non-white people, to immigrant people that violate every religious, moral, and ethical commitment we could have. And we watch in the old biblical country of Israel, even worse.
So Marx's idea is, I'm going to show you why that happens. But he didn't shy away from the implication of what he set out to show you. If I can show myself and you, my reader, how it is that this system precludes itself from being why we made the revolution against feudalism, then the conclusion has to be, we need system change. It won't do to change the taxes. It won't do to rearrange the rules of employment. It won't do. All those things that people keep trying to do who are at least honest enough to see the inequality haven't worked. Marx knew why. Because you don't face the system. You don't change the system. You don't change the failures and the flaws that that system has built into it. So he becomes a critic of the system. That's why he needs the word capitalism. It's just a word to capture the system built around this need to have money make more money all the time.
And that that becomes the core. Rick, if I can stop you a second because I think it's very interesting to note how Marx's critique of his contemporaries that he called bourgeois economists is extremely timely to understand how it is that most of our colleagues in economics are capable of hiding all of what you said, are capable of hiding the fact that the system is indeed non-democratic and deeply structurally immoral. Right. And I think what's interesting here is that we should explore the fact that these economists stay at the level of the surface. What for Marx, what the was the level of the market in which indeed we were different from the feudal subjects because people did have the capacity to move around and decide who to work for. Right? So it's very interesting that Marx is capable of understanding why is it that mainstream economists are able to mesmerize us so easily? It's because indeed, at the surface, it does seem like we can decide whether do we want to work for Starbucks or do we want to work for McDonald's or who do we want to work for. But actually, the point is here, and you know quite well, that if we are free from our feudal lords, we are also free from our means of production. Which means that we are then compelled, not anymore by physical force or by law, but we're compelled by these impersonal forces of the market to find a job, whatever it is, to pay for our house, our food, everything we need to survive. So this impersonal compulsion is what is unseen by economists because it's much easier to just focus on the freedom of choice that we see at the level of the market. And this coercion only really becomes visible if we look deeper to what you are about to problematize and to what you think, following the Marxian tradition, which I also follow, actually explains the definition of capitalism. If you stay at the level of the market, as Marx told us, the realm of liberty, equality, and fraternity, right, is actually seems real. But we need to look a little bit deeper and realize that actually there is a fundamental coercion rather than freedom, which is the characteristic of the system.
Yeah, I I love that. You know, it reminds me of the of the story that people tell here in the United States about when they were little and they went with their father or their uncle to the park, and there they encountered an ice cream man who had ice creams to sell, and the father or the uncle would look at the child and say, "Well, you have your choice. You can have any flavor of ice cream you want, as long as it's vanilla." And so the child has to try to grapple with the fact that they're being told that they have a freedom, and then their freedom is very quickly constricted. Because you need to say all that stuff about freedom because that's why you made the revolution against feudalism. But you can't really allow it. The young person who doesn't want to work for someone else doesn't have the freedom to go into production for themselves because that requires property, which the system is unlikely to give them, as it doesn't give it to most people. They have the freedom so long as they work for somebody, but they don't have the freedom not to do that. Or, as I would argue, they don't have the freedom to get together with others like themselves and set up enterprises in which there's nobody is the employer. They are their own employer. What a thought! Even though that exists in all societies for thousands of years, people have been doing that.
So what you had coming out of this history is a profession of economics whose devotion is to keeping the focus of everybody on things that don't fundamentally touch the way this system works. So your freedom is you can go into a store and you can pick items off the shelf, whatever you want. Look how free you are. You can buy an iPhone. You can do it. Yes, this you can do. But if you want to do something that has to do with the core way the system works, you don't have any freedom at all. You have all the freedom to pick everything you want as long as it's all vanilla, as long as it's all the same. And and let me drive home what that same is. If you look at production, the production of goods and services that we all depend on, our food, our clothing, our shelter, all of it, we have a name for where those things get produced. They get produced in enterprises, in workplaces. We have the words for that. And those are organized in capitalism in a very systematic way. The way they were organized in feudalism with lords and serfs, and in slavery with masters and slaves. In capitalism, it's employer and employee. And that's very different from feudalism. You know, it's different from slavery. The employer doesn't own you. The employer cannot tell you what to do because you happen to be born to these people who were serfs, and therefore you are ipso facto another one of those things. Those things are changed, and the system loves to focus on that, loves to attack feudalism and attack slavery because we are different from that. And Marx acknowledges all of that. He's interested in that. But because of his training with Hegel and the notion that everything is contradictory, he's alert because what is different will, if you look at it carefully, demonstrate to you that it's also, and at the same time, not different. And here we go. What's not different is very obvious once you ask the question. Because in capitalism, like feudalism and like slavery, a tiny group of people sit at the top of this society. They run it. They control it. And they become wealthy off of it. And that's why they have so much wealth, because they're in charge of it. They take as much of it as they can for themselves. They don't give it away to other people. And so it turns out that just like there were very few lords and lots of serfs, and very few masters and lots of slaves, there are very few employers and lots of employees. According to the US Census, 3% of Americans are employers. The other 97% are not.
And let me remind you of what employers do, just so you see the stark reality. Who sets the prices for all the goods and services you and I buy? The employers who make them. They set the price. They charge to the wholesaler, who then takes a bid for himself and charges the retailer, who takes a bid for himself, and then we buy it. But the retailer doesn't set the price, and the wholesaler doesn't, and I don't, and you don't. The employers, the 3%, they decide when the price will go up, when the price will go down, when the price will stay the same. You know what that isn't? It isn't democratic. We have not participated in making the decision about what the price should be. Yet we are affected obviously by what the prices are. Who decides how much income we have to spend? The employer. And if the employer doesn't want or need us, we get no income at all. He has the power to separate us from our income, thereby plunging our family and us into misery and difficulty and crisis. And this is not democratic. And are you surprised at inequality? Of course not. These people at the top, being in the position of deciding what to produce, what to pay the worker, what to price the output, they make themselves wealthy. They always have. And they have another incentive. You need to keep your employees poorer because you don't want them to have an alternative. They need to come back every Monday when the weekend is over to resume the whole game. They can't be allowed to accumulate. So you work on them. You keep doing everything you can to economize on the labor costs. Yeah, because the system works that way.
And let me turn it the other way one more time. If you want to get rid of poverty, of inequality, if you really take seriously the revolutionary slogans of Washington and Jefferson, or Robespierre, or Danton, or any of the others, your problem is capitalism. Your problem is this setup. You can't really be surprised at the people at the top use their position to become wealthy. If you don't want them to be wealthy and everybody else be poor, you can't let them or anyone else occupy that position. If the people want less inequality, and the Gallup polls and many other polls show that the American people want less inequality, overwhelmingly, if you want it, then you can't allow capitalism because it is the solution that gives you the problem. It is the way of doing things that has to go.
Yes. And I think this is hugely important is that the few times in which we do hear the word capitalism is to qualify it: crony capitalism, monopoly capitalism, or say it's really the issue with neoliberalism, it's a redistributive problem. Here, what we're trying really to say is that economic growth, capital, right? Capitalism has the word capital. Capital in terms of what we see in terms of money, in terms of wealth, what we can quantify as GDP growth, rests on capital as the social relation that is specific to our historical moment, which requires the majority to not get to have a say on what is being produced and does not get to keep actually the full outcome of one's labor, because guess what? That surplus that Rick talks about in his work, and which is the core of Marxian understanding of why the system grows so much, that surplus is the outcome of the unpaid portion of the workday that all of workers, no matter how well-paid they are. And so I think really here it's where it's interesting because capitalism, I guess the reason why the word is so uncomfortable, it's also because it talks about this capital that in itself the word presumes non-democratic social relations. While if you talk about the market economy, you instead focus on this world of freedom that supposedly is all about our choice. So, I think that is crucial.
And Rick, I would like to go back to what you said a minute ago and focus perhaps on an issue that again really exposes the non-democratic nature of our system, which is inflation. And I think there it's very interesting because your understanding of how inflation even occurs, which you hinted at in your explanation, is extremely different from what we hear in the news and we get from our mainstream colleagues. Usually, inflation is actually attributed as a fault of those very workers who produce value but somehow are consuming too much or asking wages that are too high. How can we understand this difference in explaining what is ultimately haunting our society today and could be actually the source of the breakdown of the society? Because with inflation, people do realize, and this I learned from your wonderful talk we gave together once at, I think it was Historical Materialism, people do realize that the system is not doing good for them if they have to pay so much for their cereal. So how is it that they are even these our colleagues are even able to spin inflation, which could be, you know, the entry point to a systemic critique, into something that actually plays to the favor of blaming those very victims? I would like to know that from you.
All right, let me respond to that, and you'll see that it's a similar answer to many other questions like that. There is something here that has to be hidden, and it has to be hidden because reasonable people will wonder about it. So, for example, money. I mean, if you have a bunch of $100 bills sitting there, that that can be called capital. People do that. But it's just money. Is it doing anything? No. It's sitting there. It isn't doing anything. It's just green pieces of paper. So when you say money begets more money, you're saying something that makes no sense. I've been watching this money on the table for two days. It hasn't begotten anything. It just sits there. Well, oh, okay. Well, maybe the nervous economist says it's it's a little bit how you spend the money. Oh, so if you spend it, that's how it becomes more? Well, then how do you know it isn't in the money that the more emerges, but it isn't in what they're spending on? And if they're spending on something that makes it more, if they're spending a $100 and there's more at the end of the period of time, whatever it is, then how did that more happen? The money. We're looking at it. Americans and others had to be persuaded not to believe their own eyes, to have an ideology, a way of thinking that made what didn't look to be real, real. Money makes more money. And Marx comes along and says, "This is a hint." When people say stuff like that which makes no sense, there is something else going. There is something very sensible, but they don't know how to handle it. So he asks the question, and then he figures it out.
The employers take money and they spend some of it to get the tools, equipment, and raw materials that go into production. And they take another piece of their money and they hire workers to come and use the tools and equipment to transform the raw materials into a finished product. And then they sell the finished product. That's what we can all see. And now let's take a closer look. When they sell the finished product and they bring in the revenue that comes from selling it, they take a portion of that to replace the tools, equipment, and raw materials that they used up, because they want to keep going as employers. And they take another part of the revenue and replace the money they need to pay the workers. But then there's a third part of the revenue. You can see it in the accounts of every business. And it's what they call their profit. It is part of what was produced by the workers and the raw materials, but it doesn't go to the workers and the raw materials. They only get what the employer paid them. So the employer keeps a portion of what is produced by the raw materials, tools, and the workers for himself. And Marx says that's his wealth. That's where it comes from. That's where all wealth comes from. The workers produce more than they get back for having done the work. Or in Marx's language, the value added by the worker's labor is larger than the value of goods and services that he can buy with his wage. Every capitalist has to do it. And if the capitalist doesn't do that, he goes out of business.
Right? He he can't exist. The system's existence is based on a deep structural inequality. And that's why you can't get equality because this system is structured to not do that. Everybody in it, the employer in the dominant position, is working all the time to give as little to the worker as possible because that'll leave more for him. This is, by the way, it is a kind of lunacy. Marx played with it, but he didn't do it as much as I wish he would have. He should have said, "This is crazy. A system that is based at its core, at that moment when everybody, everything is produced, your hairbrush, your shirt, your hamburger, your automobile. Right there, we have an employer trying to suck as much surplus profit out of those workers as possible. This is a recipe for bitterness, anger, resentment." It's as if, and this is a metaphor I find useful, it's as if you periodically had a picnic where you brought all members of your family together in some lovely place to have a picnic. And you knew that Uncle John and Aunt Mary hated each other. Whenever they got together, it was horrible. Would you create a committee to plan the picnic comprised of John and Mary? No, you wouldn't, because that's a recipe for disaster, not a picnic. If you want production to happen in a way that is good for the community that depends on it, why would you organize it in a conflictual horror show between employer and employee? And that's why we have forever strikes, conflicts, sabotage, and an endless array of trouble periodically exploding the whole society. And they can't fix it, and they can't stop it. They've never been able to. It's only temporary because they've organized this system to produce inequality and bitterness about it. Every worker knows this somewhere. They all know it. Even the ones who will never admit it and will insist it isn't true.
Right? Give them two beers and out comes. You know, there's a reason why the local cafe has in the window the big words "Happy Hour" because when the worker comes home from work, that's what they need, a happy hour. And they know exactly what is meant by the phrase "happy hour." It's the difference between sitting down and having a drink versus the unhappy hours you just gave away to your employer.
Yes. And I think Rick, what one point that is very important is to stress how in Marxian analysis, the whole point is to realize that we are the architects of this economic system, but we're also the prisoners. And this is true not just for workers, but for capitalists themselves. So the whole point is, you know, when we hear in the news, oh, it's because that guy or that guy is just greedy, or he's just bad with his employees. The point is different. The point is that once you, as a capitalist, want to survive as a capitalist, you have to participate to the rules of the game that are all about increasing this rate of exploitation that you can calculate very precisely by looking how much surplus you make and how much you're investing in wages, right? And so this is, and in our economy, you can really look at it if you look at the aggregate GDP, what share of the GDP goes to wages and what share of the GDP goes to profit. And the capitalist has to maintain a high rate of exploitation in order to make it right. And I think it's very interesting because even the concept of innovation, right? One of the ways in which people justify our system is to say, look how innovative the system is. We would never get this technological advancement anywhere else. And of course, we know that Marx was the first person who really, really had an extreme fascination for the capacity of the bourgeois economy, the capitalist economy, to innovate so quickly. Of course, it's a peculiar characteristic. But then you ask why? And the whole point here is to realize that we're not innovating to fulfill people's needs and to make people's life better. We're actually innovating because if the capitalist does not innovate, he dies as a capitalist. If he's not able to extract more value out of the same amount of time, which is called labor productivity, then we're screwed. I mean, we're screwed. The capitalist is screwed. And so this is also very important is that ultimately this innovation, it's a contradiction because we might like this innovation, but if we see how it comes out of a process that is completely inhuman, we're not then shocked to see that, you know, ChatGPT or whatever will take jobs from us because it was never meant to safeguard people's needs. It was always meant to increase this rate of exploitation. And I think this is terribly, terribly important.
I want to go back to a point, Rick, that you were making that I think is really interesting. When we discuss inflation, we never, never problematize the fact that it's an obvious fact that to compensate for higher cost of labor, capitalists will increase their prices. This is never discussed in the media. If you pay attention when you talk about inflation, it's never about the non-democratic process for which it's obvious that if wages go up, then capitalists will increase their prices to compensate for the loss of their profit. And what's instead is discussed is the idea that actually these workers are just screwing up monetary stability by demanding higher wages. And so I think this is really interesting because in their individualistic mentality of trying to point the finger, saying it's bad behavior of the workers, these mainstream economists are exposing themselves this class antagonism that it is at the foundation because they themselves have to admit that once workers demand more, the only solution here is to go against the workers by increasing the prices. So I find this very interesting is in a way that for how much neoclassical economics tries to hide all we've discussed, tried to hide this class antagonism in their policy. For example, in the fact that they know to increase interest rates when the labor market is too tight because unemployment is too low and thus workers are getting a lot of bargaining power. What's interesting is that in their very policy solutions, they display this fundamental characteristic of class struggle that they try to hide by giving a sense of harmony. It comes out because this is the reality of the system. Again, it's not the fault of this or that capitalist. The reality of the system is that for this system to operate, if wages are too high and are higher than the productivity of labor, the system is in trouble. And so this is what, you know, central bankers are meant to do, is to maintain the system operating according to its hierarchical structure that is intrinsic to it. And so I wonder how we can relate the understanding of inflation that is in the world to the understanding of unemployment that is in the world because I think these two very big problems that the system has are explained away by mainstream economics, but actually say a lot more about the reality of the system than we would think. So maybe Rick, you could tell us a little bit more about like exactly like how is unemployment understood by mainstream economics and how should we actually understand it, and how is this related to inflation?
Well, let me let me start with the inflation. The issue of inflation seems to me best understood by remembering very simply that it is the employer who decides whether and when to raise or lower a price. The workers are not part of that process. No one ever calls a worker into a room and says, "Hey, uh, what do you think the price is of whatever we produce here?" A worker would be finding that a very bizarre moment. Never happens. So, the employers do it. Now, that means they have the responsibility. And right here is the problem because if what prices are going up, then the population confronted by that risks becoming angry at the capitalist because he's the one who sets the price. The capitalists have understood this from day one. They must develop a whole series of explanations that blame somebody else. And that's what all of this is about. That's all that it's about. So, it's the banking system, or it's the government, or it's the workers, or it's anybody but me. And you know, here's the irony. The general answer to the question, why does a capitalist do anything that a capitalist does? The answer is to maximize profit. That's what we teach. I've taught in business schools. That's what the business school teaches the capitalist how to do. Raise you raise prices if it improves your profits. You lower prices if that were to improve your profits, and if enough extra people buy at a lower price, well then it may improve your profits. But the honest answer that capitalists are taught is you raise or lower the price depending on one thing: its impact on your profits. You're not told to ask, "What will that mean to the general public?" That's not your concern. You have neither time nor education to do it if you wanted to, and you don't. And by the way, the same applies to employment. You hire or not people if it improves your bottom line. If you're better off having fewer workers, you fire them. If you're better off having more workers, you hire them. We make the employment of human beings held hostage to the capitalist profit-driven system. And there again, we blame everybody else. Look at the businesses today. They are allowing Mr. Trump to do what he does, and they are already beginning to blame their price decisions on the tariffs. That, you know, that's the way this is always done. We should never be fooled because what is in the minds of a worker is all the other things that ought to be taken into account when you're thinking about these questions, but which conventional economics pushes out of the story, pushes off the table.
Let me use the example of artificial intelligence. Let's suppose there's an artificial intelligence mechanism that allows your workers in an enterprise to become twice as productive as they used to be. What will the capitalist do? He will buy that technical mechanism, the AI, and he'll fire half his workers. With half the workers, each of them now twice as productive, he'll have the same number of outputs, sell them at the same price, get the same revenue, but his profits will go up because half of the revenue he used to have to pay half his workers, he doesn't have to pay because he fired them. He will make more money. And that's what he'll do. And so we're all worried that AI is going to hurt employment. Stop. Let me show you very simple arithmetic. That employer had an option, an alternative. That employer could have said to all the workers, "I'm going to buy the AI machine, and now you're all safe. I'm going to pay you exactly what I paid you before, but you're going to work four hours a day, not eight, because you're doubly productive. In those four, you will produce as much as you used to require eight hours. The output will be the same. You're all working half-time. I will sell it for the same price. I will get the same revenue, and I will give you their same wages. My profit won't go down. I'll have the same profit I had before." Wow. What would that mean? It would mean using a new technology to fantastically improve the leisure of the working class, who are the vast majority. But the system will never do that. The system will not allow the technology unless the capitalist chooses to buy and install it, which he will only do if it improves his bottom line. There you have as stark as you could want it.
Yeah. And I also think Rick, in your example, I mean, the point is that if this, if we have one nice employer that decides to actually, you know, you know, share, use the benefits of AI to kind of maintain the same rate of profit, we know that the problem is that his competitor, instead of actually having the workers work only four hours, will have the few fewer workers work 12 hours and be more productive. So of course, this employer will ultimately potentially not maintain his position and become a worker himself if his business fails. So I guess here the point is that technology, of course, is not the issue in itself, but technology is not neutral. So it depends where, how it's used. And to go the route you're suggesting, I would say potentially we would need a complete overhaul of this trap in that we've constructed based on the accumulation of profit. And so we would need really different relations of production, right? So ultimately, I think your solutions to this anti-democratic system, which is a cooperative-based society, could do what you just said, could actually use technology in a way that actually improves people's work conditions rather than maximize the extraction of value. So maybe what do you think about that?
Oh, that that is my argument. If you had a worker co-op, if all the workers together made the decision about technology, they would have a meeting, and I can predict with real confidence what their meeting would say: "Bring the machine. It's wonderful. We will all have four hours a day we didn't have before to build a relationship with our lover, with our children, with our parents, with the community, with the political struggle." They would do what's best for them, which is to bring that machine in, but not to fire anyone. That's not necessary. They can continue to play their role in the larger economy, but they will have more leisure. It would be the whole idea that technology always said to the people, "You should support technology because it's less work for the hard work that we do. It saves us labor." Yeah, but if you had a worker co-op, it would save you a lot more labor than you will ever get saved by the capitalists. That's why even though we've had two centuries of capitalist technological progress, if you look at the statistics, workers are working the same number of exhaustive hours today, if not more, than what they used to. It has been unable. You can't get the benefits of technology with capitalism that would be available if you had a different logic and a different mentality.
Rick, I want to I want to ask you because I know this then becomes a topic that again, I think the point is that speculating about alternatives makes little sense. The point is actually to put them in practice. But we can learn from historical experiences and you know, there's literature that shows you how in Yugoslavia, for example, that they actually practiced this cooperative-based socialism in a way that was very effective. But one of the, let's say, weak points was certainly that ultimately, if the rule of the game remained the same, and what changed are the units of, of those who competing, so no longer, let's say, employers hiring employees, but like units of cooperative workers, they might still, in order to actually beat their competitors, if, you know, the ultimate monetary form doesn't change, have to like self-exploit or kind of like maintain the privilege for very, very few and exclude the others who would like to join the cooperative system. And this was one of the weak points about that model. So how do you think one could imagine, you know, a cooperative system in a 21st century that is able to learn from the weaknesses of these past experiences and actually, you know, produce for need rather than profit, which was ultimately the very goal that the, for example, the factory councils with Antonio Gramsci, or the very first shop stewards movement that was very strong in Britain had in mind, was the idea that we're not just emancipating ourselves from our boss, we're emancipating ourselves for production for profit, which thus allows far more freedom in terms of avoiding this like self-exploitative tendencies.
Great question. And and here comes the answer. When capitalism emerges from feudalism, it emerges here, there, in this city, not in that one. In this industry, not in that one. And they discover all kinds of problems that they hadn't foreseen. So in order to perpetuate, in order to build on and to retain the breakthrough from feudalism, they had to come up with plans, macro institutions that would reinforce the local capitalism. Otherwise, their isolation, their tendency to live by the rules of feudalism would collapse them. Why do I tell you this story? Because the same thing has to happen with worker co-ops. They're going to discover, for example, what you said. We might be set up in a market situation where to compete, we have to take steps like a capitalist would to survive. But we don't. That threatens our cooperative. How do we solve the problem without slipping back into capitalism? I would expect that to be a problem for the first century or two of this new system that's emerging now, because that's what it was for slavery when it came out of its forebears, for feudalism.
When it came out of slavery for capitalism, when it came out of feudalism. You are going to start with a macro that is at best a mixture of what was good for feudalism with the beginnings of what's good for you. But as you develop your base, the the the the workplaces, the the foundation, you will use that power and that wealth to create and there'll be conflict over it. The kinds of macro institutions that solve problems while protecting the cooperative basis.
Look, you're a specialist in how you developed a policy from your book, how you develop policies now known as austerity at the macro level, which can be described as follows. They deal with solving problems that emerge out of capitalism's chaos, out of capitalism's business cycle tendencies, but they handle them in a very peculiar way. Peculiar how? To preserve the role of the capitalist at the level of enterprise. You can't solve it this way. You can't solve the unemployment created by workers being laid off by having them all go work for the government. That raises too many problems. You could solve the problem, but you can't do that because it jeopardizes the underlying system. So you exclude that. You have to do this or that. You don't tell people that's why you tell them it must be done this way.
Look, you and I had a conversation. We went through that inflation of 21 and 22, and we had a Federal Reserve which told us we must raise interest rates. And I remember going on countless programs explaining to my American audience that we have used price controls. That's an alternative. We have used rationing. That's an alternative. Come on, what is this notion that it must be done this way? Well, but that's the one they, they want the conversation to be on interest rates, not on those other mechanisms.
Yes. And you know, I think the key takeaway that I've discovered from my observation and research is that ultimately they will do whatever it takes to avoid politicizing the economy. So you need to make sure people really think there are no alternatives. And what happens is that if you start putting price controls, if you start actually creating situations of full employment, these are moments in which the economy shows its real face because you realize that it's actually constructed on political relations that could actually shift into something different. And this, I think, is crucial because going back to your point, you know, it's an evolutionary systems change, not like from one day to another. It's a process, right? So if you start showing that actually it is possible for the state to manage inflation differently from increasing unemployment, which is really what they do, they increase unemployment through increasing interest rates so that workers lose bargaining power and thus accept low wages, and so supposedly the employers can start then also like avoiding this hiking of prices. Right? The whole point here is that if you show that something can be different, then this might escalate demands, popular demand, and also political imagination to say, "Hey, look, we could actually do things differently. We could politicize our economy and go and and move forward rather than using the usual recipe of austerity that has been used for hundreds of years."
And I think, Rick, this is the same thing with unemployment. I'm discovering in my research right now that Keynesians in the 60s were terrified about full employment at the end of the day. So all they were saying was, we're different from neolassicals because we really believe in employment as being one of the goals of our macroeconomic management. So they, that's how they kind of play the idea that capitalism can be humane is to say, "Hey, look, we can have very happy workers who have a job." Guess what? When they actually do achieve full employment, or like close to it, because it's always never really there, there's always at least, you know, four or five million people still unemployed according to the official statistics, but that doesn't matter. Even when they reach, you know, 4% unemployment, which is still a lot of people, again, it's it's around over 7 million officially, then we should even double it sometime if you want to count everyone that's actually without a job. Well, then they get really scared because full employment, even when it's at those numbers, means that workers can realize that they have the power that has been constantly told to them they don't have, right? And it's these moments when, you know, they get to pick who to work for because there are more actually job opportunities than the than the seeking jobs. This is when the system shows its political face, and this is when our colleagues get terrified. And this is why ultimately you want to avoid presenting these as possible solutions always because they might screw over this naturalization of the system that is still ultimately keeping us passive.
But I think, Rick, really what your work does is that it shows that naturalizing the system is irrational. Like there's nothing rational about us accepting what these people tell us. And even if they have, you know, a a very prestigious PhD from a very prestigious university, you can say, "Hey, I have the same prestigious PhD, but I'm developing a new framework which is not that new. It comes from Karl Marx. So, and then is developed according to our current." But the structure of the system is the same. And we can develop these new frameworks that can actually expose this political nature. And thus, I think, really lend credence to your alternative solutions, Rick, that you suggest with the cooperative movement. And again, I think this cannot be understood by academics. It has to be put on the ground. And I think what we're trying to do also at Tulsa is to develop a worker cooperative through the production of these podcasts and these communication sectors, which hopefully can help us. But don't you agree that ultimately what we need to do as scholars is also to go and look at what happens when workers do decide to take on their means of production and to organize society democratically?
I agree, and I would say it in two different ways. Number one, if your goal is to change society, that makes you critical of the situation. And if you're critical, you see things in a different way. And so you end up with a different theory of how the system works because you begin with a critical commitment. And it is very different if you begin with a commitment that you're going to do an understanding with no particular interest in change. You know, Marx has that famous line, "The philosophers have always interpreted the world. The point is to change it." Yeah. The people who want to change society come up with analyses very different from the people who don't. The early proponents of capitalism analyzed feudalism very critically and came up with an understanding that was then very useful for going beyond it. And the people who didn't want to go beyond it had a very different set of understandings of feudalism. And I would also like to remind people that other people who are not economists often figured these things out better than we did.
Yes. Mary Shelley wrote that famous book, Frankenstein. What is Frankenstein? Frankenstein is a monster that terrifies a community. But the story explains that it's the community that created Frankenstein. And if you can create him, you can defeat him. You can overthrow him. It. This is not something extraterrestrial. This is your own product. Capitalism only exists if the people in it accept it. If they think they have to work all their lives long and get a cheap watch after 50 years of working.
Yes. That it has to be this way, that the boss tells the underling who supervises you that that's your life. This, this is passivity almost at a psychological level that has to be, excuse me, broken if you're going to change the system. And in many ways, I think that the work you're doing, the work we're doing, that's what it's about.
Yes. We are telling the stories about the economy like Mary Shelley told the people of her time about the status quo that they suffered under, but which they themselves could, if they took it into their hands, change.
Absolutely. And I think really Trump is doing us a big favor by kind of really showing a lot of the political nature of the economy. Of course, then the mainstream economist interpreted, oh, it's all the tariffs issue, it's all this, like again, diverting the attention. But what Trump is doing ultimately is just revealing the very, very deep anti-democratic nature of our economic system. And that's why we have to see this moment in which people are seeing the truth by actually giving explanations that can go deeper. And in explaining, you see the alternative. I think this is really the power of Marxian theory is that in the very explanation of what is wrong, you see how you could fix things in a way that is actually meaningful and transformative. And I hope that we can continue collaborating, Rick, because absolutely.
Democracy at work is such an important space for this type of conversations. I hope you can follow Democracy at work. Also read Rick's latest book, Understanding Capitalism. It's very readable. Even if you have very like five minutes before going to work, you can read a couple pages and still get to a point, which I think is great because again, we need to also change the way we communicate. And academics tend to communicate in a way that is by definition not understandable. And again, this serves a social purpose that we are trying to go against. So our idea is really to let the fact that knowledge should be a common and that critical knowledge should be a common in the sense of really accessible to the majority and created by the majority. And I hope we're giving our small contribution. And thank you so much, Rick, for being with us. Make sure to subscribe for everyone who's listening to freeforum.org where you can follow all our events also the live ones. And Rick, we hope to have you soon with us and for a better future. We really need it desperately right now.
Well, I'd be glad to do this with you again, Clara. Everything you kindly said about us, I will say about you and your institute there, now your independent institute. It's what we need all over the country. And who knows, Tulsa is as good a place to lead us there as anywhere else. Bye-bye.
Bye. Bye. Thank you, Rick.
Hi Sam. Hi Matilda. It's so lovely that you could follow us. Matilda and Sam are part of the community, the assembly of free, so participating members. And so it's lovely that we get a chance to kind of get your feedback, your impressions, and maybe some thought about what you would like to explore in our future conversations.
I thought it was a great conversation. Things that things I had questions about were like things that came to my mind when when you all were talking was like, we hear all the time that wages should track with productivity, and it doesn't. You know, clearly that hasn't been the case for a long time, but why do we hold on to that, and why do we think that's a part of a social contract, and has that social contract gone away? And then my my other, I another thing I wanted to hear more about was the shop stewards movement and the cooperative movement. If we're producing for need, will that lead to like less exhaustion of resources, both natural and labor? So those are kind of two questions I had.
Maybe I can say a couple words and then we can clear it. I think what's interesting about productivity is that in itself, as a concept, it's a typical example of how economists try to depoliticize the most political of all realities. Productivity sounds good. It sounds technical. It sounds neutral. Really, what it's about is the fact that our economy, to grow, requires more extraction of value from the worker in order to maintain its competitiveness, also with respect to the global market we're in. So I, I think it's very fascinating because, yeah, we like it feels like something that we should all care about. If you look at what productivity means in Marx's analysis, it's really one important way to increase the rate of exploitation because what's happening there is that it's a way in which you can keep the wage constant, but in with that same amount of money you're spending in wages, the employer can actually get much more surplus out of you because in the same amount of time, you're producing more value, right? So you, you see here is what's interesting is that really it's an it's one of the ways the most politically friendly way to increase the rate of exploitation, but it's still the mechanism is still the same. Like what our society needs in order to progress, quote unquote, as we know it, is more extraction of value from the worker. Right? So it's fascinating to me that it's like such a deeply political reality that is though hidden in it the way we talk about it, but it's really there, right? That's why like the mainstream economists can't really hide that really our economy is based on our exploitation. They just use words that make it sound less antagonistic and less kind of like repressing of our fundamental needs as humans.
So that I find really interesting. But, you know, that's the whole point about like the Keynesians. They're all about the fact we can only increase wages if we're also increasing productivity with the increase in wages. Otherwise, you can't increase wages. Right? So the only moment in which our economy, capitalist economy, can work with a wage increase is if this wage is compensated, wage increase is compensated by a higher increase in productivity. You see, because like that actually you are still extracting more surplus from the worker and profits can still maintain high. But what's happening usually, you know, is that well, right now, since the 70s, what we've been seeing is actually that productivity keeps going up and wages actually, you know, stagnate or decline. But the only moments in history during the golden age in which it was possible to increase wages was because productivity was growing with it, right? So the contradiction is, what if wages increase and productivity goes down? Well, that's really bad for our economic system. Then the the economy doesn't grow because no surplus is being extracted. And investors will ultimately might stop investing because it's not profitable to invest. You see, so there's an economic breakdown at that point.
Second point that you're mentioning that I think is really important is of course the climate catastrophe. And I really hope that we will have a serious conversation about that and more than one conversation on this topic. It's a definite corollary to what we've said in the sense that you can only have climate sustainability if you overcome the monetary detachment of a system that operates just to accumulate. And of course, everything else is instrumental, right? So as much as you exploit workers, you're also exploiting resources, but that really doesn't matter for the system because its only goal is to accumulate more capital. And this is a point that is made very well, that my one of my mentors, Anarshik, he says it very well. It's like, you can't blame, blame our capitalist economy for like killing the environment or like screwing over workers. It's really never meant to deal with those, like it's really never meant to solve those issues. It's meant to do what it's good at, which is like capital accumulation. But everything else is structurally irrelevant for the capitalist logic. Right? So only if we actually can imagine a different logic could we do justice to what is at, what us as humans care more about, which is definitely like the survival of people on the planet. I hope that was, I mean, you know, these conversations could go on for a long time and they're very interesting. This is just like a couple thoughts that came to my mind.
Yeah. Yeah. And if I could interject, I just, I really like that you kind of brought up some of how there's always this work that's never accounted for. And also just like getting into this whole conversation about when there's innovation, then even if someone wanted to act as an employer in a way to continue to employ the same amount of people but maybe like decreasing the amount of hours, how, yeah, they're still stuck competing against someone else who may not be as ethical. And really, it's just pointing to what I kind of see and hear from people like time and time again, which is that everyone's just in a workplace where they are understaffed and everyone has more workload than they could possibly do. And that's just kind of like the status quo everywhere.
Yeah. And again, that's another way in which you can increase the rate of exploitation. Of course, you can either increase productivity, or you can repress wages, or you can increase the intensity of one worker, which means that he or she can do the work of, you know, what was before done by 10 people, right? So all these ways are really ways to cut labor costs. And this is not like an option. And this is, I think, the very important lesson is like, this is not an option in our economic system. If you do want to thrive as a capitalist, you got to adopt one or more of these strategies to increase the rate of exploitation. Which one you choose depends on the historical moment and also how strong workers are to like push back with respect to certain practices. But definitely, this is the tendency. That's why I think the idea of tendency law in Marx's analysis is important. It's not deterministic because we're talking about social laws, right, that we've kind of constructed. But at the same time, there's tendencies that you can only really like block if you politically organize and push back against them or even try to kind of overcome the whole kind of organizational structure that we are basing our livelihood on.
Something I want to mention about what Shiloh said is that inevitability. So like there's, I mean, from Marxism comes the concept of scientific socialism, and it really is understanding that like it's not just like personal motivation or ideology or, you know, really anything idealistic that is pushing capitalism more and more toward exploiting its workers. You know, making them work two people's jobs for one person's pay, or saying, you know, well, if if we raise wages and we have to raise prices, that kind of thing. It's really comes down to the fact that like, in order to ever increase profits, you're going to always make conditions worse for other people. And we really see that in the genocide, right? So like the speculation on the genocide is entirely predictable of capitalism because that's just how it operates.
And, um, building off of that, the inevitability of the fall of capitalism. And really, that's like the crux of Marxist analysis is like, it's not just that it's morally bad. It's not just that it sucks and everyone hates it. It's that it doesn't work. And if it doesn't work, we have to get rid of it, right?
Yeah, but I think that's also so, what's interesting is that, you know, a lot of the reason why, uh, we could say some of the weaknesses of the Marx movement was kind of this belief that given the contradictions of the system, they will take care of themselves and in a way the system will collapse under its own contradictions. And that has been, um, something that has, I, there's a lot of discussions about how that has like actually slowed down the potential transformative processes because it was just like, okay, let's wait and see, the system will collapse. So what's important, I think, is to understand like, again, inevitability, the word inevitability, I think is always tricky because it's like, okay, clearly the system is fragile. That's what I always try to say in my own work is like, if you look at the effort that is put by the state to present, and we didn't touch this with Rick unfortunately, I did want to get to the fascism part and how actually fascism falls completely in line with the economic structure we're in and actually is functional to it. But the point is that if you realize how strongly the governments have to constantly intervene to kind of protect these social hierarchies, we realize that it's actually really fragile because the majority is stuck in a situation that doesn't allow one to flourish in any possible way. So this fragility though doesn't break on its own. That's why we need the organization and we need ideas. Right, Sam? I know that this, this is something you deeply believe in. I think this is why we all are excited about the free is that we do need a space for people to increase their awareness, their their imagination, and this will allow ultimately to become stronger in terms of like how can we mobilize on the ground to achieve certain, even if small wins, even small wins are something in the process of more courageous transformation, I think.
Right. And that inevitability that I'm talking about is like, we see, we see the genocide happening. We see people dying. And in the Imperial Corps here in America or, you know, in the West, we don't feel it yet.
And it's coming, right? Like the the imperial citizens are going to feel more pain. And that inevitability that I'm talking about is the organization of the working class because that pain forces people to realize something is going on. It is awful, and we need to figure out what it is. Yeah.
Um, the other thing is fighting the propaganda of the capitalists. So like something that I've always dealt with as like a personal problem is like trying to explain these systems just in like one-to-one conversations. And it really, I would have to say, it's not very effective. I think the only way that this information is going to get to people is if it comes from a group collective. If it comes from a place of like higher learning and like kind of appeals to that institutional type of authority that that universities have, where people are more likely to believe what you're saying if you have a sense of like, well, yeah, authority backing you up. So if you're just getting into individual one-on-one conversations with people trying to convince them that capitalism is bad and it doesn't work, I think that is kind of a futile effort. I mean, you can certainly try, but through my experience, I would say it's not very effective.
Yeah. Two points there. Of course, like, I mean, I think the genocide really shows how, you know, our economic system doesn't care about the extermination of people. And that's why ultimately, you know, we do need to change things, otherwise what we'll just see is the extermination of the entire global south, and then slowly also the global north and the working people in the global north. And so ultimately, this is why I think people are more and more willing to actually look deeper right now because of how, you know, I think the idea that we're going to all be Palestinians is not is not very far away. And so we think we can just like not care because they're far from us right now. But this is expressing a reality that we need to confront, and we can't avoid. And the thing about, you're right. I mean, that's why I think it's important. I'm proud at least of myself of having like, you know, gone through the whole terrible academic career path, because ultimately, right now, I, we can, I think, kind of for once instrumentalize academia in our favor in the sense of actually using these positions of more authority, using the fact that, you know, one has, yeah, the the the the knowledge and the capacity to say, hey, I am a professor of economics, but economics is in itself a problematic discipline. And I think the fact that we can actually try with free to get this like authority from the academia to help out, and again, not take priority because I think that's not going to be very imaginative because academia by definition is never imaginative. There's too much privilege there to for imagination to actually emerge. But the idea that the academic world, and especially those academics like Rick and like many others that we will have on this show, really can help us like go hand in hand with organization on the ground. And definitely one has to like, you know, say this is where the truth lies. Like there is, it's not like there are like multiple truths. No, there is one truth, and then there's of course the dominant ideology that hides this truth. But we need to like be able to say, no, this truth is real, and we can all speak up for it. And I hope that with our organization of free, we can become one of the many examples of how this can be done. Thank you so much for being on the show, and we'll see each other very soon.
Thank you.
Thank you.
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