Transcription
There is no going back. You're not. That's not going to happen. The decline is going to continue. It's been already 15, 20 years underway. I give you an example. It's been even longer that the United States has held back in every way that it could. China, it it began to at the turn of the century, so 25 years ago, it began to understand that China was going to be a significant competitor. It didn't get that before. It's had hopes with when Nixon and Kissinger went and uh celebrated in in Beijing with Joe and Lie and Mount Son that that China would become, you know, India something like that, or that China would be to America what India was at that time still to Br to Great Britain. Uh, didn't work out. And by the beginning of the century, they knew. So they tried, tried everything. They tried covert action, overt action. To this day, they forbade American companies to trade there. They, they put tariffs on. They undertook trade wars.
Now, here's the important thing. They've been doing it for at least the last 30 years, probably earlier. Uh, and if you go back before before the 1970s, then the the the skull duggery with the CIA and your MI6 and so on. Lord knows what they all did. But we do know they tried everything in the last 30 years. And that effort was a, and let me stress this, 100% failure.
And if I can give any advice, if I should be so bold to your audience, given your dependence either on the United States in those ways or on China in those ways, this is a struggle that you will have to live with the results of every bit as much as we do.
Hey everyone, my name is Anthony Fatsies and welcome to another episode of the What the Finance podcast. On this episode, I have the pleasure of welcoming back Professor Richard Wolf. The story we are told is that the system is going through a rough patch. My guest today argues the system is the rough patch. The Iran war, the tariff battles, the debt spiral, the fracturing of American power. In his framework, these are not separate shocks. These are symptoms of an empire in decline and the economic system hitting its structural limits. Richard Wolf is a professor of economics and emeritus at the University of Massachusetts Amherst and has been described as America's most prominent Marxist economist. He is the host of Economic Update and the author of Capitalism Hits the Fan. He isn't here to tell you how to trade the decline. He's here to explain why it's always coming. He's here to explain why it was always coming. Professor Wolf, thanks so much for coming back on the show.
>> My pleasure. Thank you for inviting me.
>> Yeah, looking forward to the conversation. As we were saying before, there's a lot happening in the world and there's a lot to keep you down, but also there's, you know, green green shoots coming through that could potentially bring positivity. But maybe we can start, you know, what is your current thoughts on what we're seeing in the economy and I guess geopolitics overall at the moment?
Well, our economy is in terrible shape. It it is so bad that even the normal people who are cheerleaders in almost all circumstances aren't doing that anymore. Even the leaders of the government whose job it is to pretend that things are going well whether they are or not, even they still do it, but without much enthusiasm and with even less success in terms of moving the population.
This morning, they released data here in the United States that our inflation rate is now 4.2% uh over the last uh period and more is expected. Uh, some items, for example, gasoline to put in your car, uh, is up 40, 50% from what it was a few months ago. And you have to remember when I tell you that that I think more than any European country, the United States depends on the automobile. The vast majority of us uh live in a place that is different from where we work, and that both those places are different from where we shop. Only in the biggest cities is that uh not the case. Uh, but mo in most people's lives, they have to have one or more cars per adult in order to navigate because we do not have a decent public transportation system again, except in urban areas. Uh, and even then, they're not very good. So everybody has a car, long story short, and therefore everyone feels the inflation of the gasoline price uh very, very immediately and intensely.
If you look a little closer at the data, it turns out not only that prices are up, but that they're up well above the rate of increase of wages and salaries on the average. So that what we economists call real wages are declining there. No question about it. And it is big enough to be felt. And when you add it to the headlines at Blair, what is happening to petroleum prices and food prices because of the petroleum basis of fertilizer, etc. You get very bad results when you ask people's opinion, not just about how things are, but how they expect in the near and midterm future to look. So it's, it's not a good situation. It's bad.
If you wanted a a broader economics measure of it, then I would remind people, if you're not familiar with the statistics, that we are living in a period of inequality of wealth and income the likes of which we have not seen in this country for a century. It's extraordinary what is going on. The Great Depression of the 1930s compressed inequality. We became a much less unequal uh capitalist system. The entire period since then, 1945 to the present, those 75 years have been a rolling back of what was achieved in the 1930s. The so-called New Deal, it was called here. All of that has been erased. If not 100%, then at least 75%. And you put that together with growing inequality, and you literally have a place like New York City, where I'm living and where I'm speaking to you from, where within a few blocks, you can visit where Elon Musk lives with his hundreds of billions. And a few blocks in the other direction, there are people who report what we euphemistically call food insecurity, but what used to be called hunger on a regular basis.
So for all those reasons and many more, uh, we are in deep trouble. And I would stop there, except the trouble is magnified or compounded by what I would call, and here I rely on my wife, who's a psychotherapist, a level of denial of what I've just said that is as impressive as the truth which is being denied. Denied. And and the combination produces a very depressed population.
>> Yeah. A lot to unpack there. And are you seeing, you know, obviously this is a long-term trend that we've seen over the past, yeah, as you said, decades, you know, since the 1940s. Um, but it seems like we're seeing more crises occurring. You know, there's more issues with obviously geopolitical issues. There's more wars happening. There's more, you know, um, I guess pandemics, all these just all these different things occurring. Do you see them being all interlinked with, uh, I guess this concern about the economy, or do you think they're sort of separations?
>> No, no, I think they're all very, very closely linked. You know, when I'm asked, how do you account for the very things that I describe and the statistical work I bring forward? I say to people, we are, and this is particularly appropriate uh to that part of your audience that is British, uh, we're going through the decline of the American Empire. What you've been doing for the last century, we've been doing for the last couple of decades. So maybe it's therefore allowable to see as much uh denial as we see. You are a better judge of me of that in terms of of the British parallels or not. But it's, it's very clear here that there's no, there's no desire, there's no appetite to look at this reality. And what we have is upset deepening with each passing year, leading people to behave in ways. They also notice the level of bitterness in our politics, the harshness, uh, the the demonization of Republicans by Democrats and vice versa. Uh, these are much sharper than they used to be. These are dangerous levels of rhetoric beyond, you know, the exuberance of a debate or something. These are becoming settled ways.
I would argue that a person like Mr. Trump would never have been elected to the United States presidency. Too many deficits, too many lacks of any kind of sense of space and time, and too much dishonesty. I mean, politics is full of that, but this man really is uh breaking the boundaries, you might say, and everybody knows it, including his own people. Uh, so you have to ask, ho how does such a person get to be elected twice? Yet? Uh, how does he survive in office given who he is? I mean, we had a, a last night we had a finals of our basketball. It's sort of the ultimate game of basketball at the end of the professional season, and it was game number three, and the New York team uh was winning two to zero, and so the third game was played here in Manhattan or in Brooklyn. Um, and Trump said he would go. Well, the game didn't start for hours beyond the starting time because of the mass hostility as well as the mass security. They needed a mass security because they're terrified of what the American people here in New York, for sure, will say. And perhaps in some extreme cases, do. So he held the game up. And the New York team had asked him, can you imagine this? By the way, the New York team had asked him as a team not to come. The antipathy for Mr. Trump here in New York, and you can't write this just off to Democrat or Republican. This is a level of anger and bitterness and hostility that is part of a disintegration of the social compact that allows large groups of people to live together. New York City has got 8 million people. Um, and they don't agree on anything except the following. They do not want this president. They do not want his government. He has threatened to send in his little private army, ICE. You may know about them, an anti-immigration army. And various of our political leaders have literally said, "If you send them here, we will send them back to you, but they'll be in poor condition." You know, our mayor has said that if Benjamin Netanyahu visits the United States, our mayor will have him arrested, and on and on. That's the level of intensity that uh is exploding here. And it's directly connected both to the wars abroad. Remember, Mr. Trump campaigned for presidents at for presidency on the grounds of no more of these endless wars. His words, his phraseology. And he has now produced more wars, not fewer, more. And everybody who paid any attention is fully aware of that. The economy is not in good shape. The inflation is getting bad. Wages, excuse me, wages are not keeping up. The war is going badly. I would say half, half the American people believe that the war, particularly the one on Iran, was a mistake. And a mistake in the following sense: the United States cannot win. The United States is going to lose. And the only interesting question that remains is how badly the United States will lose, how much damage it will do before it withdraws, and how will the world change to the disadvantage of the United States as a result of whatever it is he does to get out of the disaster he initiated in that part of the world?
>> Yeah, I'd be interested to go more into that because as you said, it's a very difficult situation for the US to withdraw from because it seems like, you know, Trump continues to try to uh talk about, yeah, we've negotiated a deal, then it escalates, then sort of back down and escalate again, never ending. Yeah. So how do you see it occurring?
Well, you know, I have to ask you in a way a question. Very few people outside of what we call the MAGA community, that's maybe a quarter, give or take, a quarter of our population when polled, believe in Mr. Trump. They, they really do. He represents for them the protest that they feel against what has happened to them. And I should say, what has happened to them deserves to be protested. Choosing Mr. Trump as the way to do it strikes me as bizarre. I mean, he is utterly unqualified to do anything about their suffering. They don't have good jobs anymore. All the manufacturing is gone. It all went, I'm exaggerating, but not by much. It all went to China. They all know it. They are purchasing in the store the goods made in China that used to be made here in the United States. So they see it, you know, on the back of the toaster or on the back of the shirt. They can see where it's made, and they understand what happened to them. But they want to blame someone, and they, they like Mr. Trump because that's what he does all day long. He blames immigrants. "They're invading us." He blames black and brown people. He blames women. He blames, you know, the Chinese economy as if the movement of American companies to China was somehow a maneuver by China rather than a decision by the corporate leadership who remain American to move their production over there for more profits. Even though I and any other competent economist can show you that 10 days over again, no issue. Instead, Mr. Trump is a specialist in scapegoating. That's his trump card, if you like. He scapegoats whoever is on the outs in our culture, whether it's African-Americans who've been that played that role throughout the history of the country or others, he will find a way uh to blame them. The only part of the society that gets no consistent blame is uh the employers, employer class. The first thing Mr. Trump did in his first presidency was the tax cut of 2017, biggest tax cut for corporations and the rich in our history. The first thing Mr. Trump did in his second presidency was what he called the big beautiful tax bill of last spring. Again, the first top priority, give corporations and the rich a big tax cut. Those folks are very happy. Those are the 10% of our society that are rich. They are the ones who own, according to Federal Reserve, 87% of shares of stock, both as such and as mutual fund shares in the United States stock market. It's the top 10%. They are not dissatisfied. They are not unhappy in general. It's the other 90% of us who are. And that 90% and here goes to your point. They don't believe anything Mr. Trump said when he gets up now and says, "I've been negotiating with the Iranians." And then a statement is made by some Iranian official. We don't know what he's talking about. We're not talking to him. I'm telling you, the half the American people, probably by now 60%, believe the Iran, the Iranians, they don't even know them, don't like them, but they believe the Iranians because they know Trump just makes it up as he goes along.
>> Hey everyone, thanks again for listening and sorry for interrupting. The podcast has always been about the guests and trying to better understand this crazy world we live in and the geopolitical, macroeconomic, and financial trends that are shaping it. To try and delve deeper into these challenges that we're facing in the world, I've recently started the Substack. My first piece, Reset and Reorder, looked at the strings that bind everything together and what's led us to the situation where we are today. The Mechanist Restoration has really delved deeper into China, the Mechanist Reemergence, and what this means for trade globally and everyone in between. If you're interested, I'll put the link down in the description. Otherwise, thanks so much for watching and let's get back to the show.
>> Yeah, and that's the issue. So, how do you see this ending then? Because it seems like a very difficult situation. Is it, is there any solution?
There's a consensus. I'll give you the consensus. I don't have anything better than than what I'm reporting to you. And the consensus is he will carry out some more bombing and droning and missing and whatever else they have to throw at the Iranians. Uh, they'll have a good video of flames shooting in the air and buildings falling over, and then Mr. Trump will announce a great victory. A great victory. We bombed them to smitherreens. And then he will withdraw. And he knows, he knows that the half of the American people who've had it with him, whose only interest in him is seeing him gone, they will be, they will say this is not a victory. They will make fun of him and all the rest. His little core, his quarter, they will believe him because they love what he represents and they want his protest uh to be their way of protesting. And the other quarter, you know, will fall one way or the other that's left. Uh, but increasingly they are voting against him. So my guess is he, he will now concentrate, once he gets out of this dead end, he will concentrate on trying to win the elections that are scheduled for early November, not that far away, of of this year, or in coming up, which many Americans expect, coming up with some excuse to not have the elections, to prevent them, to postpone them, to uh suspend them, whatever lingo he comes up with, um, and try to slither through because his polls will have told him by then that he's going to lose.
>> Okay. Yeah. So, it seems, seems scary to think that that's a possibility, but I guess you, you never know. And then, you know, there, there seems to be this conventional framing of, uh, and it's what we saw with Venezuela, it's what we saw with Iran, it's what we're seeing with China as well, that, you know, they're the enemies of the West. And you can say potentially they've done bad things. I guess all countries have done bad things, but that seems to be what, what's being, uh, sort of perpetrated and why the US has gone into these countries. Do, do you agree with that?
>> That he, he, he beats that drum continuously. But but to be fair to him, uh, not that I feel all that needful of doing that, but to be fair to him, this predates him. You, you can't blame Mr. Trump for the antipathy to all of those countries. Americans, for better or worse, to be honest about it. By the way, I was born in Ohio. I've lived and worked in in the United States all my life. I'm talking to you from New York City as I speak. Uh, Americans tend to believe even now that they live somewhere else, that the rest of the world is very far away, is not a serious place, is vastly inferior in terms of its economy, in terms of its political democracy, in terms of its military. Um, there's a shock to give you to illustrate it. It is shocking to most Americans that a very much smaller country. My students at the university in New York, half of them cannot find Iran on a map. If I show them a map of the world that includes Europe, Asia, Africa, they find Iran from, I've done this. Half of them can't do that. They really don't understand where it is or what it is. But it's a distant, v they country which is bad. Bad and not bad in this particular way or that particular way. Yes, a few students understand it. The people there are Islamic in their religion. Yes, they know that that's another religion. Beyond that, they really know very little. Uh, that it had oil. Yeah, some know that. But where it fits in the world oil market, they don't know how the United States has controlled the world oil market. They take it for granted, but they don't know how it works or when it started or who's involved. Why am I stressing this? Because to understand the rest of the world in in ways that are not pure caricature, you have to do some work. Americans don't do that work. Their teachers don't do it in the classroom. The media don't do it. It's just the oceans, Pacific on one side, Atlantic on the other, have done their jobs of keeping the United States out of it.
I, I like to give a statistic to my students. I'll mention it here. How many people died in three countries? I'm going to pick in World War II. Just as a hint of what that war meant differently by the number of people who died during and as a result of the war. I'll pick three countries: Russia, or the Soviet Union, Germany on the other side, and the United States. Okay. The number for, if you look up Wikipedia or any other uh reasonable source, the, and I've looked at several sources, so I know I'm in the right order of magnitude. In the Soviet Union, 24, 25 million people died. I mean, staggering. In Germany, 8 million people died. And in World War II, the number of Americans who died was 400,000. Okay. You have to understand it never impacted here anything like what these World War II, World Wars one and two, because the numbers are similar from argu from World War I, uh, in terms of ratio, it just didn't mean it. If we are not of the history that most of the rest of the world still notices through the behavior of their grandmother or their grandfather or the stories they've been told or the, the things a teacher told them. We don't have that here. America, when I tell my students that in 1975, when the long and difficult war in Vietnam ended, we, I'm talking to American students. We lost. I say they won. I wish I could just show you a glimpse of my students' faces. 50 young people looking at me. The look on their faces is as if I just said something unspeakably inappropriate. They have no. I said, "Here's the clue as to why what I'm saying is correct. The enemy at that time was the Communist Party of North Vietnam. And I explained to the students that North and South Vietnam were were separated and antagonistic. And who's in charge of Vietnam now? It's been unified. And the answer is the Communist Party of North Vietnam. That's who runs the country. That's a big clue, I say to them, as to who won. And we're gone from there. So they understand. And they are genuinely, and I mean this genuinely upset. They didn't know. For them, the war in Vietnam, the war in Afghanistan, the war in Iraq, and currently the war in Ukraine are all either won by the United States or about to be won because the United States is a winner. That's the mentality. And if you have that mentality while you're going through the decline of your empire, they threw you out of Vietnam, and they threw you out of Afghanistan, and they're in the process of throwing you out of the Middle East. You, you've got a real psychological dissonance problem. And Americans are just beginning to figure that out.
>> Yeah. Okay. It's, uh, it's amazing thing, as you say, the ch, the challenge that we have is it's all about the messaging. It's all about this, yeah, patriotism, patriotism that's put into, uh, sort of the average person. Um, but then enemies realize that if they just hold out for as long as possible, and this is the same for what, you know, you'd say Russia's the bigger power verse Ukraine, but Ukraine just needs to hold out for as long as possible until the Russian, uh, people just have enough of it. And I think that's what we're seeing with big powers invading other countries. There's just, there's only so far that these countries can go until the economic impact is just not enough and, and they'll pull out and the other country will, will be okay.
Yeah, it could be. But, you know, it's an extremely dangerous game to play because again, using the United States because I, I know the situation here. I don't know it so well in Russia. But the situation here, by not explaining things to our people, by not, and by the way, I'm not the only one who thinks the way I do. There are plenty of people like me, and we are now becoming a a group with a quite a voice. I'm, I'm surprised, to be honest, how many there are. But that's the same at the green shoots with the, the new political developments that are happening here. They're wonderful to see. You can hardly believe it. But my point is, if you don't explain things to people, what you are doing, you don't intend this, but what you are doing is getting them ready for scapegoat artists like Mr. Trump. He can get stand up there and tell you how horrible the Mexicans are because they come to the United States where they rape and kill. None of that is true. None of it. The complete, uh, it's lying. I mean, there's no nice way to put this, but it has an audience. And I don't want to put blame. I want to understand why, why the man lies. Well, the answer there is easy. It gives him a political platform. Why are people bought, you know, buying into it? Because no one has given them a different understanding. Where should they get it from? The schools aren't doing it. The mass media aren't doing it. The Democratic Party doesn't do it. The Republican Party doesn't do it. So where are you expecting people to come up with an understanding that would be humane, would be reasonable, rational, might even lead all of us to come up with better solutions? No. What we do is abusively pick up immigrant people, often because their color is darker than the rest of us, and yank them off their lives, out of their jobs, and put them on an airplane and deposit them in the middle of Latin America or the middle of Africa. It's cruel. It's unnecessary. It, it is, it's awful behavior. And the only thing that makes it even worse is that a large part of the time it is rationalized by people who appeal to the Christian Bible to support it, to to endorse it, to to make it seem that it is, I don't know, God's will or something like that, when in their, in their more sane moments, these same people would understand that that that saying that is sinful. It, it's extraordinary, uh, of a way to do things, and it bespeaks a very disturbed population, which is what we have.
>> Yeah. So h how do you see the US coming out of this situation? Do you see it as potentially being able to get back to the hegemonic power it was, or do you think it just has to slowly decline? How do you see it?
My guess is, as best I can tell, there is no going back. You're not. That's not going to happen. The decline is going to continue. It's been already 15, 20 years underway. I give you an example. It's been even longer that the United States has held back in every way that it could. China, it, it began to at the turn of the century, so 25 years ago, it began to understand that China was going to be a significant competitor. It didn't get that before. It's had hopes with when Nixon and Kissinger went and uh celebrated in in Beijing with Joe and Lie and Mount Son that that China would become, you know, India something like that, or that China would be to America what India was at that time still to Br to Great Britain. Uh, didn't work out. And by the beginning of the century, they knew. So they tried, tried everything. They tried covert action, overt action. To this day, they forbade American companies to trade there. They, they put tariffs on. They undertook trade wars.
Now, here's the important thing. They've been doing it for at least the last 30 years, probably earlier. Uh, and if you go back before before the 1970s, then the the the skull duggery with the CIA and your MI6 and so on. Lord knows what they all did. But we do know they tried everything in the last 30 years. And that effort was a, and let me stress this, 100% failure.
I'll give you just one statistic. You know that in economics, we keep track of the total output of goods and services in any economy each year by measuring something we call the GDP, gross domestic product. Over the last 30 years, without exception, the average rate of increase, average of GDP in the United States was between two and 2 and a half percent. Over the same period of time, same 30 years, last 30 years, the average growth of the GDP of China was between five and 9%. Uh, I don't know of any story in history comparable. China has become a modern powerhouse economy in a handful of decades. It took Britain several centuries to cover the same ground. It took the United States, standing on Britain's shoulders, it still took it two centuries here. They did it in 40 years. It's incredible what they've done. And to think that they achieved it is awe-inspiring. But to think that they achieved it without help from the West. I want to remind you, Anthony, when I was a graduate student getting my PhD in economics, I specialized in economic development. It was very popular then. Many of the young men and women in economics, special economic development was the term for those of us who wanted to learn economics so we could go to Asia, Africa, Latin America and help people do the thing that was number one: get out of poverty, become a modern country in the manner of Western Europe, North America, and Japan. And we went all over the world. I went to East Africa. My first book was an analysis of British colonialism in Kenya. That was my book. Okay. The one place nobody went was China. Excuse me. China and Russia. Why? Because they were a communist country. They were bad. Nobody went there. So they didn't get the benefit of all the learning we did in the rich countries of the world where we were located. They didn't have any of our help. And here's the truth. They did better without it than all the countries who got it. And that ought to make you stop and ask. It certainly has done it for me, and it's been my whole career, all my life.
So I can tell you, we have got to understand that there is a new potential empire emerging. The question is whether China will learn from the experience of Britain and America, of Holland and Greece and Rome, all the previous empires. Are they going to try to do one too, only to discover that it's good going up? It's even good when you peak, but when the empire goes down, not so enjoyable. And maybe the way you ought to deal with your emergence is to not go that route, to be multi-multi-lateral from the beginning. After World War I, there was the effort at the League of Nations. After World War II, there was the greater effort at the United Nations. Maybe we can avoid World War III and learn the lesson in advance without the destruction and all the death. And let the United States sit down with China as a rising empire having lunch with a declining one and see how they can work on this planet together without either of them making the experience of the other one the last one that the human race has. Because with nuclear weapons, this is now ratcheted up to an even more profound level. But if you want to know what worries the American people, it's because deep down they know what I just said. They can't put into words. They're not given the vocabulary. They're not given the analytics. They're not given the information, which is a tragedy, right? But it is a truth. We are trying, dozens of us all over the country are trying to overcome it, but we're battling the need to deny, which at least so far is stronger. And so I'm worried, like my fellow Americans. And if I can give any advice, if I should be so bold to your audience, given your dependence either on the United States in those ways or on China in those ways, this is a struggle that you will have to live with the results of every bit as much as we do.
>> Yeah, so many great points there. So, Professor Wolf, thanks so much for your time today. Really appreciate it. Um, my last question is, what is one message you want? Is that the message you want people to take away, or is there another message you like people to take away from the conversation?
>> Yeah, I am an unreconstructed, uh, professor. I guess I've been a professor in American universities all my life. I do believe an unexamined life is a lot less rich and satisfying than an examined one. People should not be afraid of looking at the realities, even if they carry some bad news, because knowing what's happening will make your decisions personal, political, career, and much more successful because you have a sense of what's going on, even with the negative parts of it that are going to be an inescapable component at this point. Thank you and, uh, hope to do it again in the future.
>> Hey everyone, thank you so much for listening. Really appreciate your support and I hope you found amazing value out of this interview. If you really enjoyed it, would appreciate if you liked and subscribed or shared. Uh, it really helps with the podcast. We're still trying to expand, get to more people to help make sure that everyone understands and decodes what's really happening in the world of finance, investing, macroeconomics, and geopolitics. If you enjoyed this one, then you might enjoy this other interview as well. So really appreciate it and let