Saturday, May 2, 2009

Re: Capitalism Hits the Fan

by John Case

Art got me to see the clip! I agree we should start doing some audio and even video presentations. I think we should think of them as podcast shows! 5 - 15 minute "conversations" on the the hot econ topics I think is the best format. The key is getting sufficient audio quality over phone lines so the recording is of adequate quality. Libero -- any ideas on that?

Don't miss the excellent review below by Art of Wolff's presentation. I think PA should publish it.

Some thoughts on solutions.

Economic democracy is in large measure a well-functioning market, as long as commodities persist. Buyers get to vote with their dollars via multitudes of transactions that would be impossible to replicate via state bureaucracies. (If there is single greatest weakness to Marx's economics, IMHO, it is the negligible attention he gives to the demand side of economics. Value is always two-sided in Marx's dialectics: use value, and exchange value. But Marx's primary interest is in supply-side, and utility (use-value) is always either 0, or 100%.)
Socialization builds upon objective features of the means of production and exchange of a given time and place. The scale of global financial and manufacturing monopolies argues strongly for revisiting Marx's assertion that capitalism inevitably evolves a fundamental conflict between highly social, highly interdependent production and private ownership and control. Now we call this the "too big to fail" problem.
Let's consider Chrysler as an interesting and topical example of this problem. The workers will become the primary stockholders under the impending managed bankruptcy brokered by the Obama administration. There is the little matter of defeating the Bondholders' (finance capital's) obstruction -- but the President seems determined to get it done. What should the workers adopt as the mission of the new Chrysler-Fiat company, at least as far as their interests are concerned? First, a substantial portion of any profit gets returned to workers, establishing in each worker a potential conflict of interests: a) maximize returns to capital; and b) maximize wages. Common ground will be found in support for public takeover's of health and retirement obligations from the enterprise. But this will not resolve all the potential difficulties. Its new territory for workers. Chrysler workers will gain directly at the expense of competing firms, or lose as well. How will this affect relations with Ford, or (if it survives) GM workers within the UAW? And competition IS in the public interest, including workers who want choice in cars, right? This needs a more socialist answer. Syndicalism cannot solve this problem.
Any chance of success the project has must be tied to a full commitment and participation of the workforce in both planning and execution. Management must have the power to execute, including the power to hire, fire, layoff, etc, in addition to being accountable for profitability.
IMHO, these conflicts argue for separating the "ownership" organizational entities -- consisting of all Chrysler participting owner-workers -- from the union organization's collective bargaining forms. It also argues for serious consideration on how the profits to workers should be returned. For example, returns to capital invested in a University endowment to help fund a college education for any displaced worker would be creating a public good. The same for building parks, hospitals, entertainment venues, etc. A group of workers might very well decide the quality of their lives to be more improved by a park with their name on it than personal consumption.
Socialization --- enhanced public goods -- can build on the widespread emergence of labor whose product is intangible, or can be copied virtually for free. These products, like News reporting, for example, will either limp along or fail as commodities.
The cooperative enterprise, championed by Carl Davidson, has a better potential future in high tech than earlier efforts. But there is still the labor/management problem discussed w/r/t Chrysler that has frustrated many cooperative initiatives. Coops must strongly discourage hiring and firing. But there is little alternative for most industries vulnerable to business cycles, or which require large scale. And technological change, completely independent of cycles, can compel sharp increases or reductions in production in any business.


Comments by Art Perlo on Capitalism Hits the Fan

Richard Wolff (Professor of Economics, UMASS Amherst) has released a DVD
titled /Capitalism Hits the Fan/. It contains a lecture he gave in
November, 2008, along with some supporting graphics. My comments are not
intended to be exhaustive, or to constitute a complete review.

The first half of the lecture is a rehearsal of US economic history.
From 1820 to 1970, the US was probably unique (Wolff uses the term
"American exceptionalism") with steadily rising productivity, and with
real wages rising at about the same rate. Even during the depression,
although nominal wages fell, prices fell even more. Beginning in the
1970s, productivity continued to increase, while real wages declined.
Plotting these on a graph, the pre-1970 trend lines for wages and
productivity overlap, while the post-1970 trend lines diverge
dramatically. Wolff lists four reasons for this divergence: computers;
competition from abroad (including from US firms abroad); increase
supply of workers due to large-scale entrance of women; increase in

There is much that could be said about this history, but it would be
unfair to criticize on the basis that this or that aspect was left out.
This was a 1-hour lecture, not a 2-semester course. But two things
struck me.


No mention of class struggle anywhere (in this or in later
sections of the talk). No mention of the role of unionization and
New Deal programs in raising real wages in 1930s and beyond. No
mention of full scale capitalist counter-offensive – political and
economic -- against the working class launched in the 1970s.


To mention entrance of women in the workforce, and increased
immigration, as contributing to the decline of real wages, without
providing any context, is mechanical in its economics, and
irresponsible in its politics. There are also earlier periods of
large-scale immigration, as well as waves of internal increases in
the workforce from the century-long displacement of farmers. These
occurred when, according to Wolff, real wages kept pace with

The next section explores the current crisis. The narrative is expressed
quite well. Looking at the graph of productivity vs wages since 1970, we
see a huge gap – which fed a huge increase in profits and executive pay.
Instead of raising workers' wages, the capitalists allowed for rising
consumption (and continued sales) by lending to the working class –
graphs show the exponential increase in mortgage and credit card debt.
Wolff states that credit solved the problem of rising expectations of
the working class, which had been conditioned by 150 years of rising
living standards. Hours of work increased in order to finance increased
consumption. And the credit markets provided an outlet for all the
profits that the capitalist class was accumulating. But it all reached a
limit: workers are now working as many hours as they can, and can't
borrow any more, and the system has come crashing down.

The section is presented effectively, and I like the formulation that
the money the capitalist class loaned to the working class represents
wages that workers should have been getting. But there is a feeling that
these economic events simply happened, without a social or political
context. No recognition that social policies (subsidy of suburban
housing and highway transportation, moving jobs out of cities, growing
segregation, state/local government funding issues, etc.) drove large
sections of the working class to depend on and aspire to individual
solutions (big suburban home, 3 cars per family).

What is to be done? Wolff emphasizes that this is not primarily a
financial crisis, but a crisis of the system. He lumps together and
ridicules both monetary and fiscal measures (in fairness, the lecture
took place last November, before the Obama administration took office
and introduced a real stimulus program and budget). Wolff ridicules the
idea that regulation will solve the crisis. The same corporate boards
that dodged, undermined, and eventually repealed the New Deal
regulations will similarly shred any new regulations. Economists frame
the discussion as between neoliberalism and Keynsianism but that is just
unregulated vs regulated capitalism. They don't deal with the
fundamental conflict between the people who run the enterprise and the
people who work in it. What we need is fundamental change.

Wolf continues with his answer to /What is the Solution/? People who
work should own each enterprise. Why should democracy be in politics but
not in economics? As an example of what is possible, look at Silicon
Valley. A few engineers would leave IBM or Cisco and start a company in
someone's garage. They would share the work and the rewards, and one day
a week they would devote to meetings to discuss all the technical and
administrative aspects of running the company. This, says Wolff,
replicates Marx' idea of a Communist enterprise. It is also cited as an
ideal by Republican-oriented business publications. All the achievements
usually attributed to "capitalist entrepreneurship" are really
achievements of communist organization.

Wolff's recognition that this is not primarily a financial crisis, and
is in fact a crisis of the capitalist system, is welcome, if hardly
unique. But his thesis is mainly supported by assertion. I would agree
that Keynseian economics is inadequate either to explain or provide
solutions to capitalist crises. But Wolff does not discuss any of the
limitations of Keynesianism, aside from assertimg that regulation will
eventually be undermined.

I find Wolff's utopian vision of an economy based on workers' coops a
little silly, and his example of Silicon Valley amongst the worst he
could have chosen But Wolff's utopianism is not the main problem with
his /Solutions/ section.

What do we take away from this lecture, which was made shortly after the
November election completely changed political possibilities in
Washington? No mention of the need for working class organizing. No
mention of unions. No mentions of the urgent problems facing the people
– jobs, foreclosures, health care, or of the policies that are necessary
to address these needs.

Viewing Wolff's lecture, political action appears almost irrelevant. But
one does not have to be a Keynsian, or accept the idea that capitalism
can be "saved" or regulated, to join with progressives in fighting for
the positive measures the administration is introducing, and to push
beyond them. Wolff, in fact, does damage to the anti-capitalist cause,
by painting it as in conflict with other progressive currents, and
proposing to divert it into a relatively sterile utopian channel that
can, at best, be a small part of the range of anti-monopoly and
anti-capitalist struggle.

If you get the DVD, I suggest going to the /Extras/ menu and selecting
the abridged version. I watched the full-length (1-hour?) version, and
the flourishes and repetition that may have gone down well in person
become a bit tedious in your living room.

I should emphasize that Wolff's lecture contains valuable material and
useful formulations. It is important to find ways of using online and
video methods of presenting an anti-capitalist economic analysis. If I
were conducting a class on the economic crisis, I would not use the
whole video for reasons both of form and content, but I might well use
parts of it.

The movie is available at You can
watch a low-res version online.

Blurbs from the DVD's web page:

"With breathtaking clarity, renowned University of Massachusetts
Economics Professor Richard Wolff breaks down the root causes of today's
economic crisis, showing how it was decades in the making and in fact
reflects seismic failures within the structures of American-style
capitalism itself. Wolff traces the source of the economic crisis to the
1970s, when wages began to stagnate and American workers were forced
into a dysfunctional spiral of borrowing and debt that ultimately
exploded in the mortgage meltdown. By placing the crisis within this
larger historical and systemic frame, Wolff argues convincingly that the
proposed government "bailouts," stimulus packages, and calls for
increased market regulation will not be enough to address the real
causes of the crisis - in the end suggesting that far more fundamental
change will be necessary to avoid future catastrophes. Richly
illustrated with motion graphics and charts, this is a superb
introduction designed to help ordinary citizens understand, and react
to, the unraveling economic crisis."