Capitalism Hits the Fan
Produced by the Media Education Foundation 2009.
Richard Wolff (Professor of Economics, University of Massachusetts, Amherst) has released a DVD titled Capitalism Hits the Fan. It contains a lecture he gave on November 19, 2008, along with some supporting graphics.
Wolff begins by emphasizing that the economic crisis is severe, that it will not be temporary or short, and it is not simply a financial crisis but rather it comes out of the whole economic system. (These points might seem obvious today, but at the time the lecture was given, the extent and severity of the crisis were not as widely recognized.)
To understand the crisis, Wolff recounts US economic history. From 1820 to 1970, the US was probably unique with steadily rising productivity, and with real wages rising at about the same rate. But beginning in the 1970s, real wages declined, while productivity continued to increase. Plotting these on a graph, the pre-1970 trend lines for wages and productivity overlap, while the post-1970 trend lines diverge dramatically. (This is where Wolff's graphs are really useful).
While much could be said about what was included and what was left out of this history, one feature is striking. There is 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 the full scale capitalist counter-offensive – political and economic – against the working class launched in the 1970s. The economic history seems to have taken place in a social and political vacuum.
Wolff then lists four reasons for the divergence between wages and productivity since 1970: 1) computers replaced workers; 2) growing competition from European and Japanese corporations, leading to large-scale export of jobs by US corporations; 3) increase supply of workers due to large-scale entrance of women in the workforce; 4) increase in immigration.
One could question this analysis on many economic grounds. One example, there are 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 productivity. What's different about the recent period? Wolff does not explain.
But far worse is the lack of any political or historical context for his assertions. Wolff's formulation leads to the conclusion that immigrants and women are to blame for declining real wages. And nowhere in this lecture is anything to correct that impression.
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; 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 as in the historical section, 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, three cars per family). And again, no mention of class struggle.
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, says Wolff, frame the discussion as between 'free market' (unregulated) and Keynesian (regulated) models. 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.
Class struggle is implicit in this view, but it is entirely absent from the solution Wolff presents. People who work should own each enterprise, he says. 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's 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 that thesis is mainly supported by assertion. I would agree that Keynesian 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 asserting 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 – all of which were evident at the time of the lecture. No mention of the policies that are necessary to address these needs. Viewing Wolff's lecture, political action appears almost irrelevant. We are left with the impression that the political and social struggles now under way are pointless because they fall short of the fundamental systemic change that is necessary.
But contrary to Wolff, one does not have to be a Keynesian, 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 being in contradiction 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.
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 DVD is available at , and you can watch a low-res version online. 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.
