This is Andrew Smolski for CounterPunch with acclaimed economist Richard Wolff, author of such works as Capitalism Hits the Fan, Democracy at Work, and most recently Capitalism’s Crisis Deepens. The interview was conducted over Skype on Oct. 10th, 2015. I would like to thank Dr. Wolff for the time he spent explaining important aspects of capitalist economy and communist firms.
In this interview, we discuss wages, a pertinent current topic with the ongoing struggle for $15/hr, stagnating worker incomes, and what will be TPP’s further attack on wages in the United States. More importantly, what began as a discussion of wages quickly developed into a much broader critique of the current system’s political economy, and a way to fundamentally alter the way we produce, distribute, and consume. It is not enough to bargain with capitalists. We must instead look to how workers can take over the means of production and employ them for the benefit and wellbeing of all.
Please, take the time after reading this interview to check out the flyer for his newest work, as well as visiting Dr. Wolff’s webpage www.rdwolff.com and the webpage for his non-profit 501(c)(3) organization, Democracy at Work, www.democracyatwork.info.
Lastly, you can read a prior Q&A that we did for CounterPunch discussing similar topics: “A Q&A with Richard Wolff”.
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A = Andrew Smolski / R = Richard Wolff
A: Marx famously said that “labor power is a commodity; neither more nor less than sugar”. Marx went on to say that a worker sells their labor power to produce a wage in order to live. Dr. Wolff could you explain what Marx meant by labor power and wage?
R: The way Marx understood the economic core of capitalism by focusing on what he took to be, perhaps, the single most important relationship among those that together constitute the economic system. And that particularly prioritized relationship is that between the employer and the employee. In Marx’s concept, that is a relationship fundamentally of exchange.
The key opening aspect of the relationship between employer and employee has to do with an exchange they make. The employer gives something in exchange for the employee giving something. What the employer gives is a wage or a salary, a quantity of money that the employee will obtain and be able to use to buy goods and services that he/she wants and needs to live. In return the employee gives to the capitalist what Marx calls “labor power”. What he means is the capacity to work. That’s what the employee literally gives to the employer, their capacity to work, for the employer to then use as the employer sees fit. This is just as the worker uses the wage as he/she sees fit.
That then leads to the second relationship between employee and employer, which follows their exchange. The employer says to the worker, “Having purchased your labor power, I’m now going to put it and you”, because there is no separation between a worker and his/her capacity to work, “I’m going to put this labor power I’ve purchased from you to work. I’m going to use it in the particular way I wish to. And that is, to put you, the worker, together with means of production that I provide, the tools and equipment, and the raw material I also provide. And, I’m going to give you precise instructions on how you use the tools and equipment on one hand to transform the raw materials on the other hand into a finished product.”
The last relationship of the three key ones that bind the employer to the employee is the relationship at the end of the process. When the production is completed, when the employer has gotten from the employee his/her capacity to work, and that means literally the application of brains and muscles to transform raw materials into a finished product, the employer then owns the product. Once the employee takes their self out of the work place, go back to whence he/she came, their home, their residence, and they leave behind the product of their brain power and their muscle power, the product instantaneously belongs to the employer, even though it was produced by the employee. So that the employee must accept that the relationship between the two of them is that the employer, you, gets what I, the employee, produced. I then go home, spend the wages gotten from the employer for work, in order to enable me to go back the next morning, presumably fed, clothed, sheltered, etc. to do all this again.
So, for me, and for Marx, because I think Marx captured this beautifully, the central relationship of a modern capitalist economy is this exchange, then production, then separation, that is then involved in the connection between the employer and the employee.
A: Marx was able to explain a lot from the employer-employee relationship (alternatively capitalist-proletarian/worker/laborer). In what way was Marx’s explanation of this relationship distinct from a neoclassical or Keynesian economist’s explanation?
R: It couldn’t be more different. In order to explain that, let me first explain what Marx concludes from the inferences he draws from the way he set up the relationship. It goes like this. When the employer bargains with the employee and they finish discussing the kind of work they’ll do, the kind of machines the employee will work with, the kind of product that is to be made, the conditions under which its done, they end up having that famous part of the conversation in which the employee asks, “How much are you going to pay me?” Then, the employer and the employee have to reach an acceptable agreement. Let’s just say for the sake of simple argument that they agree on $20/hr. That will be the wage for the work that is done.
Marx’s argument at this point is absolutely crucial. The employer is only interested in this whole business of having a relationship with another person, called an employee, in order to come out at the end of this with more money than he/she went in at the beginning. That is why we call the employer a CAP-I-TA-LIST. Because he/she uses a quantity of capital, money, throws it into the production process, which includes the relationship with the employee, with a single overriding goal of emerging with more money at the end of the process than he/she threw into it at the beginning. Let me use a simple illustration.
If the employer has $100, and uses $20 to buy raw materials, $20 for the tools and equipment, and then $60 to pay the wages to the worker. So, 20-20-60, that’s the employer’s $100. The capitalist is only doing this, because the end product, which belongs to him/her as employer, can be sold for more money than $100. If that isn’t the case, then the capitalist has no incentive to commit his/her wealth, money, 100 bucks, to the production process. The capitalist would be better off not taking the risks, because there are always risks in production, holding on to the money or lending to somebody at interest. He/she wouldn’t put it into production, unless he/she got more at the end, what is typically called by Marx “surplus” [Wolff’s side note: the German word mehr that Marx used was translated into surplus, which can have varied meanings in English; nevertheless, the point is to clarify the value above the cost of production]. The bourgeois economic term for this is profit. The capitalist is going to have a profit from investing his/her $100 in production, because he/she will get more.
Marx asks, where does this more come from? Let’s use the example of a chair. You need tools and equipment like a hammer and a saw, etc. You need raw materials, you know the planks of wood. And then, the human brain and muscle transforms the tools and equipment and the wood into a finished chair. So, Marx’s argument is that the value of the wood reappears in the chair, it’s just the form that has been changed. And ditto the form of the saw, and the hammer, are likewise transferred overtime to the product. Let’s say that the chair has in it $20 worth of wood, and $20 worth of saw, hammer, and other tools. The capitalist has paid $60 to the workers for their work.
Now we get to the key question for Marx. How much value do the workers add when they transform wood, saw, hammer into chair? Here comes the crucial difference between Marx, on the one hand, and everybody else on the other hand. Marx’s analysis goes something like this. The workers add more value during the time they work than the employer pays them for working. In other words, that’s where the surplus comes from, the more at the end of the production process for the capitalist, the profit. Its precisely this relationship between worker and employer, and now we see why Marx gives that relationship such a priority, because there is the secret of profit. There in that relationship is a fundamental situation in which the worker produces more while he/she works than the employer pays them to come there and do the work.
Now, let me translate this into simple English. When you sit there with the employer and he/she says, “Ok, I’m going to pay you 20 bucks an hour”, you know what Marx is here theorizing, even if it’s not conscious. You know that the only reason the employer is going to give you $20 for every hour you work is if that hour produces more than $20 worth of stuff for him/her to sell. Because if it didn’t, there’d be nothing in it for the capitalist. There’s got to be more than the capitalist gets from you, the worker, than he/she gives you because there’s no other rationale in Marx’s view to account for why this is done. The inference Marx then draws is stark.
Workers are exploited! Why? Because they produce more by their labor than they get. In production workers add more value to the tools, equipment, and raw materials they use up than they are paid for doing so. Therefore, a worker who says to himself/herself, “I will never work for an employer who doesn’t pay me what I’m worth”, is a person who doesn’t understand capitalism. You will NEVER get paid what your worth, because that is the foundation of this system. The capitalist, because he/she has the money to put you to work in the first place only does it if he/she gets more from you than he/she lays out for the process. Which is why if you follow Marx, you have the mass of workers paid more or less what they need to get by, while the growth built into this system accrues to the employer. Or to say the same thing in simple English, the rich get richer and everybody else doesn’t.
So, that’s how Marx sees the whole process.
Based on this, you couldn’t have a starker differentiation than the Marxist and neoclassical views on the employer-employee relationship. In the neoclassical and Keynesian canons, or systems of analysis that they use, there is no such thing as exploitation. So, we’re not talking about subtle differences. We’re not talking about nuisance, or shadings of analysis. We’re talking about fundamental it’s there or it isn’t there.
In neoclassical economics here’s how it works [Wolff’s side note: Keynesian economics isn’t all that different. It’s best understood as a variant of neoclassical economics.]. The world appears altogether different. The worker is understood to be one of the partners in a production relationship. The employer is understood to be another partner in the relationship. And in this view, the worker brings his/her contribution, brain power and muscle power, to the process, and the employer brings his/her contribution, variously described as entrepreneurship or managerial talent or some similar characteristic. The output is then divided with the proper reward given to each contributing partner.
The worker’s get back out of the joint product the wage, and the employer gets back the profits. And so, this is a world of fairness, a world of shared output, in which everybody more or less gets out of the process a reward corresponding to what they contribute. If profits go up it is explained, because the clever owner/manager/board of directors did a fine job, right. And this is appropriate because if they got more it’s because they contributed more.
Marx in response to this heaps ridicule. He says the logical flaw is that these morons [Wolff’s side note: Marx didn’t have much respect] need to infer that because the capitalists get money, profits, they must have contributed something. The whole point says Marx is to understand that they don’t. They didn’t contribute crap, zilch, nothing! And the mystery is only that the workers accept that a portion of what they produce goes to somebody who didn’t produce anything at all.
Marx enjoys driving home the contrast by noting that in the early days of capitalism you might kind-of understand how capitalists came to be so self-deluded, because the capitalist was typically the man/woman/family that started a business, and they were in there every day and they were literally contributing something. But, nowadays Marx noted most capitalist work is done by huge corporations, where the people making the decisions, typically the board of directors, so 15 or 20 people sitting at the top of a corporation who have absolutely nothing to do with production [Wolff’s side note: Marx said most of this in the late 19th century, so we are already a century into what Marx was discussing]. These people have never been on the assembly line, they’ve been in the office, they’ve never been in the store, they don’t know the details and they aren’t expected to. They sit at the top and they gather into their hands all the profits and decide what to do with them, but their connection to production is so remote that it would be hard to explain, exonerate, or excuse their contributions. Not to mention there are 100,000 workers in a corporation and 15 individuals making all the decisions.
It’s pretty clear that something is going on here that smells a lot more like what Marx is talking about than some big partnership. And so, that is the fundamental disagreement. So for neoclassicals there is no exploitation, there is no conflict, this is a partnership that works well and is fair, etc. etc. For Marx, then, there’s a conclusion that never comes to neoclassicals. This for Marx, on the face of it, is outrageous, unjust, unequal, and therefore not sustainable in the long run, because for Marx it is only a matter of time for people to understand, as Marx himself did and help others to understand, what the situation is, and therefore sooner or later workers will say, “Why do we need capitalists? Because if organized production ourselves we would not only pay ourselves the 20 bucks, but we would be in charge with what is done with the surplus”, which is the value we add in production over and above the $20 we get, “which would be ours collectively, and we would become our own board of directors. And that would be a system far better for us than turning over that surplus to other people who are with a different interest from us. We wouldn’t treat it the same way, because we are the people in charge and we wouldn’t participate in self-exploitation.”
So, the conclusion for Marx is revolution. You need to get rid of capitalism in order to replace the capitalist-labor relationship, wage labor in the way I’ve described it, with an altogether different system that is more egalitarian, more democratic, and more just, because the workers in each enterprise would become their own board of directors. That’s actually understood by people even if they’ve never heard of Karl Marx. You can see it in the fact that all over the world today, and true for the last 300 years, there are businesses that have organized themselves not as a capitalist corporation, but as what Marx would’ve called a communist organization. That is, it is a community of workers who set up a business and own and operate it themselves.
But, because of the hostility of capitalists to all of this, the people who’ve organized their enterprises this way have had to come up with bland, unfrightening names. The most popular one is a “workers cooperative”. It sounds downright warm and cuddly. And that actually allows you to push in a direction that will hopefully not scare the status quo into repressing you, by having the clever disguise of a different name. I even know some worker coops that refer to what they are doing as entrepreneurial innovation. Because by putting the adjective entrepreneurial in front of it, it’s more of a protective disguise. I think it’s charming, and I think Marx is giggling it whatever place he remains as he watches the human race agonizingly, hesitantly coming to terms with what he figured out in 1860.
A: In this explanation, which is a very thorough and well thought out explanation, there is no such thing as a wage that includes surplus value. That can’t exist because this is automatically a matter of exploitation.
R: Ok, well, careful. In a normal capitalist situation, yes. Is it conceivable that workers in a capitalist enterprise develop a union so powerful and a commitment to struggle so intense that they could and would drive up their wage until there was literally nothing left in the way of a surplus for to capitalist to grab? The answer is hypothetically sure. But that’s the end of that company. That capitalist will close down the business because he/she is not getting anything out of it. That would leave the option for workers to reopen the business after the capitalist closes it as a worker coop. There’s two things to say about that.
One, it already happens around the world. It’s happening right now in the United States. Typically how it happens in the United States is as follows. The capitalist decides he/she can make much more money closing his/her enterprise in Cincinnati or Chicago or San Francisco or Texas or wherever it is, and reopening it in Shanghai, China, because the wages in Shanghai are much, much lower than they are in the United States. He/she says goodbye to the workers on Friday and says, “Don’t come in on Monday, because there won’t be work here in Monday, I’m closing the place down.” The workers then have a choice; they can go home and feel terrible, kick the dog, abuse the wife, or whatever other anomic reaction, or they can get together with the other workers and say, “We are going back on Monday, and we’re going to sit in that factory, or office, or that store and resume it, running it as a worker coop.” And that happens. So, we actually see what can happen.
The second thing to say, is that the workers wouldn’t do it either [i.e. pay a wage that includes all of the surplus value]. Any business or any enterprise needs to not only pay its workers, but also take care of other expenses. Even if there’s no capitalist to get the profits to live the high life that capitalists typically do, which will save you on some of the surplus that was used for those purposes, but there’s other parts of the surplus to be used for other purposes. For example, you may be in a bad neighborhood where you’re afraid that over night when you close your business, nasty people will come take your tools or furniture. And what you might need to do is to pay somebody to stand around the place, a night watchman let’s call it. Well that might be necessary for a group of workers who’ve taken over an enterprise to do. So now, they have to produce more value than they pay themselves to take care of the night watchman. He has to have a jeep to go around the enterprise, a lovely uniform that makes him/her look intimidating, and everything else that goes with this activity. Likewise, they have to pay taxes to the government, typically.
So, they have to make more than they pay themselves to cover what we call the expenses. That is, to secure the conditions for the enterprise to function on a normal basis. They would still have to do that. So it’s always been a crazy nonsense of right-wingers to criticize the viability of a worker coop with the stupid remark , “O, well then the workers will just give themselves all the money.” Workers are not that stupid. And its ignorant person that attributes that stupidity to workers. Workers typically know better than the capitalist what all the conditions are that they’re going to have to keep in place, and so they know collectively they will produce more than they pay themselves in order to cover the other expenses.
What they won’t have is a capitalist to sustain! What they won’t have is the shareholders to pay dividends to! They won’t have the fancy landscaped office for the capitalist to have more secretaries than he/she needs! None of that will be necessary!
Those funds would be available to improve the working and living conditions of the workers.
A: So, and to clarify, then surplus value is not just what goes to the capitalist in profits, but includes expenses. Then it is not just exploitation producing surplus value.
R: There will always be a surplus. To use the word value here you have to be careful. Value applies when the market, when there’s buying and selling and things have value. Human beings have produced food, clothing, and shelter, for example, for thousands of years. But they didn’t have value because they didn’t go through a market exchange process. They didn’t have any money. You know, we lived in tribes and clans in society for many more years without markets, without things having value in an exchange process, than we have had with it. So, you’ve gotta be careful here to remember your history.
So, things only have value if the market is the way things go from the producer to the consumer. Most of the history of the human race there weren’t any markets. They weren’t going to do it that way. I’ll give you an example. In a village, this person maybe grew the wheat, that one raised the chickens, and that one baked the bread, and the other one made shirts; and then, or maybe two or three times a year, the elders in the community, the people over 40 years of age, got together and says, “Let’s see, you the shirt maker, you hand them out to these people. Three shirts to a family with three people. Six shirts to a family with six people.” You know, it was distributed by the arrangement of the elder. Or the arrangement of the priest. Or the arrangement of an elected official. A hundred ways that human beings distributed the goods and services that they collectively produced.
It was a very, very special set of circumstances that had humans at a certain point go, “No, this is how we’re going to do it.” You who produce it, you go to a certain place at a certain time. We’re going to call that place the market. And in the market, you exchange with other people, “You give me three of what you make for two of what I make Jack, or Mary, or whatever it is.” And then they bargain. From there things have a value. The value of this shirt is three oranges or two pounds of cheese.
Anyway, your basic point is correct. Workers always produce more than they themselves get to live off of. That’s been true a thousand years ago, and its true today. All that capitalism is, is one particular way to arrange that process. It doesn’t have to be arranged that way. I can give you two examples.
In a slave economic system, here’s how it works. One group of people are masters. They own not only the land, the equipment, and the raw materials, but they actually own the laborers too, because slaves are people owner by another person. So, in that system the slave produces everything, the master takes everything, because it’s the product of a person he/she owns. But, then the master has an epiphany or realization that if he/she doesn’t give something back to the slave this arrangement won’t survive. The master takes a portion of what the slave produces and gives it back to the slave in the form of the food, clothing, shelter that the slave will consume in order to be able to continue. The slaves end up producing more than they themselves get, and the person getting the more are the masters. They get everything and keep what they don’t give back to the slave. Ok, that is one way to arrange the production process.
In feudalism we called the producer a serf and the owner is called the King, lord of the manor, etc. etc. The serf works three days a week and keeps the fruits of his labor. The other three days of the week the serf gives whatever he/she produces to the Lord. On the seventh day the serf goes to Church in order to be told by some priest that this was the best way for them to live. Which for a thousand years in Europe they believed. Then capitalism came along overthrew slavery, overthrew feudalism, and installed simply another way of organizing this production process.
Marx said that capitalism, slavery, and feudalism were all the same in that all three were exploitative. What he meant was that the people who produce the surplus aren’t the ones who get it, and aren’t the ones who get to decide what to do with it. In the case of slavery, the producer is a slave, but the ones who get and decide what to do with the surplus are the masters. In the case of feudalism, the serfs do the work, but the ones who get and decide what to do with the surplus are the Lords.
And here comes Marx’s biggest achievement. He said capitalism is like slavery and feudalism because its exploitative. It’s just a change of form of exploitation, because in capitalism, and this is what he shows in Capital, the workers produce a surplus that the employer gets and decides what to do with it. So, Marx reaches a distinct conclusion that what we need in the world and what will give us finally the liberty, equality, and democracy we’ve always wanted is a system without exploitation. By which he meant, a system in which the workers who produce the surplus will be the ones who decide what to do with it. Because they’ll get their own surplus and distribute it. And that is the breakthrough humans have fought for and until now not achieved, a system that makes the economy finally a community of people working together, which is why he called it COMM-U-NISM.
By the way it has nothing to do with the State, or the importance of the State. You’ll notice that up until this point where I’ve explained it to you the word State never appeared, it wasn’t relevant, and it isn’t in Marx either. It’s an understanding of what you opened this with, namely the relationship between employer and employee.
A: So, within this…
R: By the way, Andrew if I could interrupt. If any of this strikes you as interesting, novel, comprehensive, clear, that isn’t, I mean, those are nice words and I appreciate if they’re in your head about me. But it isn’t about that, and it isn’t about me. We live in a culture that has systematically repressed this way of thinking, this way of analyzing for 150 years. That’s why when someone who has looked at it and read it, as I have, articulates it, it comes a little bit like a bombshell, or a little like “Wooh!”, even when relatively well worked out. Only because in our culture it has been repressed. It’s sad. It’s about our culture, not the logic of the argument.
A: Ok, well then this brings us to question that I didn’t send you. But, would you suggest then that what is repressed is an idea of solidarity, and then bringing back into the discussion whether the economy is about us working together to produce so we can have dignity, wellbeing? Or is the economy just a matter of profit? And then is that a moral question? Or is it a question of efficiency?
R: Those things are never clearly separated. If someone tells you they are easily separable, then go to talk to somebody else. That would be my advice. Sure its moral, and it’s a question of efficiency, if you assume those things have a reasonably broad definition. But for my money, absolutely.
This is a society that we live in that suffers from unbelievable extremes of wealth and poverty [Wolff’s side note: nowadays, everybody knows it too, so it isn’t even controversial]. We have a differentiation amongst us of wealth and access to resources that is staggering, that mirrors ancient pharaohs in Egypt and things like that. I live in the middle of New York City and I am immediately surrounded by it. It takes me 10 minutes by subway to go to a place where apartments start at $5 million each, and then to a place where the person you are talking to can’t think $5 million because it is so far outside of his/her frame of reference. That’s like talking to the guy dragging the stones up to make the pyramids and then to the pharaoh who commands them to do it. They are just so far apart.
We have a politics that is so obviously bought and paid for by the rich in this society that it is no longer controversial in our country to say so. The democracy we have is purely formal. You know, once a year we go into a booth and vote for a person whose name we barely know and about whom we have no security of what he/she will do. It’s all a game. Which is why half of the population in most countries don’t even bother anymore, because they don’t see the point or the purpose of it.
So, it seems to me kind of straight forward that we have SERIOUS problems of morality and justice.
And then, when it comes to efficiency, you must be kidding me. We just went last week through another tale as old as capitalism, that yet another company, having spent years fighting against regulations of what it does, having staved that off for many years of profitable functioning, and finally the regulations are passed. I’m talking about Volkswagen here. So, they installed in their cars a device that when you are testing for pollution that it should less than what you actually did in the way of pollution if you ran the car. The effrontery, the grotesque billions of dollars they made while fouling the air we all breath in order to make another piece of profit. They said they were an efficient car producer. Bullshit! They weren’t efficient. Or rather, the efficiency was achieved by not counting the costs of the visits to the doctor of countless asthma patients, emphysema patients, people who died of lung diseases before they should have, all because of the air pollution this company imposed contrary to legal regulations.
I can tell you these stories until you’re bored by the details. So, it seems to me the burden is on the system’s defenders to defend it. Not on critics like me who argue, “Jesus Christ! We could and should do better.”
Let me put it to you another way, this is a country, the United States, which says it is democratic. If the word means anything, then it means something like the following. If you are affected by a decision then you have the right to participate in making it. That’s the premise. If we call a person someone a mayor of a city, or a governor of a state, or president of a country, or someone that, Lord knows, affect our lives, we at least have the right to vote for that person being in that position. Ok, keep that in mind.
What is the place where most adults in the United States spend most of their life? Answer, workplace. 5 out of 7 days of the week from 9 in the morning to 5 in the afternoon, you’re at work. And then if you aren’t at work, you are driving to or from work, dressing for work. Work is the center of adult life of our people. When you go to work, here’s what we do in this “democratic” country. We avoid democracy. We give up democracy. Why?
Most Americans work in a corporation, a form of capitalist enterprise. A tiny group of people, the board of directors, typically 15 to 20 people, they make all the decisions governing where you work, what you produce, how you produce, and what is done with the profits you help to produce. Whose on the board of directors? Who are these 15-20 people? Answer, they are elected once a year by shareholders under the system of one share, one vote. If you own one share, then you have one vote. If you own a million shares, you get a million votes. And if you have no shares, then you get no votes!
Fact, 1% of shareholders in the United States own two-thirds of shares. Therefore, 1% of shareholders dominate and select the board of directors of American corporations [Wolff’s side note: 1% of shareholders is less than 1% of the population as a whole]. They’re called major shareholders. They’re big banks, big pension funds, various wealthy individuals, they’re big corporations, that’s who own the shares.
So, what do we know?
The mass of people in any corporation own no shares at all. The workers General Motors, General Electric, Microsoft, you name it, they don’t own any shares. Therefore, they have no votes at all. Meanwhile, whether or not they have a job, what they produce on their job, what technology is killing them on the job, and what is done with the profits their labor helped to produce, are all decisions made by people over whom they have no control. They have no participation whatsoever.
The place that most adults spend most of their lives is a place from which democracy has always EXCLUDED. Therefore, to call the United States a democracy is a mistake. To justify the wars in Iraq or Afghanistan, or the bombing of Syria, on the grounds that we are bringing to them democracy is an ignorant arrogance that leaves me speechless, especially once you understand the absurdity of what is being claimed here.
So, these are fundamental questions of morality and efficiency woven together and they confront anyone who would want to defend capitalism with what at least a reasonable person would have to admit are basic challenges.
A: Ok, we have moved from a focus on wages to a focus on how ending exploitation should be the point of struggle. And to end exploitation we need democracy. Yet, we encounter a contemporary situation where exploitation has increased and democracy diminished. How does this create the conditions for more capitalist crisis?
R: If you have capitalism working in the way I’ve described, this grotesquely undemocratic way of organizing life in most enterprises, then you immediately have a fundamental social contradiction between this undemocratic organizing of the economy and this peculiar political tradition of universal suffrage. What capitalism is create, basically, a small minority of people sitting at the top of the economic pyramid, the boards of directors of mega corporations, a tiny 1% of the people who very wealthy who have unspeakable privileges. And yet, those privileges are vulnerable.
Why?
Because in our system, the majority of the people prevail in the political arena. The majority of votes, roughly speaking, wins! That creates the following terrifying danger for the people at top. Sooner or later people are going to understand in our system that the damage you suffer in the capitalist economy can be offset or reversed if you use your majority in the political system. You can use the fact that the mass of workers, utterly disenfranchised economically, can use politics to undue the effects.
So, for example, let’s pass a tax system politically that taxes the people at the top so they lose nine-tenths of what they have. And we distribute it to everybody else in one form or another. That’s always a possibility. That means that the people at the top have to take steps, urgent steps, to prevent that from happening. And they always have. For example, they create a voting system that gives an enormous amount of power to money. So they can use the money, because that’s what they have a lot of, to offset the population having the votes and no money. They make the candidates and political parties dependent on the money to have the images on the television to persuade people. They need all of that.
It also breeds in capitalist a deep suspicion and hostility to the government. And that is for no complicated reason. It’s because the government in a system of universal suffrage is elected by masses of people, which for the big folks at the top is exactly the problem. They don’t want the government to have power. Because if it does, it will reflect what the mass of people want, and that is to undo through government action the results of what capitalism does through exploitation.
Now follow the logic. You have to keep the government poor. You have to keep the government small. You have to keep the government dependent on the rich. You have to do all those things. Ok, that means one of the things you don’t allow the government to do is to have economic power over capitalists. That would be the worst conceivable lever for masses to get back at you. Here then is the problem. Capitalists are organized in lots of different enterprises. They depend on each other, but aren’t centralized. This produces chaos. Let me give you an example.
General Motors wants to produce more cars, so they will need more iron and steel to make the cars. But, if iron and steel producers haven’t increased their productive capacity, they can’t make the extra iron and steel. Therefore, there has to be lots of coordination between the enterprises. But coordination is a problem, because they are also competitors. You see, General Motors would like there to be more producers of iron and steel, because more competition will drive down the cost and then General Motors could by the iron and steel more cheaply. So, you can’t have good coordination between General Motors and iron and steel producers, because neither of them trusts the other as far as they can spit.
Well then, how are you going to get the coordination?
The answer is, hypothetically, you could turn to the government. You could say, “Hey, you’re the government, you’re separate, you aren’t competing with us, you aren’t buying and selling from us. So, how about we give you the right coordinate so our decisions work out.” But of course they can’t do that, because that would create a powerful government, which they don’t trust for reasons based on what if the masses got a hold of that powerful government. They don’t believe the government could be limited to just coordinating them in the way they want. They fear that it could be used by the masses to impose their will on the system. So, they impoverish the government, or at least most of it.
So, what’s left is the market. And we live with that. That’s why for capitalism over the last 300 years has never gone long without an economic downturn. Every 3 to 7 years we have a recession or a depression, a downturn, a crisis. We have 50 words for this because it’s such a common phenomenon. We’ve spent the last 150 years trying to figure out what we need to do to capitalism to stop it from being so unstable. Keynesian economics were by far the most important efforts to try and do it. So, we now all practice Keynesian monetary and fiscal policy. We are now living in the wake of the collapse of ’08, proving what we should’ve known all along, that we don’t know how to stop crisis. We have failed.
That capitalism is caught up in such a craziness that in can’t allow the institutions that might coordinate it, because they are too afraid of them. So, they end up putting the society, and themselves, at risk through this instability due to the absurd contradiction so undemocratic an economic system and a political system based on universal suffrage [Wolff’s side note: notice the irrationality of putting also themselves at risk]. There is NO solution to these contradictions. That was Marx’s point. Once you understand the crazy was this system has evolved itself then you come pretty quickly to the solution that what we need is not another law, not another regulation.
We need system change! We’ve got to get out of a system that is riven with these socially destructive and immensely costly contradictions. And one way to do that, the way I would prefer, is to overcome the contradiction by finally making the economic system democratic so it isn’t at odds with a political system that is at least trying to be democratic. We end up in this crazy arrangement where the absence, the cultivated absence of democracy inside the enterprise is constantly making a joke out of the effort to have a democracy in the residential community in the realm of politics.
A: Dr. Wolff thank you so much for giving us such a lively description of capitalism’s contradictions and exploitation, while still providing an optimistic blueprint based on worker solidarity.
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Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. His most recent book is Capitalism’s Crisis Deepens and his work can be accessed at www.rdwolff.com or www.democracyatwork.info
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