What is most startling about the excited response to Sen. Sanders’s campaign is that millions of Americans seem to be saying that free-market capitalism is failing them and that there must be something better than accepting vast income inequality, as economist Richard Wolff explained to Dennis J Bernstein.
By Dennis J Bernstein
Sen. Bernie Sanders’s candidacy raises the question of whether there can be a better system than free-market capitalism with its bloated income inequality and its hollowed-out middle class while Hillary Clinton’s message is that the system needs only minor reforms at the edges, said economist Richard Wolff.
Wolff, a Professor of Economics Emeritus, University of Massachusetts at Amherst, taught economics for some 15 years and is currently a Visiting Professor in the Graduate Program in International Affairs at the New School University, New York City, and author most recently of the book Occupy the Economy: Challenging Capitalism.
In the following interview, Wolff said the enthusiastic response to the Sanders campaign suggests that there is a growing public awareness that free-market capitalism left to its own devices doesn’t fulfill the nation’s needs. He also explored what a “socialist” administration under Sen. Sanders might look like.
DB: Let’s just start off with the fact that there are about 45million Americans who live in poverty now. And the word poverty or poor doesn’t seem to exist in the lexicon of most of the debates.
RW: It’s amazing that it doesn’t exist. It’s amazing that, indeed, the whole world’s poverty story doesn’t exist. One of the most revered anti-poverty agencies in the world, Oxfam in Great Britain, issued a report about 10 days ago timed to happen together with the World Economic Forum in Davos, Switzerland. And the point of their report was about poverty. And it had two basic statistics, which if there were any justice in the world would be the number one topic of the debates, and of the political campaigns in the United States and elsewhere.
The first statistic was that the 62 richest people, the 62 richest individuals, most of whom by the way, are Americans, own together more wealth than the bottom half of the population of this planet. That’s 3.5 billion people. The is a level of inequality for which you’d have to go back to ancient Egypt and the pharaohs, to find comparable kinds of numbers.
The second statistic that they released was even worse, in a way. It said that 2015 was a banner year, a turning point year, because in that year for the first time since records have been kept, the top 1% of wealth holders in the world, the richest 1% together own more than the total wealth of the other 99% in the world.
This is a level of inequality that is a product of an economic system that has dominated the world for 300 years, named capitalism. It’s the one we live in. And any system with a result like that, with a level of inequality, and the poverty that goes with it, is a system that ought to be questioned and challenged.
And the significance of the Bernie Sanders campaign is that what it does is bring back into the American political life, into the American political discussion, the alternative to capitalism. He calls it democratic socialism, but the important thing is not the details of what he’s proposing, but rather the opening of American politics to finally dealing with the topic it should have been discussing for the last 50 years, which is … can we do better than capitalism? And, if we can, how do we go about it?
DB: Maybe we can hone in a little bit. What do you perceive, what do you see, what’s your understanding of the bottom line differences between what Bernie Sanders is saying about the economy, and what Hillary Clinton is saying. I’m not even getting into Trump, at this point.
RW: Sure, I think there are a number of ways of going at this. But let me try this one. Hillary Clinton [and] her husband Bill Clinton are people who came to their high political office, and indeed came to their ways of thinking, in a period of American history, the last three or four decades, when the governing ideology in this country was that capitalism is the greatest thing since sliced bread. That it’s a magical, ultimate achievement of human civilization. That it provides growth and prosperity in an endless vista into the future. And that therefore anyone thinking about alternatives must have been asleep at the wheel, must be a backward-looking person, maybe even an evil person, but someone whose thinking and speech we don’t have to take seriously.
So like everyone else in these dominant positions in America in the last 30 – 40 years, they spent no time worrying about how to do better than capitalism, no time learning or exploring the alternatives. That’s no good anymore because capitalism has shown us its vulnerabilities: the inequality that I mentioned a few minutes ago, but we can go on … the instability, the crash of 2008, and the failure of most Americans to recover in a significant way, from that crash. The uncertainty that now suggests we may have another recession this year, later.
This is a system whose inequality and instability, the injustice of everything we read about in the papers, from the scandal of the Flint water system, to Dupont’s poisoning of the water, to the absurd prices of apartments in New York City. I mean, one could go on and on.
This is a system that has given us more than enough reason to think about alternatives. And the fundamental difference between Sanders and Clinton is Sanders is about alternatives, Clinton acts as if they are not necessary because that’s been the way she, and the people she represents, have been thinking for 40 years.
DB: Now they say, we hear this again and again and again. Bernie
Sanders, he is a great idea with what he wants to do, impossible to afford. $17 trillion, $18 trillion, Hillary Clinton sort of jumps on the bandwagon with the Wall Street Journal. Are these ideas that Bernie Sanders has that everybody deserves health care, and so on and so forth? Are they possible, or is it ridiculous?
RW: Well, they’re absolutely possible. And there’s a certain shame that should be attached to Mrs. Clinton using these arguments. It has been the standard trope, the standard argument of conservatives that anything that sounds good of the sort that liberals, socialists, radicals propose … if they admit that they sound good, the way to get rid of the population’s’ interest is to suggest that they are either undoable or too expensive. This is so silly. And let me give the example from American history that proves the point. In the Great Depression of the 1930’s, when the unemployment was much worse than it is today, when the bankruptcy and economic difficulties of cities, towns was much more severe than it is today, it was thought to be a crazy idea, in the midst of the Great Depression to come up with extraordinary new, expensive programs to help the mass of people, which is basically what Sanders is proposing, now.
But in fact, the President of the United States at that time, Franklin Roosevelt, after whom Sanders patterns himself very obviously, Roosevelt didn’t believe that you couldn’t afford it. And so he went ahead and said “I’m going to do spectacular things. I’m going to create the Social Security system, I’m going to give everybody a check when they are 65 years of age for the rest of their lives. I’m going to create the unemployment compensation system, and give the millions of them unemployed people a check every week. I’m going to raise the minimum wage.” and then the really big one … ”I’m going to hire 15 million unemployed people and pay them a good salary.”
“Where in the world,” conservatives said ”are you going to get the money?” With a wry smile Mr. Roosevelt said what in effect Bernie Sanders is saying, namely “I’m going to go to where the money is. Because the money is there. The government doesn’t have it, but the corporations and the rich people of America have. And they have more than they need and I’m going to relieve them of it.”
And that’s exactly what he did. He raised the taxes on corporations and the rich. He created and funded the Social Security, unemployment and public employment programs. He proved, not only, that it could be done, and not only that the money was there. And it’s easier today to do those things than it was then.
But he made the really important point, and he proved it. That doing that got the United States out of the great depression, helped millions of people, and set the economy on a much more successful course than could have been achieved any other way. So the notion that we can’t do it is contradicted by the fact we’ve already done that. We’ve been there, we’ve done it. And all Sanders is saying is “Lord, let us learn from our history, and do this again.”
DB: Professor Wolf, what do you think about this notion also brought up by the nurses and others, in terms of the penny tax for the stock exchange, and a tax on trades?
RW: Look, it’s one of a handful, or a dozen proposals that are around there. All of which have the same function: to go after taxing the wealth where the wealth is. Look, we’re coming off of a 30 – 40 year period when the rich have gotten much, much richer. Every statistic done, whether it’s by Piketty and Saez, the leading researchers in this area, or anybody else, shows that we are now at a point where the rich have become so absurdly wealthy, that a proposal to tax some of that wealth will still leave them, if it passes, in a position of great wealth, just not obscene wealth.
And I think taxing transactions in the stock market, which is a place where only the richer folks basically play, or at least they do the bulk of the playing there, is a perfectly good way to do that, as would be a much more progressive income tax, as would be a payroll tax that keeps on rising and doesn’t stop at $120,000 a year, the way it does now. As would be a return to a proper inheritance tax, the way we once had, and so on. And it should be explored, and the different taxes put together in an effective way that raises the money to basically begin to correct for the absurd imbalance that has been created by a system that hasn’t been reined in and has allowed capitalism to work its sad function of dividing a society to the point where it becomes explosive.
The reason Bernie Sanders has a response that is surprising so many people is that we’ve turned a blind eye to the negative dimensions of capitalism. We were too busy leading cheerleading sessions for this system to honestly evaluate its strengths and weaknesses. Had we done that, we wouldn’t be as surprised or as shaken as the establishment clearly is, by all the people, left and right, who are not anymore willing to go along with the business as usual.
DB: Speaking of the business as usual, let’s talk about a sort of a Goldman Sachs run America, Hillary Clinton, I hear this many times,“of course Hillary Clinton as a senator from New York had to understand what was going on in the stock market. She represented them, so that gives her the knowledge to deal with them.”
RW: Yeah, I find that an amazing argument. The stock market happens to be physically located in New York City. But it is a national institution. It doesn’t rely on the senator from the state where it happens to have its building. It’s just a childish argument. Goldman Sachs, the others who are active in the stock market have all kinds of fingers in all kinds of political apparatuses because that’s how they keep their wealth. That’s how they grow their business. They all do that. They’ve always done it and there’s nothing particular about the New York senator.
Indeed, if the New York senator, Mrs. Clinton or anyone else, wanted to become a national figure you might expect that they would act more in the national interest than in the narrow New York interest, or at least blend the two. But to excuse herself, that because she happens to live in New York City she ought to be off the hook for criticism of working with Goldman Sachs strikes me as kind of bizarre.
As if to illustrate it, let’s remember, if I am properly informed, Mr. [Ted]
Cruz, who is a candidate on the Republican side, his wife used to work for Goldman Sachs, I believe it’s been reported that he had taken out huge loans to pay for his campaign, both from Goldman Sachs, and from First City Bank in New York. This posturing that she [Clinton] is to be excused because she’s a senator from New York, and he [Cruz] is to be excused because he denounces New York, this is, if you pardon me, political theater that masks the underlying reality that in a society that has become as unequal as the one we have now in the United States, it would be sheer insanity for the tiny number of institutions that have become wildly wealthy to not spend a lot of time and money controlling the political system because if they didn’t do that, the political system would undo the very wealth they have accumulated.
We have a political system where everybody gets a vote. It would be childishly easy to go to the mass of people and say “Hey, use your vote to undo the inequality that the economic system has dumped on us.” To prevent, precisely, that happening Goldman Sachs, First City
Bank, Bank of America, and the biggest corporations spend a lot of time and money lobbying, funding the parties, to make sure that politics doesn’t undo what the capitalist economy has delivered into their hands.
And Mr. Sanders is precisely important only because he opens that fact up and says “Look, If you want the government to work differently you’re going to have to address who pays for it, whose working ceaselessly to control it, otherwise you’re making nice gestures and nice pronouncements the way so many candidates have been doing for 50 years and nothing fundamental changes.
DB: I wrote extensively about the deregulation. I remember when
Reagan was in the Rose Garden talking about how the deregulation of the S&L’s was the beginning of the future, for freedom, and free trade and all that kind of stuff. And then we watched it unfold, to the big banks, taxpayers being sucked under, paying out one way or another. We hear now, out of that, out of the ruins of that there’s Dodd-Frank. And Mrs. Clinton, Hillary Clinton, is a strong supporter of Dodd-Frank. Dodd-Frank was the answer to the problems. Can you talk about that?
RW: Yes, I believe that’s a perfect illustration of what Hillary Clinton, and most of the others, on both parties, are all about. They like to pretend that the problems are manageable, that the problems are easily fixed and that the various bills that they are lucky enough to pass like Dodd-Frank are an adequate fix to the problem. But this pretense, and that’s all it’s ever been is now no longer sustainable. That’s why Bernie Sanders gets the response that he does.
But let me illustrate with Dodd-Frank. One of the biggest problems of the crash of 2008 was a basic act of blackmail that was imposed on the people of the United States, and upon the government. It was imposed by the biggest banks, the ten big banks in this country, Bank of America, Wells Fargo, Citibank, the Goldman Sachs … the names are well known to everyone, Morgan Stanley, who basically said “You cannot let us fail. We have made bad investments. We cannot collect on our debts. We face bankruptcy and collapse. But if you let us, in fact, collapse well then the system will collapse with us. We’ll take it down with us. And we are, therefore, as the phrase went too big to fail.”
Okay, this argument worked. The blackmail succeeded. They were given trillions, with a T. Trillions in loans and supports and investments by the federal government, by the Federal Reserve and so on.
Where do we find ourselves today? We find ourselves with the exact same banks that were too big to fail back in 2008 are now bigger than they were then. In other words, if and when a crash comes we’re going to have an argument that is even stronger in the way of blackmail, than we had last time. Dodd-Frank didn’t solve that problem.
Number two. We have huge loans made by these corporations to a large number of borrowers who, once again, can’t pay back. This time it’s not people with mortgages they can’t pay off. It’s whole countries and industries that can’t pay their debts. For example, in the United States right now huge amounts of money were lent to the genius oil companies who decided that by fracking they could bring up shale oil and make a killing. The oil companies, those genius entrepreneurs were wrong. They borrowed from the biggest banks in America who lent them a lot of money. They were wrong. Oil has been a disaster and those companies, which are going bankrupt now, can’t pay back the banks. And so we face another looming economic crisis. Dodd-Frank didn’t prevent that. Dodd-Frank didn’t interfere in that. Dodd-Frank, whatever virtues it had and it had some, is simply way too little too late to deal with the levels of problems we have.
And when Mrs. Clinton and others refer to it as a great achievement it’s once again a spectacle for the rest of us to see, they don’t get it. They don’t see that the system as a whole is our problem, and that we need to talk about an alternative system because these little band-aids we’re putting on our failures to recognize that we have a major illness for which a band-aid simply isn’t enough.
DB: Now speaking of band-aids, and prosecution of economic criminals, it is very interesting … you know on Christmas Eve somebody gets busted breaking into a food mart, stealing some steaks, a couple of bags of food, gets into a fight with somebody who tries to stop them, goes to jail for five years. Somebody purges, rips off the U.S. Treasury for billions, takes us into trillions, what happens? Doesn’t that have to be a part of an administration? The willingness to have law enforcement go after these criminals to make an example? Will it ever happen? Should it happen? Should he be talking about this?
RW: Well, you know, I think some of us have different views about that. I’m so concerned, and basically so impressed by what Sanders has done in the way of raising the question of the system itself, making the question “Can we do better than capitalism?” become a real, live, important political question, that I’m afraid I don’t want to deflect the attention to the crimes of individuals. And let me explain why.
It’s not that I support, or excuse or anything that the banksters, as they are called, did. But my understanding about how banks work in our economy has taught me, over and over again, that if you arrested the top 20 bankers and put them in jail, the people who come after them, the vice president who then rises to become the president. These are the same people subject to the same pattern of rewards and punishments who will be driven by the nature of their job, and what they are paid to do, and the inducements and incentives they face to make pretty much the same decisions. That’s why it’s the system that has to be changed. Because if all you do is put away the people at the top the next group of people who rises to the top will, in all likelihood, make the same decisions. They can’t afford not to. They will convince themselves that they will do it more cleverly than their predecessors.
So for me, the better way to go it so be less focused on the individuals that might be punished and more on really changing the system so that we are not forever putting individuals in the position where they do what we see they do, and then we come X years later and rap them across the knuckles, and put in place the next group who will show us that they can and will do the same.
DB: I guess I just raise it because one of my pet peeves with the current administration is the current Secretary of Commerce, Penny Pritzker, who herself was a banking bandit, crashed a bank in Chicago, 1,400 people lost all or most of their life savings. Then she helped invent the securitization of bonds, these compiling of bonds that they sold on Wall Street which led to the big melt down. This woman was right in the middle, so she ascends to Secretary of Commerce. This family has been doing this corruption for generations. So it’s just sort of interesting to me, and I understand your point.
RW: I understand the frustration of the American people. And the last thing on Earth I want to be understood as excusing them. I think the problem is, for better or worse, it’s deeper and broader than these individuals. We have to learn that this is a systemic problem, otherwise, you know, it’s the old discovery in the Middle Ages when you have some horrible king or emperor, you discover that whoever his or her, I guess it was mostly his children would be ascending the throne, they would end up doing pretty much what their parents had done. Not because they were good or bad but because that’s how the system works. And that you had to make fundamental changes rather than focus on any individuals.
DB: Just to go out where we came in, the possibility of a socialist, if you will, President of the United States? Do you believe it’s possible? And, I guess, you also believe that if there is no remedy now like this election of Bernie Sanders, maybe the next person is more radical?
RW: Absolutely. I mean, we didn’t believe that Obama could win when he first began to run because the thought of a black American, an African-American being president was simply beyond the realm of possibility. We were wrong. Okay. He hasn’t proved to be the engine of hope and change that he claimed he would be. So now we have a Mr. Sanders, who takes it all a whole other stage further. But if you stymie Mr. Sanders the way Obama, either through his own errors or through the oppositions that he faced, couldn’t move forward, there’s no reason to expect that the same will not happen to Mr. Sanders.
On your question about whether there could be a socialist, of course, a socialist could be president. I find it amazing that Americans are even wondering about that. Europe is the perfect proof. Europe has a dozen, or more than that, more like two dozen capitalists countries, capitalist like the United States is. They are run by big private corporations, etc., etc. Many of those countries, I will list a few, France, Germany, Italy, Spain and so on, have not only had socialists in higher office, but have socialist presidents, socialist-dominated houses of parliament.
France today, for example, has a socialist president and a socialist majority in both houses of its legislature. That hasn’t undermined capitalism. That hasn’t overthrown capitalism. Capitalists have long ago come to terms, and come to good understandings with socialists in political leadership.
The idea that somehow in the United States it isn’t imaginable is the same self-deluded political thinking that we talked about earlier in this program, in terms of the need of a conversation about the system and about alternatives to it. If Europeans can have Mr. Francois Hollande as the president of France, the United States could certainly have Mr. Sanders as its president. The world isn’t going to end. These are lots of Chicken Littles screaming here that don’t have to be taken seriously.