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 in New York City. He wrote Democracy at Work: A Cure for Capitalism and founded www.democracyatwork.info, a non-profit advocacy organization of the same name that promotes democratic workplaces as a key path to a stronger, democratic economic system.

Professor Wolff discusses the economic dimensions of our lives, our jobs, our incomes, our debts, those of our children, and those looming down the road in his unique mixture of deep insight and dry humor. He presents current events and draws connections to the past to highlight the machinations of our global economy. He helps us to understand political and corporate policy, organization of labor, the distribution of goods and services, and challenges us to question some of the deepest foundations of our society. For more of his lectures, visit the Democracy at Work YouTube channel: https://www.youtube.com/user/democracyatwrk.

Get the book here: https://goo.gl/XDxuDL

OK, thank you all for spending time a little bit with me.

Let me tell you exactly what I'm going to do, and then try to do it.

I want to tell you about the economic system in which you live.

And like any object of people trying to figure things out, there have been differences about how to understand economic systems from the beginning.

I don't want to bore you by taking you back to any economics class you may remember having had in college.

If your experience was like mine, this is a memory you'd rather not bring back, for good reason usually.

But if some of it is still in your mind, you may recall that people like Adam Smith and David Ricardo and Karl Marx and John Stuart Mill and John Keynes and a whole lot of other people whose names you've probably heard all tried to analyze the economy.

But they ended up, many of them, doing it in radically different ways.

They didn't see the same thing when they looked at the economy.

They didn't understand the mechanisms that make it work.

They didn't understand in the same way where it was going.

That is, it's been a field characterized by fundamental differences, as big a difference as whether you believe the sun goes around the Earth or the other way around, and many other examples that I could give.

Economics has been what philosophers call an agonistic field, a place in which different ways of understanding the economy contest with 1 another, Fight it out.

And those losers sometimes come back and win later.

Let me give you an example that you may know about.

Because of the Great Depression of the 1930s, the confidence in the capitalist system being able to solve its problems as they arose collapsed.

the United States had unemployment rates hovering around 20% to 25%.

That's 5 or 6 times the unemployment we have now.

Those were years, the 1930s, when the total output of goods and services shrank each year from what it was the year before.

It's not surprising that people who were living in a capitalist system worked like that, raised lots of questions.

And then there were those who believed, oh, no, it's OK.

It's a temporary thing, nothing to worry about.

The system is wonderfully configured in such a way that it can solve its problems, and it will.

Just wait 6 months, a year, another year, and so on.

But there were too many people suffering too much to wait.

And 1, a brilliant 1, a fellow in England named John Maynard Keynes basically had the courage to stand up and say, this system isn't working.

And if we continue to keep our faith in it, despite the fact that it isn't working in obvious ways that we can see every day.

He mentioned, by the way, people sleeping in doorways in London where he was British, people out of work in huge numbers, people whose wages were going down, not up, et cetera, et cetera.

He said, if we don't face it, there's going to be a revolution, and we're not going to have any capitalism at all.

He liked capitalism, but he felt that letting things be handled by the private sector was self-destructive lunacy.

And he developed an analysis which we now call Keynesian economics.

But it saw the economy radically different from what preceded it.

And Keynesian became the dominant economics in the world for most of the period, roughly the 1940s to the 1970s.

And then it was all pushed out, and we had a return of what existed before the 1930s.

It was almost as if the memory of the Great Depression and all the troubles it had.

And by the way, if you're interested, John Steinbeck's a good 1 to read, give you a feeling of the Great Depression if you've never read that or seen the movies of Grapes of Wrath or Mice and Men.

But in the 1970s, it all went the other way.

The Keynesians were dethroned, and we started looking at the economy again in a different way.

The private economy, which had been excoriated for failing in the Great Depression, was suddenly rehabilitated and made the be-all and end-all that would solve everything.

70s, 80s, 90s, it would have continued, except In

this capitalist system we live in crashed again.

For those of you who don't follow these things, in the autumn of 2008, September to December, here in New York, we came that close to an economy that would have stopped functioning.

By stopped functioning, I mean the kinds of things you don't think can happen.

We're still in the after effects of that.

Here we are almost a decade later, like the Great Depression.

It has raised again the question, gee, what about this economic system?

Only now we have to ask it in a different way.

And that's really what I want to talk to you about.

Because we can't go back and repeat our own history.

We can't now say, oh, let's bring the government back in the way Keynes believed you needed to do, fix this capitalist system, manage this capitalist system.

Because if you leave it to itself, if you leave it to the business community, look what happened in 1929, and look what happened in

You read every few weeks now about an election, like the 1 a couple of weeks ago in France, in which the entire society is being roiled around by the consequences of an economic system isn't working real well and is producing new kinds of political characters.

Even here in the United States, We have what at least most of us think of as a pretty weird political scene these days, don't we?

And that's not just because a particular fellow got in.

It's because of all the conditions that made it possible for him to get in and to do what he's doing.

So let's talk about this capitalist system, remembering that people have always disagreed.

The debates were not only between those who loved capitalism and felt it should be handled by the private business community being able to do its thing.

Deregulate, let the economy work, versus the Keynesians who loved the system, but said in order to make it work, the government has to come in and make things happen because left to itself, the system collapses, like in 29 and

Turns out, though, they were not the only 2 perspectives.

There's also a perspective that says the problems of capitalism go far deeper than whether or not there's more or less government intervention.

For such people, this whole issue is secondary.

And it's the 1 I want to present to you a little bit.

Their point of view is that if you look at the capitalist system, with or without government intervention, all the key levers of power are in the hands of the people who run that institution, which is now the place where most production of goods and services happens.

And that institution is called the corporation, the capitalist corporation.

We are discussing this in 1 of them, aren't we?

It is a powerful institution, as you all know.

And so this approach says, let's take a look at how it works and see what consequences come from that.

Before I do it, I need to tell you honestly and clearly where this approach comes from, this looking at the organization of production as it is done in a corporation, which is the dominant form of modern capitalism.

The origin of this way of thinking is in the hands of critics of capitalism.

This point of view comes from people down through a couple of hundred years that capitalism has been the dominant system in the world.

Like every other system, slavery, feudalism, any of the others, capitalism has always had people who love it and people who hate it, just about like everything else.

And what I'm about to tell you is there's a tradition, which some of you I'm sure know, of criticism of capitalism.

It has many contributors, but the name that has come to dominate is the name of Karl Marx.

And this is often called Marxian economics in the sense that it's influenced more or less, that varies from individual to individual, by the critical way that Karl Marx developed his analysis of capitalism.

I'm not sure whether I should take a moment out to remind you all of who Karl Marx was, but then again, maybe it's worthwhile.

That's very important, because that's the first generation after the French Revolution.

And Marx was a tremendous admirer of the French Revolution.

The slogans on the banners of the French, liberty, equality, fraternity, those were the 3 words of that revolution in 1789, were absolutely the love of the whole generation of which Marx was a part.

And they all understood the French Revolution pretty much in the same way, that what the French did was to get rid of feudalism, the old system, and bring in capitalism, the new system.

And that by doing so, they would bring in liberty, equality, and fraternity, or to use the modern language, a democratic system.

So Marx was able, by the time he becomes a young man, to see about 50 years worth of development of capitalism in Europe.

It began in England, moved to France and the Low Countries, and then spread eventually to the whole world.

And then in England, where he lived most of his adult life, he looked around and he's, by the way, it's the England of Dickens.

So if you want to understand what he was seeing, remember Oliver Twist.

The England of his time was certainly capitalist.

Capitalism was a dynamic, developing system.

But where was the liberty, equality, and fraternity?

Again, if you want to see what I mean, read Dickens.

He'll describe to you the absence of liberty, equality, and fraternity in 25 ways.

Or if you want the French version, Balzac, or Zola, or any of the others who were writing about these periods.

So Marx, young, radical that he was, from an upper middle class family, educated at the university, which means he's 1 of the 3% or 4% of the people who had such an education at that time, he drew a conclusion.

The French Revolution was wonderful for bringing in capitalism.

But capitalism, it turned out, was not the vehicle or the means to bring people liberty, equality, or fraternity.

And so his life work was to answer the question, Why not?

What is it about capitalism in the 19th century, which is when he lived, that prevented it from bringing the liberty, equality, fraternity, democracy, all those wonderful things?

And I'm going to tell you his conclusion, and then we're going to go back and see how he got to it and why he got to it.

His conclusion was that capitalism was not only unable to bring it, but that capitalism was a fundamental obstacle to ever achieving it.

And that, therefore, the human race, if it wanted liberty, equality, fraternity, and democracy, would have to devise a system other and different from capitalism, or else spend its entire lives bumping up against the limits of a system that cannot allow for, has never allowed for liberty, equality, fraternity, or democracy.

And why am I going to present an analysis of it to you?

Well, let's go back to the corporation, that instrument, that institution through which goods and services are produced.

Everything Google makes is the product of the Google Corporation, which the Google Corporation makes sure we know, as all other corporations do likewise.

It's the institutional form in which the work gets done.

The raw materials, the tools, the equipment to produce the output, which is then marketed around the world.

And in Marx's image, in Marx's head, therein lies the problem.

And again, I'm going to save us a lot of time by summarizing what he found and why it's so relevant.

The workplace, the corporation, but by the way, it applies if you're not incorporated, if you're an unincorporated business or a partnership or a family outfit.

But since most production in the United States is organized in corporations and more and more around the world too, that's the appropriate institution for me to focus on.

In the corporation, something very interesting happens every day.

The key decision makers are 2 groups of people.

1 group are the shareholders, the people who literally, in the way capitalism works, own the corporation by owning shares of it.

Shares, however, are only owned in the main by rich people or by a few institutions.

To give you just 1 statistic here from the United States, 1% of shareholders own about 2 thirds of the shares.

If you ever wonder who the 1% are that folks talk about, that's as good a group as any.

They are the major shareholders, we call them, in economics.

They're literally a handful of people in most corporations.

That is, your grandmother may have left you when she died, 11 shares of something, but you're not a major shareholder.

I don't want to upset you, but you're not a major shareholder.

A major shareholder owns millions of shares.

Can be a bank, can be a wealthy person, can be a foundation in a variety of holders of these major shares.

people, groups, institutions, own all the shares, except for the handful that grandmothers leave as parting gifts.

And the way a corporation works, again, for those of you who are not familiar, once a year there's an election.

And the shares vote for something called the board of directors.

That's usually a group of 12 to 20 people.

If you ever wondered, some of you may have had as a career objective to become a member of a board of directors.

You probably noticed that that's a good place to be.

And so I'm about to tell you how to do that.

You have to get elected by the shareholders.

Once a year, the shareholders have a vote.

So if your grandmother left you 11 shares, you get 11 votes.

If you are Chase Manhattan Bank and you own for your various accounts 27 million shares, then the vice president you send to the annual meeting of the shareholders votes to 20 million shares.

You could think that you're just like him, but you understand.

If 1% of the people own the bulk of the shares, that's the 1% who decide all these elections.

So the 12 or 15 people that are on the board of directors, they make the decisions.

Sometimes with more influence from the major shareholders if they muddle in there, sometimes with less.

But it really doesn't matter, because even if you add together the 15 to 20 individuals who are on the board of directors to the 10 or 20 or 30 individuals who are major shareholders, Those people, that's 50 people more or less, make all of the key decisions for every corporation that works like this, which is 99% of them.

Let me be clear with you so we all are on the same page.

This board of directors decides what the company produces, what objects are made, what services and goods are produced.

Number 2, how they will be produced, what technology will be used.

Number 3, where the production will take place.

And finally, what to do with the profits that all of this work generates.

This board of directors and the major shareholders make all those decisions.

Those are the key decisions any enterprise ever makes.

Meanwhile, there is a large number of people,

hundreds of thousands, millions, who are employees of the corporation.

They all, of course, have to live With the decisions that the board of directors and the major shareholders make Well, let's give you an example We're gonna close this factory or office here in New York and we're gonna move it to China Have a nice day Or we're gonna substitute these machines for these working people and lay them off.

We're going to take the profits to which the labor of all the employees contributed, and we're going to decide to use it for an advertising budget or beautiful new shrubbery outside the main office or whatever it is we want, because that's who we are.

The board of directors, 15 to 20 people, and the major shareholders, another 20, 30 people.

This is an interesting way to make the fundamental economic decisions of a society.

Because what you are essentially doing and saying, whether you face up to it or not as a culture, is that there's going to be a tiny group of people who make all the key decisions that everybody else has to live from, on, and with.

But now to drive the point home, the mass of people, the employees to begin with, but the larger community in which every corporation lives and functions, they all have to live with the consequences.

But they are excluded from participating in making the decision.

Let me say that again to make real sure it's with us.

The mass of people in our economic system are required to live with the consequences of the decisions made by the corporate leaderships, Decisions from which they are excluded legally and in practice.

Whatever else you call this system, it is not democratic.

In the communities where we live, we insist upon having votes.

We say that the mayor or the governor or the senator or the president makes decisions that we all have to live with.

And Therefore, we, who have to live with the decisions, must be able to participate in making them.

But when we go to work in a capitalist system, we cross the threshold into the office, the store, or the factory, and we put all of that aside.

Herein, in that situation I just described summarily for you, Marx said, lies the reason why capitalism, despite its hopes and dreams of the people who brought us capitalism, that it would usher in liberty, equality, fraternity, has proven itself unable to do that.

Because it turns out, Marx argues, that if you put the power of directing what goes on in an economy in the hands of a tiny number of people, You can't really be surprised if they make the decisions that keeps them in that charmed place.

So why are we surprised to learn, as I'm sure many of you know, that over the last 40 years, for example, here in the United States, just to take an example, corporations, boards of directors, and major shareholders have decided to take the profits that everyone helped to produce.

By the way, you know how we know that everyone helps to produce the profits.

That happens every year, the proof of it, at the Christmas party.

That's when the chief executive, a little wobbly from too much punch, gets up on a chair, and thanks everybody for the contribution every person in this firm made to our successful year.

And then having thanked you, the chairman and the other members of the board go off and decide what to do with what you kindly helped to produce.

So it shouldn't come as a surprise if the last 40 years turns out that what has happened is that those corporations, those boards of directors and major shareholders, decided to take a huge part of the profits that were earned and give it to themselves in the form of dividends to shareholders, which is what they are, and spectacular pay packages to the chief executives who are on boards of directors.

But let's take some other examples that are remarkable.

Corporations have decided, and Google is an important player in this, to do what we call in economics, automation.

Over the last 30, 40 years, we have really replaced huge numbers of jobs that people hold by computers and robots.

They bring an economist like me, and they calculate what we would pay for workers, versus what it would cost to buy and maintain these computers, these robots, whatever the automation form is.

And they make the decision based on what's better for their profits, because that's how corporations work.

And then they make An interesting decision.

If the machinery is more profitable, they buy it.

And they turn to the workers and they say, you're fired.

And those workers go off and have maybe a nice day.

We have no idea, I take that back, we do know what happens to them.

If they don't find them pretty soon, they start being willing to accept jobs that they are over-trained for, jobs they are underpaid for, et cetera, et cetera.

The social costs of all of this are staggering and always have been.

But that's none of the problem of the corporation.

It bears in a capitalist system no responsibility for that at all.

If there are costs of laying all those people off, those are the problems of those people, and of their friends and relatives, neighbors, and the communities in which they live to struggle with as best they can.

Marx says this is really interesting, because in many situations, it's easy to show, don't need to be a Marxist for that, that the social costs of the unemployed are much larger than the profits gained by the private corporations who made the decision to fire these people.

But because the private corporations got the profit without having to pay the cost, it was profitable for them, even though it was socially an unprofitable move to make.

Marx argues that leaving things in the hands of the capitalist corporation, and you can see now why a bit more government intervention or a bit less is really beside the point.

Because with more or less government intervention, you're not changing the basic way the capitalist enterprise is organized, with a tiny group of people making all the key decisions and doing so in a way that replicates their situation, understandably, and unfortunately replicates that of everybody else, too, along the way.

In fact, let's even push it further, as Marxists should.

If the government doesn't just regulate, But let's suppose the government goes a step further, fires all the private boards of directors, takes the property away from the shareholders and says, this is now a government enterprise, and then puts into the board of directors not individuals elected by shareholders, they're all gone, But officials designated by the state apparatus, you 20 people will now run this factory.

That's a little bit like what happened in the Soviet Union in

Because they didn't change the internal structure of that enterprise.

Yes, instead of privately elected people, as in private capitalism, they had state officials.

Interesting change, but that doesn't change the fundamental problem.

The way this is organized is fundamentally antagonistic to ever getting liberty, equality, or fraternity, or democracy, if that's what you're interested in.

Now, this is a very powerful way of analyzing things.

But Marx was a very sophisticated thinker and wanted to drive it home in the most intimate way that 1 can by looking very closely at the employer-employee relationship.

And again, this is an elaborate piece of work he did.

And I'm going to give you a heroic short summary.

But I think you'll understand it real well.

Let's start with the employee who's looking for a job.

And you go and you meet an employer who's got a job.

And the employer explains you're to come Monday through Friday at 830, and you stay till 430, or whatever it is.

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