The Contradictions of Capitalism

it is great to be joined once again by economist Richard wolf professor emeritus at my alma mater the University of Massachusetts a visiting professor at the new school University in New York City a professor wolf you had this great article recently on the democracy at work website called the contradictions of Finance and it talked in in very interesting terms about some of the inherent contradictions of our financial system and it really got me thinking more broadly about some of the contradictions that exist in sort of on our planet for lack of a better term I'll start more broad than where you were in the article and let you take us wherever you want and the contradiction that I'm sort of thinking of is our system which includes everything from lending stock markets increased consumption as something to be sort of in never-ending ly a pursued is based on the idea of unlimited growth but we have a planet which is of a limited size it contains limited resources it does at least theoretically although according to many we are very far from that limit it will only house a certain number of humans and to me that is one of the most interesting sort of inherent contradictions in the way we think about our planet and economies I'll turn it over to you and you can tell us sort of how your article ties into that or feel free to comment in any way you see fit well I think you make a very good point and it is generalizable people once thought that there were unlimited supplies of trees the European Economic Development over the last five thousand years has taught the people of Europe that there are not in fact unlimited numbers of trees and they can't use wood as a fuel and they can't use wood in the way they once did and they found other things to do but there were very difficult transitions to make and we are now discovering that having shifted from wood for example as a fuel to coal and then to fossil fuels like oil and gas they also produce horrible side effects and have limits so that you might have thought the population would have been trained by now to understand the contradictions and to not be so glib about imagining the limitlessness of whatever it is they're doing rather than paying attention to what the quote-unquote side effects were which can come back and become more important than the thing itself and there are plenty of other examples let me just give you two that are very pertinent today yeah oh one the capitalist system of the world crashed in 2008 and most people of the world are still living in the aftermath and in the consequences of that crash in order to try to cope with it the central banks around the world the leading financial institutions in each capitalist country here in America the Federal Reserve pushed interest rates way way down to where they are today barely above zero in many parts of the world and downright negative in Japan and Europe and in parts of the United States now well that was supposed to be a recovery mechanism but here's the contradiction because interest rates were so low we now have the highest level of indebtedness by American corporations in the history of the United States we have a level of indebtedness of corporations all over the world like that they all took advantage of these very low interest rates to borrow money like there was no tomorrow and if there is an economic slowdown at any time and many predicted for this year or next then it is a very dangerous situation to have an economic slowdown at a time when corporations are weighed down by debt they are required to repay and may not be able to and we may be looking at another crash that's a contradiction that people were not willing to deal with and think about for the last eight years of keeping interest rates at this low level last example is to make it clear to folks there's another part of capitalism that has always mystified many economists who've looked at every capitalist Enterprise large medium and small is constantly trying to save on labor costs you considered a clever effective business man or woman if you can reduce the number of workers you need to produce your output or you can in some way get less expensive workers to replace the more expensive one we know that companies go overseas to do that we know that they bring immigrants into the country to move in that direction and so on but here's the contradiction if capitalists in their competition with one another are indeed successful either in reducing the number of workers they need or in paying workers less and especially if they do both and let's add if they can replace high-cost workers with less expensive machines what we used to call automation well then there's going to be a problem because with fewer people earning less money you can't sell the output of those very enterprises that congratulated themselves on reducing their labor costs in other words you may save on labor but you're gonna pay a heavy price in the inability to sell what you produce now this these are real contradictions that present all of modern capitalist economies the ecological one this problem of lowering your labor costs the problem with lending and they reflect on a system whose contradictions are not just some matter for academics to debate about but these are very real stumbling blocks that the system puts in its own way there's the to piggyback on this idea of your winning as a corporation if you are saving on the labor side but then you are actually creating a situation where fewer people can then afford to buy your products or services we have another contradiction that comes to my mind which is on the one hand we've sort of made one of the championed ideas of our system that of being able to buy and consume more that's one of the great things that our system allows people to seek and rewards and is seen favorably by society but at the same time we've seen that same system create larger than ever wealth and and income inequality gaps and it actually makes it so that consumption that is so revered is also something that becomes more difficult to do and it's similar to this idea of at the individual corporation level that you mentioned but it's sort of the idea of what the system is set up to allow and what it actually allows isn't it absolutely the metaphor that I found useful in the classes that I teach goes like this that what we do in the realm of consumption and advertising to people as to what the good life requires you to buy and then making it impossible by means of limited wage increases by means of having to carry debt that means you have to take a certain amount of your weekly pay and put it aside to pay off your past debt and don't even have it available for consumption now it's a little bit like that horrible example when you have a little dog and you teach the dog to jump for a biscuit but each time the dog jumps you raised the biscuit a little further so he jumps a little higher but you raise it a little further eventually you drive the dog crazy with the sheer frustration of such a level of non success and not to push it too far I do believe that the more inequality we have the more we are treated to seeing of the super-rich with their yachts and their apartments and their ski chalets and their fancy cars and they and the industry that caters to all of that the more the distance between all of that and what most of us can afford the more the sense of bitterness of frustration showing up in our politics these days showing up in the rage that so many people feel and that occasionally explodes you're talking about a society whose contradictions are becoming a problem of the dysfunction of this system as a whole last thing I want to touch on you mentioned politics is there anything that is substantively different between the policies suggested by to the extent we can understand them at least with regard to – well maybe both of the major candidates but certainly one in particular Donald Trump and Hillary Clinton is there anything that big picture in terms of the economic system that we have that would be different if one or the other were to be elected president frankly I don't think so I think the major thing that both of those candidates are doing is pretending that these contradictions don't exist and aren't of a scale that they need to worry about either they ignore them altogether or in some kind of sick mockery propose things that will actually make them worse or on the other hand propose the most modest kinds of marginal adjustments whose scale is way less than what the problem demands it's sort of like being given a diagnosis of cancer and having someone suggest well Wow with a diagnosis like that I'd go out and buy more band-aids that you currently have and you have to say to such a person goodness the scale of what you proposed relative to the problem I have is kind of virtuous up virtually indecent in its pretense that I'm not confronting a much bigger my fear is that American politics at least of the two major parties is an effort to distract to deflect onto personalities and who's telling more truths and who isn't and who's got this kind of style and another these are all a little bit like watching distracting television or movie because you don't want to deal with your problems rather than dealing with an election whose extensible purpose is to face your actual problems and try to solve them we have been speaking with professor emeritus of economics at the University of Massachusetts and current visiting professor at New School University in New York City economist Richard wolf a pleasure is always having you thank you David and I look forward to the next time

  1. The history of human civilization does not reflect the claims of Wolff. 200 years ago, 90% of all people on earth was living in utter poverty, equivalent to living under $2/day in earnings (in today's terms). Today, only around 10% of the world's population live on the same $2/day in earnings. 90% of the population 200 years ago was about 900 million people (the population back then was about 1B). 10% of today is 700 million. So, despite increasing the global population by 7x, the absolute number of people in poverty actually has gone down over the past 200 years.

    I do agree that income inequality by having the wealthy becoming so much more wealthy is a problem. The problem is that those wealthy can affect policy and decision making through paying the policy and decision makers a paltry sum to have them make policy or decide in the favor of the super wealthy. That's not good, and a super high taxation policy would help by tamping down their wealth.

    The goal is for all people to live in a copacetic agreement. That can't occur when there are people who have perverted wealth accumulation beyond needing money to live.

  2. There is nothing inherently wrong with capitalism. In fact you can have greed and poverty in socialism. What matters is the spirituality of people. If people are compassionate towards each other, then capitalism can work extremely well. Adam Smith knew this when he wrote his best seller "The Theory of Moral Sentiments." Charles Dickens also understand the importance of love when he wrote "A Christmas Carol." Once people care about each other, then capitalism can create wonders. Think about corporation co-operatives. What a great idea!

  3. Another contradiction, people getting into jobs thinking that they will be available forever, or even should exist forever. "What about the coal miners?" Yeah? What about them? We should have long since stopped mining coal. So, there are jobs that are going away, some for good reasons and some for bad, but we need to acknowledge that fact and plan accordingly. Make employment education available for these displaced workers. If we lose our workers altogether, we won't have an economy, be it socialist or capitalist. We can't all code, we don't need ten million fry cooks or house painters. A total lack of planning is responsible for this, and "let the market decide" has shown a complete and total lack of will to adapt with any kind of real or necessary speed.

  4. Cut your payroll spending to make a profit? That is why privatizing government agencies wouldn't work. The system as it is now isn't perfect, but it would be made worse if privatized. How? The need for profit by the owners of the private run agencies. An example, the postal service doesn't need to make a profit to sustain itself. If the postal service is operating in the red — and it's lacking in efficiency– it's probably because there aren't enough employees to run things smoothly. The same would happen with a privately owned postal service. So why is this country always so broke it's being run inefficiently? Money hoarding by the 1%. You don't have to be an economist to see that.

  5. Capitalism is a conspiracy between the banks, oligarchs and government to confiscate the wealth of the long – suffering, hard-working citizens!!

  6. Capitalism, the legal pyramid scheme.

    Yeah yeah… I know. Oversimplified. Whatever.
    There is more to it than that I know but it DOES have the exact same flaw as a pyramid scheme. …and more.

  7. so many assumptions. Replacing humans in some labor does not eliminate all possible labor. Who will build and repair the machines that are replacing labor? Evolution is a marvelous thing. Literally needs to look up contradiction and learn what it means.

  8. It's not a contradiction that companies try to find a way to get more done with fewer people. People find other things to do and usually more meaningful because usually those types of jobs that become obsolete are not meaningful at all.

  9. I don't agree with Richards solutions but his diagnosis is spot on these are the reasons I'm not a libertarian any more

  10. David Pakman claims he is not a Socialist while promoting it as a viable solution here in the U.S.A.. He uses fancy words so that he's accepted as more than just an educated idiot. We have been a loosing Nation as we've been living in an economic system which has been half socailist, half capitalist and each half has been custom designed to serve our central banking NWO slave owners who is likely paying this David Pakman for this bit of propagada.

  11. I’m sorry but this whole thing was BS. All these “contradictions” can be debunked by a first year economics student….

  12. some of what the professor said is true, to be sure. but it's very hard not to notice the undertones of jealousy toward rich people, as though rich people are some uniform group of vicious, undeserving people. if you hate all rich people, then I guess this professor feeds into that emotion with a veneer of intellectualism. there are indeed economic problems worthy of discussing, but let's separate those discussions from the hatred and resentment that so many on the left have for those with have more wealth. it just isn't possible to think objectively when you're foaming at the mouth about CEOs and 'corporatists'.

  13. Contradictions:
    – High personal consumption is revered in capitalism, but limited resources is the reality of our planet.
    – Capitalism incentivizes saving on labor costs, but lower labor costs diminish workers’ ability to purchase the output of corporations.
    – High personal consumption is revered in capitalism, but consumption is hindered by the incentive to lower labor costs.
    – Crashes in capitalism are fixed by lowering interest rates, but lowered interest rates incentivize too much borrowing, which makes the economy more vulnerable to slowdowns.

    Question: isn't lowering interest rates an instance of government regulation hurting the economy, rather than capitalism per se?

  14. But… there are unlimited trees. We can plant more, we can find ways for trees to grow faster and more efficiently. There is unlimited fuel when we constantly find new fuels to use. What, really, is finite when human ingenuity and innovation is taken into account? Even if not infinite, things are not strictly the amount we start with, as Wolff seems to be suggesting here. He reminds me of Thanos tbh. "We have finite resources, too much people and consumption" omegalul

  15. I had a "sense" of much of this. Doesn't take a giant intellect to grasp. Interesting to hear my "sense" spelled out in economist terms.

  16. 1. True CAPITALISM never existed (True Capitalism is gov.hands off n equal playing field).
    2. We have CORPORATOCRACY ( owned and controlled by Big Corps).
    3. What we now have is anarchy by very rich and powerful corporations.

  17. The words "capitalism" and "greed" have no light, warmth, love, joy and beauty. Neither do the words profit margin and inventory. Neither do the brain numbing, soul sucking numbers that make up capitalism. At the risk of sounding radical, the words socializing, society and "socialism" have light, warmth, love, joy and beauty. So do the words "community" and communism.

  18. Life has contradictions you moron! You choose the best model. The choice is between constitutional govt, plenty and stability v arbitrary laws, grinding poverty and the knowledge that party or govt is always looking for 'traitors' or 'wreckers' – so you may be next. Not much of a debate – unless you're an intellectual who's too stupid to choose rationally.

  19. All of these contradictions iron themselves out if you just allow enough time for "cause and effect" to take place.

    Greed and bad decision making are not rewarded in our society, unless there is an incentive, usually provided by ideologs or charities/governments.

  20. Artificial scarcity amidst an abundance of means. Millions unnecessarily living in absolute poverty while a few hold the majority of the wealth. These extremes are unjustifiable. Capitalism is inherently sociopathic amd will collapse itself without regulation.

  21. The world's economy's crashed in 2008 ( G. Bush et al ) and most people are still living under the wrath of that . That's really saying something

  22. As I was watching this video I went through McDonald's drive-thru. What used to cost $5 now cost $8. 75. And of course the wages have stayed the same that entire time. I seriously don't understand how people are surviving? It's absolutely brutal out here. And obviously McDonald's is just an example of the prices everywhere being much higher while wages stay the same. how long are the people going to tolerate this before everything just explodes?

  23. The lack of understanding is hard to watch.

    1. The fed price fixing the cost of money (artificially low interest rates) is the opposite of a free market. If government incentivizes corporations to take on excessive debt the unintended consequences can’t be attributed to “capitalism”

    2. They both talk about scarcity of resources but ignore scarcity of human capital. Competition for workers drives salaries higher acting as a counter to employers trying to reduce labor costs. No economist I’ve ever met “struggles” with this as the interviewee suggests.

  24. Addressing these as best I can: 1. The ecological contradiction (I know this as the limits of growth): This is a serious risk. If our population gets beyond what our planet can support, then we are screwed. But we can all ready see the way out, as standards of living rise, and especially as women get more education, fertility rates decline. So, if we develop in a sustainable way, our population will plateau before we reach our limit. 2. The lending and debt contradiction: When companies go bankrupt, they don't necessarily stop operating. One thing that would work is legislating that when publicly traded corporations default on their debt, they continue to operate, but the debt gets converted into equity. So the people who used to be the creditors now own the corporation free and clear. How could creditors complain about that? 3. the labor cost contradiction: So capitalists want to pay people less to make more profits. But paying people less means that people are going to spend less. So capitalists will have a harder time selling their products. If you are a capitalist, and your product isn't selling, but you still have a comfortable profit margin, which you really should have, since you have kept your labor costs low, you just lower the price. So this is actually how you get to a post-scarcity economy. No one has any money. But everything is free. So it doesn't matter. 4. The inequality and endlessly increasing consumption contradiction: So the rich are so much richer than everyone else that the level of consumption people come to expect, from watching how the rich act, is necessarily out of reach of the majority of the people. If the income tax were more progressive, and there were no deductions, exemptions, or other exceptions, that would pretty much solve this.

  25. I began asking unions in the early 1990s on how they plan to deal with the race to the bottom with undercutting labour pools from cheaper countries, and I was not able to get any coherent answers from the House of Labour in Canada. I see it is essential that we begin to act on the foundations in Poli Sci 101 – that there needs to be a legitimation base for alternative policies – and the support base for these alternative policies have to fan out in order to create a wide common front of support – allowing this process to continue until critical mass for transformative change happens. I am baffled why progressives are not using the discussion page on the Sanders Institute You Tube Channel – that could be a venue for building a wide common non-partisan front – that could enable civil society and individual activists to face the hard issues.

  26. Do the rich actually benefit from hording more and more wealth? In that inflation for property and luxury goods skyrockets. The size of their fortune grows larger and larger – but in real terms are they getting richer?

  27. Ok, today 2018 business is doing better, interest rates are going up. Business uses some of it's new assets to pay down their debt, some to increase their employee's pay, and some for reinvestment. What does the Left have to say about that! Well the left is complaining that it should have applied all the assets to the employees.
    And who controls the interest rates? A command and control economic group, by Government sanction, the FEDERAL RESERVE.
    Capitalism in a free market, which we don't have, has no single group setting interest rates, mandating interest rates, nor mandating the terms of who gets a loan. Which through our regulations we do have.
    So the more we go towards a Government controlled economy, the more problems we have, yet the left's answer is more Government control.
    The less we regulate, control, and dictate from Government. The lower the taxes and Government spending, the better the economy grows. Jobs become more available, wages go up, prices come down, and Capitalism flourishes.
    So why do you want a Socialist economy, that has never worked anywhere, ever, in the world. An economy that leads to, or comes from a large oppressive Government. At the cost of individual liberty. Only so that the Rich can be punished, and the lazy can be equal to the industrious. Yet in every Socialist country the "Leaders" are never equal to the "worker". Or are you willing to accept that some are more equal than others? And if so, why should the Government be the ones to reap the rewards of your labor.
    Earn what you own
    Own what you earn

  28. I'm not sure where to start he is wrong on so many points. Just to pick one how about the fact that what he is referring to as a contradiction is in fact the checks and balances of a free market system

  29. Capitalism had boom.bust cycles about every 20 years. Socialism bandaid softens busts enough to keep it going. Cronyism and corporate welfare makes it worse. We need to create better.

  30. David, this is the important conversation of our time. We must get rid of the Orange Pervert (short term), but his election is a sign that we are not addressing the true problems.

  31. I turned away from capitalism's insanity nearly 20 years ago. Still worked, but no buy in. Now I have a five acre food forest and no debt. Capitalism is CRAZY, and crony capitalism is worse.

  32. Capitalism is an epic fail. I know this because the first thing successful capitalists buy is socialism for themselves.

  33. Wait. So the contradiction of capitalism is that there’s an involuntary, non market government institution manipulating interest rates to encourage debt?
    And then that entrepreneurs want to produce more goods and lower the prices of goods for workers? (Because he left that part out of the analysis of businesses conservation of labor…that’s just efficiency. Produce more with less and therefore there’s more goods for more people and leftover resources can be freed up for use of satisfying other demands. He doesn’t realize that prices go down with productivity??)

  34. Capitalism only work if from time to time it fails, then it must fail to solve it problems and bury them undera artificial or natural crisis.

  35. Given that it ultimately wouldn't be in the best interest for businesses to automate, since they'd be undercutting the ability of consumers to to afford the goods in the first place, wouldn't the market naturally regulate itself to find the optimum operating point by rolling back some of this automation or repurposing workers in a productive way?

  36. these people that don't agree with capitalism don't have faith, and are atheist. capitalism was created by God. God supports work, selling, creating, prosperity, loaning, etc. If the capitalistic system is modeled after the biblical standard then there is nothing wrong with capitalism. sin is what keeps in from working, especially the sin of unbelief. if you have faith in God, then he will provide what is needed for everyone to prosper and multiply. there is no limit on supply with God in control. the universe is expanding constantly, and Gods power and love is limitless, so there is no limit. God said to prosper and multiply when he created us. why would God command mankind to prosper and multiply, but then not provide the resources and knowledge for his will to be accomplished?

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