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Since the 2008 financial crisis we have been consistently told that the economic recovery is going to plan. The problem with this line is that very few people believe it and even fewer have seen it.

So what is the gap in capitalist thinking that stops the real economy recovery? Why is the 1 percent now concerned about capitalism’s ability to deliver all it has promised? Is the current economic malaise across developed economies permanent or just a passing trend? And what’s next for an economic system that now looks intellectually bankrupt?

For an invaluable insight into these questions, Renegade Inc. caught up with the Marxist professor of economics, Richard D Wolff, who began by talking about the nature of the American dream – in reality, for many, a nightmare.

American nightmare

Wolff compared the state of the American dream to the relationship between a tortured dog and the actions of its owner:

“You know there’s a way to torture a dog. You put your little biscuit, the dog jumps. You tell the dog jump again, you put the biscuit. The biscuit is always out of reach and at a certain point – if you actually do this experiment – the dog stops jumping. The dog isn’t stupid, after a while realizes, “This is what it is.”

In other words, the American dream the establishment elite repetitiously dangle before the American people is tantalizingly always just out of their reach.

“For the mass of the American people”, says Wolff, “they are either at or just about to get to where the dog is when it stops jumping.”

Wolff continued:

The 1 percent hold the biscuit. The metaphor I would use is, the whole society is on a speeding train roaring down the track. It’s already visible that there’s a stone wall that the track goes right into and that if you don’t do something this fast train is going to hit that wall and everybody [on the train] knows it but they’re having such a good time. The cocktails taste so good that nobody does anything even though in the conversation they talk to each other about the train and the wall. There are an increasing number of major big capitalists who understand that they’re on that train and where the train is going and what’s going to happen.” 

US venture capitalist, Nick Hanauer, for example, is one such person. Hanauer has publicly acknowledged that unbridled capitalism does not serve anybody’s long term interests, least of all capitalists themselves. And US billionaire capitalist, Ray Dalio, has similarly highlighted the structural problem inherent to the capitalist economy. 

In other words, the train will hit the wall, not because of the 1 percent behind the wheel driving it (they are the symptom), but rather the fate of the train has been structurally determined. The 1 percent “are in this peculiar place of not wanting to understand that. They will assure you that they love capitalism and capitalism is wonderful. Dalio makes that clear”, says Wolff.

Keeping the goose alive

Bernie Sanders’ economic adviser, professor Stephanie Kelton, has stated that the ‘reformer’, Dalio, has talked about creating the conditions from which the redistribution of opportunity will likely arise. Indeed, Wolff himself acknowledges that capitalists like Dalio, Hanauer and Buffett understand that the extreme ‘neoliberal’ variant of capitalism needs to be reconfigured in order to save the system from itself:
MMT – Letters from America

“Capitalism has to be brought back because if you don’t you’re going to kill the goose that lays the golden eggs. You are going to destroy the game”, says Wolff. 

 ”Rational’ Capitalists who stress that in order to keep the goose that lays the golden eggs alive you have to feed it a different kind of food, are more closely aligned to centre-left anti-neoliberal political figures like Jeremy Corbyn than they are to the globalisation-booster economics of the extreme right. Wolff makes this argument in relation to Roosevelt’s support of organised labour during the 1930s as the catalyst for improving liquidity in order to boost profitability within the system.

Roosevelt understood in the 1930s (as does Corbyn today), that a redistributing from capitalism is a relative ‘win-win’ situation for workers and the system as a whole. By referencing the situation in the US under Roosevelt, Wolff makes the additional point that a class conscious electorate that threatens revolution, is more able to take ownership of the economy by forcing the hand of politician’s into accepting the mutually-beneficial capital-labour relationship predicated on the redistribution of wealth:  

“The unions were led by socialists and communists almost exclusively. It was a very powerful thing when they went to Roosevelt and said, ‘Look we elected you. You’re a new president. You’ve got to do something in this depression that we have here in the thirties,’ – and the nice part was – ‘we would love to help you do that.” The nasty part was, ‘If you don’t you’re not going to be president very much longer.’ And they had that in their power to make that come true. So he went back, called his rich 1 percent friends and he came back and he cut them a deal. He said, ‘OK, I will do for you more than you’ve asked but all that talk from you socialists and communists type about revolution, that’s got to stop.’ 

As Wolff explained, a compromise deal was struck:

“He [Roosevelt] went back to the rich people and what he told them is ‘the government’s bankrupt, too many people unemployed, there’s no money and I’ve got to do big things for the mass of people. The only way to pay for that is you. You have the money, you’ve got to give it to me. I’m going to tax you half of it and you’re going to loan me the other half.’ I’m going to create Social Security and unemployment compensation’. They went crazy. And then, you know, 15 million jobs were created with government money paying people a salary so they could stay in their homes. And it was all tax and borrow from the rich. We never had this before. A massive redistribution of wealth from the top to the middle and the bottom.”

Out of kilter

Wolff alludes to the fact that the intervening decades have been defined, not by the redistribution of wealth downwards, but its movement in the opposite direction. The system has veered out of kilter. But among the majority of the ruling class, there has not been any acknowledgement of the structural issues that caused it. It is through Marx that the said issues can be understood. However, Wolff says that Marxist economics is not taught at the universities the elites attend.

“I went to the same school they did. There was no criticism that was structural, there was no exposure to Marxist thinking and… or for that matter other kinds of thinking that are critical of the consensus… So they just don’t know”, says Wolff.

What is needed is a sense of collective humility: “They have to open up to learning everything that they were deprived of learning for the last 50 years. They have to learn that there are other ways of organizing an economy. But what’s really causing that is not so much the breakdown of this system, it’s the terrible problem of China, that’s what eats them”, says Wolff.

The economics professor explained:

“China is more successful than they are. China’s growing much faster. The real wages in China have gone up four times in the last 25 years. American wages are stagnant and flat. First they [the establishment] attempt to refute the numbers.”

When that fails:

“they retreat and the retreat position is, ‘Well they are doing well because they allowed private enterprise’. “In other words”, says Wolff, “the story now becomes, ‘OK, if they’re any good it’s because they’re like us.”

Wolff continued:

“I make fun of them when they do that. I say to them, ‘Look what you’re doing. First you try to fake that there isn’t something going on you have to worry about, then you admit it and then you tell me the only reason there’s good stuff over there because they’re like us” – it’s like a child – and I say, you know,  ‘This is childish stuff. What about the Socialist alternative?’ That’s a trap. I do that on purpose. They have no f**king idea. You know what comes out of their mouth? ‘Well socialism is when the government…’ I say, ‘It has nothing to do with the government.’ Marx never wrote a book about the government, didn’t give a sh*t about the government. This is about reorganizing product… and then I give them a lecture. They don’t know anything.”

Pavlovian reaction

Wolff infers that this is all a Pavlovian reaction to Socialism and Marxism:

“Socialism for them is Stalin or something. This is in their head. For most Americans when you’d ask them about socialism you can see it. The propaganda program here has been the government is bad. It’s the way it works in this country. For the last 60 years that I’ve been awake, the way they handled the socialist threat was by saying Socialism is when the government does everything, step one. Step two. Whenever the government does anything, it’s inefficient and wasteful and crude and ugly and smells bad. OK, therefore socialism is crude, ugly and smells bad and they don’t want anything to do with it.”

Wolff adds that the aim of the propaganda is to distract the masses away from the underlying causes: 

“The beauty of this simplistic ideology is every time capitalism sticks it to the people they get angry at the politicians.

If you lay off a thousand workers in your town in America, the people will get angry at the congressperson or the senator. But they won’t get angrier at the employer who fired them. When they get thrown out of their house because they’re not making their mortgage payment it’s not the lenders, it’s not the bank. You give people an entire ideological structure. Badness is government. Badness is Socialism. Socialism is government. Hate them all and you’re safe.”

As a socialist, Wolff has had to figure out a strategy that deals with that reality:

“One of the ploys”, says Wolff, “is to make it clear to them that Socialism isn’t about the government. When I talk about transforming the enterprise so that the workers democratically control it, I call it the democratization of the enterprise. In this country democracy is considered ‘good’ so I’ve made a ‘good’ thing out of socialism and they don’t have the apparatus to refute it. They’re stuck. And then I run.”

A blip?

In the context of what Wolff believes is the American nightmare, the Marxist economist has been surprised at the extent to which many on Wall Street, as well as social democratic and progressive movements, agree with him that the crisis in capitalism isn’t just a blip, but a structural issue within the economy:

“Just to use myself as an example; I’ve done more public speaking in the last five years than in the previous 40 because the demand for what I have to say is suddenly enormous. And the questions are not combative, they’re questions of clarification. I having a wonderful time because everybody wants to learn about what’s wrong with this system. Why is this the first generation of students to be burdened by levels of debt that are literally unmanageable, impeding their choice of partners, their question of whether they have children or not and all the big questions of life?”, says Wolff, who adds:

“People are discovering that as the American Dream is out of reach, there’s no hope they’re going to get it. There’s no sign that the downturn – which really hit home in 2008 – is ever going away. And you know there’s an ironical way… it’s worse in the United States. The word recovery appears ten times a day in the mass media. This is a kind of torture because you’re telling the people there’s a recovery but they’re not experiencing it.”

So instead, people turn inwards:

“We’ve been trained to blame ourselves”, says Wolff. “You must be doing something wrong that you aren’t participating in what everybody says is the big recovery because your job is no good, you had to substitute for your old job – which had income and security and benefits. With the new ones you don’t know one week from the next what hours you’re going to work and what kind of work you’re going to do. The modern economy with its euphemistic gig or shared economy is no substitute for the reality – as Americans like to say – that there’s too much month at the end of the money.”

In the view of Wolff, when people stop blaming themselves, they tend in large measure – led by president Trump – to scapegoat foreigners:

“We started off with a trade war with the Canadians and Mexicans – nearby foreigners that everybody knows about. When that didn’t go too well and ended up in a treaty that’s really not much different from the old one, we had a new and more scary foreigner, the Chinese. Trump has already said Europe is going to be his target. He announced tariffs on wine and cheese. [Poor foreigners] are also depicted as threatening us. Notice the language – an invasion. This is hyped language that is completely out of control”, says Wolff.

Alternative, structural critique

“You have the revival of an interest in alternatives to capitalism which are not going to be brushed away with the usual dismissive references to Stalin or something. This won’t work anymore. People are not interested. That’s ancient history”, says Wolff, who adds:

“I’m an economic historian and I specialize in how economies change over time so I noticed something. Every economic system the human race has ever displayed has the following characteristic; it’s born, it evolves over time and it dies. The burden is on the lovers of capitalism to give me a reason to believe it won’t go through those stages the way of every other one. Feudalism did, slavery did, primitive tribal societies did. So capitalism was obviously born and has evolved which means the next stage is it dies. And then the only interesting question becomes, when, how and soon?”, says Wolff, who believes that this latter stage might already be with us:

“I’m beginning to wonder this could maybe be the death throw [of capitalism]. Watching the British destroy themselves around Brexit; watching this country not only elect a Trump but continue to support him enough that he can continue being in the naughty boy position and behaving outrageously. I think these are signs of social disaffection.”

Wolff continued:

“Clearly the splitting of our country intellectually and ideologically, the polarization – particularly on the right- has gone very quickly. The imagery – even the colourful imagery – of the end of times, the use of biblical references to catastrophe, the number of films about a tsunami or a hurricane – is already there for the country. The language of the president are all signs.”

Where next?

The key problem for Wolff going forward relates to how society will be able to shift to a new paradigm in relation to the production and distribution of goods and services. Specifically, according to Wolff, the problem that has to be addressed, and which Marx identified, is the undemocratic nature of the capitalist system:

“We do it in a peculiar way in capitalism”, says Wolff. “We have a tiny minority of people – the owners of the enterprise, the board of directors, the major shareholders, whatever you call them – and they have all the power. They decide what the enterprise produces and what technology is used. They decide physically and geographically where the production is and then, most importantly, they alone decide what to do with the profits that everybody has helped to produce. This is not democratic. This is not egalitarian. This is an autocracy, a dictatorship of a tiny group of people inside every factory, every office, every store, in capitalism.”

Wolff adds:

“Since you spend most of your adult life working five out of the seven days – the best hours of the day – you’re in the workplace. If you’re committed to democracy that would have been the first place you instituted. We’ve never done that. The United States as a country goes around the world claiming it’s bringing a democracy. But you can’t bring it because you don’t have it. You don’t have it to bring. And I would argue that many of the key problems like inequality could be better handled by a transformation of the enterprise than by anything else that has been tried to this point.”

For Wolff, inequality “is the raw end of the nerve of what’s going on. The exponential rise of a company like Amazon is symptomatic of the growth in inequality and of a capitalist system found wanting:

“Mr. Bezos and his company, Amazon – invited the cities and towns and counties of the United States to compete with one another for the decision of where he is going to build his second headquarters. Town after town used up very scarce resources of planners and city officials to put together a glowing proposal [in order to attract Amazon to their locales]. They were begging on their knees. Would this rich man give them some jobs? And they were prepared to give enormous subsidies. New York state and city offered three billion dollars. We are going to give a man whose personal wealth is one hundred and fifty billion dollars an extra three – which he doesn’t need – to make his company – already very profitable – even more profitable.”


“The people in New York rose against it – another sign of change – so he couldn’t come here. But look at this spectacle and nobody is lost on that. The country divides into those disgusted by what it means and those who defend it by the argument, ‘We need those rich people.’ That’s not a sustainable argument. They will lose that in the long run [because it’s based on the ‘trickle down’ myth].”

“What we need”, says Wolff, “is fundamental change. And most of that is coming over to our side. It’s not going to be impressed by a fat old man who wants to make America great again. That’s the past. That’s old. My guess is we’ll probably be stimulated – if that’s the right word – by some event. You have put a generation of students in an impossible situation. Students are young, not yet settled in life. You have fooled them for a while. You’ve told them that the gig economy or the shared economy or the hustle economy is an exciting new place… most of them can’t manage in that way, they’ve learned that. They’re now telling the younger people, ten… five or ten years younger than them – that they go out on dates with – that this is a dead end, that this is a hype that is not really available to them. Meanwhile they can’t live in an apartment by themselves and have to double up with roommates.”

Wolff added:

“American capitalism from the end of World War II to the present, built its own defense on the notion, ‘We produce a big middle class and we raise your wages. Now this is all being taken away. That’s a very different experience. If you had it and if you were led to expect it because your parents promised you the American dream and you’re getting the American not so dreamy, the reaction becomes easier for you to break from something. And to see the break as not your fault of not conforming but the failure of a promise – which is what it is.”

Wolff concluded:

“I knew that something fundamental had shifted when my whole adult life of teaching about how monetary and fiscal policy can manage capitalism was exploded by the crash of 2008 into smithereens. I don’t think the profession has really recovered. The old neoclassic community are holding on but they’re holding on to a sinking ship. If you look at most graduate programs in economics, the majority of students today are not Americans, they’re foreign students who are here to get credentials that they can use when they go home. But here in this country it’s a profession with very few interested people. It is compromised – in my judgment – beyond rescue.”

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