Capitalism hits the fan

by Richard Wolff
Santa Fe, NM
September 13, 2011

available from Alternative Radio

You can listen to Richard Wolff deliver this address here.

Richard Wolff is Professor of Economics Emeritus at the University of Massachusetts in Amherst and currently a visiting professor at the New School in New York. He is the author of numerous books on economics, including Capitalism Hits the Fan.

This is a crisis. I wasn’t so sure back in 2007, and even into 2008, that it would be a serious crisis. Like so many in my profession, I had not seen just how bad things could get. But that’s all better now. I see clearly. And while most of my colleagues in the profession don’t, because of their commitments over a lifetime, I do want to tell you a little bit about how it is as well as how we got here.

First, how it is. This is the worst economic crisis in my lifetime, which means it’s probably the same in yours. This is the fifth year. This crisis really begins in the middle of 2007. We’re now in the second half of 2011. That’s really bad. Our unemployment is extremely high, not the 9% you read in the newspapers. The Bureau of Labor Statistics in Washington keeps a whole bunch of unemployment statistics. They have even names, U-some number, to distinguish one from the other.

The most important of those is called U-6. Let me make sure we all know what that means. It counts three groups of people. Those looking for work but not able to find it. That’s the 9% you read in the newspapers about. And then it adds two other groups: people who have a part-time job but want a full-time job but can’t find one— there are millions of those people in the United States, and then it adds a third group. These are the people who have stopped looking. And they get different names, depending on which year you look at the statistics. They’re sometimes called—and you have to appreciate the compassion here—“discouraged workers.” More recently, they’ve been given the name “marginal workers,” which is probably less good to be called. When you put all those three together, you get the U-6 statistic. It’s currently 17 1/2%. Not 9%, 17 1⁄2%. That’s not my adjustment of the unemployment data; that’s the official government data. Seventeen percent is one out of six, better than, which basically means that every single American family has somebody in their extended numbers, if it’s one out of six, who is in that group, who is not earning any kind of money that they can live on.

Therefore, this is not a crisis that is a part of our economic system failure. It is a general crisis. I want to drive that point home. It’s not a financial crisis. That is an adjective designed to suggest that the crisis is limited to a part of the economy—finance. As you will see in a few minutes, this crisis comes out of the entire economic functioning of our society and is not particularly financial. It shows up in finance, but that’s not where its origins are and that’s not where its impact has been felt exclusively.

This is a general crisis of our system. So I want to turn, having said that, and talk a little bit about the system.

But even before I do that, one more point. Let’s keep the human dimension of a crisis of these proportions in our minds. Somewhere between 20 and 30 million people are in this U-6 number. That’s an enormous number of people. They have been out of work, on average, more weeks than in any other crisis for many decades. It’s a long-lasting unemployment. When people are unemployed for a long time, they exhaust their savings, they become burdens on other members of their family or circle of friends. Every statistic we know means that those people suffer mental problems, physical health problems, problems in their relationships with spouses and children and parents, and the damage and the scarring from all of that lasts for decades. The social costs of a crisis of these dimensions are staggering. It is a blot on the reputation of economists that there are very few studies that even try to measure what those costs are.

And if we were to add to it, if we had more time, the costs of the millions of people who have been thrown out of their homes through foreclosure actions, that would only add. The millions of people who have seen the benefits that go with the jobs they still have be cut back and the anxiety that produces, that would have to be added. And for all of you that are wondering whether Medicare and Social Security will be there when you need them—and that’s something you should wonder a lot about—how do you measure the costs of those anxieties and those shattered relationships and those strained family structures that come out of all of this? The costs are incalculable. And we’re not doing much about it, so it sits there. Again, we are in the fifth year of this economic decline.

So what is it that’s having the problems? It is our economic system. Let me be clear. I don’t believe it is valuable or useful to look for a scapegoat. I know that some people want to blame the Federal Reserve system, our monetary system. They want to get really angry at Ben Bernanke, which I encourage you to do, but not as an analysis of our difficulties. Then there are those who think it’s the evil machinations of Wall Street. Once again, please, be angry at Wall Street, but as an analysis of our problem, no.

Our problem is that everyone over the last 30 years has played the game of economics as best they could: workers, businesses, government. They’ve played by the basic rules of how this system works. And by doing so, they brought the system to this disastrous end result. So don’t get angry at any one of them. Don’t decide that the evil culprit were those folks who took out loans that they couldn’t afford, those things we later called subprime loans. They, too, were trying to live the American dream, to follow the encouragements to borrow money, to enjoy that, and to pass on the dream to their children. Everybody was doing what the system calls them to do, what the system rewards them for doing, what the system invites them to do. The problem is the system and not this or that player in it.

What is this system? It has a name. This system is called capitalism. It’s been the dominant economic system for several hundred years, first in Europe and then brought here. I want to talk to you briefly about that system. It is extraordinarily unstable, and it always has been. Capitalism bounces up and down. That’s why we have so many words for that: recession, depression, inflation, upturn, downturn, boom, bust. I could go on all night. Cultures develop many words for something when it’s very important in their lives. And that is.

It is so unstable meaning periodically millions of people are thrown out of work. The resources that people normally work with sit idle, gathering rust and dust. Currently, by the way, the government says we are working at about 70% capacity. That’s what it’s called. That means 30% of the tools, equipment, machines, office space, mall space is empty, is sitting idle. We will live in an economic system in which millions of people want work and don’t have it, in which all the raw materials, equipment, and machines they need to work with are sitting there idle. If we had a system that worked, it would put the people who want to work together with all the stuff that they need to work with to produce the wealth that could all make our situations much better. But our economic system cannot and does not put those together. And what’s worse, it’s a-bouncing up and down.

In my classes in the university, to get this idea across, I tell a joke, which I’m going to impose on you. If you lived with a roommate as unstable as this economic system, you would have moved out or demanded that your roommate get professional help. But you live, or most folks do, in an economic system where they make neither of those kinds of demands on it. They live with it. It’s extraordinary.

So we’re in another one, another economic downturn, of which there have been so many. But this one is really bad and lasting a long time, which they sometimes do. The last time we had that in the U.S. was the Great Depression, the 1930s. Let me remind you, it begins in October of 1929, and depending on what historian you like best, it ends 1939, 1940, 1941. My message—it lasted a decade. These things don’t have to be short. And in case you think that only the happened in ancient history, in the 1930s, think about Japan, which settled into a depression in 1989 and is still in it. Still in it 20 years later. That’s why the newspapers are full of the U.S.’s economic position and the great challenge mounted by China. What happened to Japan? Japan is in a terrible economic mess it cannot find its way out of. So is it possible that the one we’re in is going to last a long time? You bet. And could it get worse before it gets better? I used to have to say it could. Now I can tell you that all the current statistics indicate it already is getting worse. It’s extraordinary.

But this one has a particular set of qualities I want now to turn to. This crisis comes after 30 years of an extraordinary economic development of the U.S. Thirty years ago, the U.S. was one of the least unequal societies in terms of the distribution of income and wealth when you looked at the whole collection of advanced industrial economies. Today we are the most unequal. Something happened over the last 30 years that dramatically widened the gap between rich and poor. For reasons you’re going to see in a few minutes as I go through it, we produced enormous wealth for the top, and we wiped out the middle, which probably some of you have already noticed in very intimate and personal ways. So that now we have a small group of rich at the top and a vast group of people struggling to make ends meet.

You might imagine—you would be wrong but you might imagine—that if a crisis happens in a society at the end of 30 years of extraordinary wealth at one end of the society and a hard time for everybody else, that the system would try to fix its dilemma by asking those who have done well over the last 30 years, who are the most able to pay now compared to everybody else, to kick in and do something to help the system get out of its mess. But that’s not what’s happening. This society is trying to solve its economic problems by having debates in Washington on what? On how much to cut Social Security, Medicare, Medicaid, aid to education, helping students go to school. It’s extraordinary. The solution to an economic crisis coming at the end of a tremendous explosion of wealth at one end of the distribution is by taking more away from those who have had a hard time for the 30 years, just to avoid taxing those whose have the most and those who have done the best? How is that possible?

Again, to drive it home, that’s not what happened in the U.S. in the 1930s, which came after a period when much less of an inequality of wealth had been experienced. Let me remind you of what happened the last time the U.S. faced this situation, because the contrast could not be starker. In comes Roosevelt on a program of balanced budgets. A very conservative Democratic leader was our President Roosevelt. But three or four years into the crisis, when it looked as bad as ours now looks, when the unemployment kept getting worse, even worse than it is today, Mr. Roosevelt underwent a transformation. He became a different president. I would like to suggest it was because he saw the light. Clearly, that was not the case.

What he saw was the heat. And the heat was coming from below. The trade union movement of the U.S., just to remind you, had the most explosive growth in the history of the U.S.—we had never had it before, we have never had it since—sweeping across America’s basic industries, steel, auto, rubber, chemical, all of them. The CIO organized millions of workers whose reaction to the Great Depression was to become more militant on the left politically. Beyond that, the Socialist Party had a renaissance of membership and the Communist Party became an important political force, more than it had ever been, more than it has been since, a lot more. Mr. Roosevelt faced a mass of people whose reaction to a protracted depression was to demand fundamental help from the government and fundamental change. So Mr. Roosevelt saw an opportunity and a pressure.

So what did he do? Faced with unemployment, he did something very different from what we see today. He said, If we’re going to solve the problem of unemployment, and if the private sector is either unable or unwilling to do it, well, then I’ll do it. Between 1934 and 1941, Roosevelt and the federal government created and filled 11 million jobs, paid by the federal government, giving those people and their families and their communities a job instead of a dole, a decent income, the ability to maintain their mortgage payments and so keep their homes, etc., etc. In today’s numbers it would be roughly double that number of people, and that would be a major address of unemployment issues. That’s what he did.

In case you’re wondering how that was paid for, he went to the corporations and he went to the rich, and he said to them, My fellow rich Americans, you’re going to pay for it. And you’re going to like it, because you’re not doing anything to get us out of this mess from which you as rich people are endangered and you as corporations are suffering. You’re not able or willing to help yourself, so I’m going to do it for you, but you’re going to pay for it. And they did.

A couple of statistics. You know, I’m an economist. We have to pepper our conversations with statistics because it helps the average person think we really know what we’re talking about. So here’s one. At the end of World War II the federal government relied, as it does to this day, on taxing individuals and taxing corporations— individuals’ incomes, corporations’ profits. In 1945, for every dollar that Washington got from taxing individuals, it got $1.50 from taxing corporations. Corporations paid 50% more in toto than individuals. What’s the relationship today? For every dollar that the government gets by taxing individuals, it gets from corporations—ready?—25 cents. That is a massive shift over the last half century of the burden of taxation off of business and onto all of you. But that’s only half the story.

Here’s the other half. Roosevelt went to the rich people and he said, I’m not just going to tax the corporations to pay for the jobs program, I’m going to tax all you rich people. And he really went after them. First, in the 1930s he said, I’m going to raise the rates of taxation on rich people. You’re going to pay a lot more than middle-class people and low-income people, a lot more. The rates were jacked up into the 90th percentile. What does that mean? For every dollar over, say, $100,000 or whatever the cutoff was then, for every dollar over that that a rich person gets, he or she would have to give the government 90-plus cents, keeping the remaining 10 cents, roughly, for themselves. Wow.

In 1942 Roosevelt makes an even more dramatic proposal as president. He says, I believe we ought to have a maximum income in the U.S. Yup, the president. And what was it? $25,000 a year? His proposal was, every dollar you earn over $25,000, the federal government is going to come and take it away and use it to fix this economic system. Of course, wealthy people, as you might imagine, didn’t like this, and the Republican Party opposed it. The Republican Party threatened not to allow the national debt to be raised back in the 1940s, just like they did a few months ago. Roosevelt made a lot of public speeches and they fought, and they reached a compromise. Okay, said Roosevelt, I won’t insist on a cap, a maximum income, but in exchange I want the maximum tax rate to be 94%. For every dollar over $100,000 that rich people get, 94 cents will go to Washington, you get to keep 6. And the Republicans went along. That became the law.

In the 1950s and 1960s, it was 91%. In the 1970s, it was 70%. What is it today? 35%. Are you with me? Over the last half century, the top income bracket, for the richest people, was dropped from the 90s to 35. That’s a tax cut. The last 50 years in this country, if you just look at our tax system, is a sign that the issue in America isn’t: Will there be a class war? We’ve had 50 years of class war, and we lost, because we’re paying those taxes. We are the middle, we’re paying the taxes. It’s so grotesque that we even have in the U.S. rich people, really rich people,—I’m thinking, as you probably can guess, of Warren Buffet, one of the richest, who is making a career these days of explaining that there is something wrong in a system in which he pays a lower rate of taxes, earning hundreds of millions of dollars a year, than any of the people in his office, the secretaries and the clerks. He’s able to see it. This is a society that has relieved the rich in a staggering way while making them richer over the last 30 years. Stunning.

Their plan right now? What are they going to do to help this economic crisis? Nothing. No tax increases. Last December you all watched as Obama tried to see whether we could, for people over $250,000, not give them the tax cut that Bush had gotten through, make them pay a little more. You know what his proposal was, for those of you who don’t watch the numbers? To let it go from the 35% it is now up to the lofty level—ready?—39%. That was defeated, and the President accepted that defeat. Wow. They weren’t even willing to pay another 4% to help the situation. So we don’t have the 1930s, we don’t have Roosevelt, we don’t have a jobs program, we don’t have a tax the rich. We have the opposite of all those things.

A few days ago the president of the U.S., in what is arguably one of the major speeches of his campaign for the presidency next year, had a jobs proposal to make. What was it? Exactly the same as the last time. He’s going to provide incentives to business to solve the problem of hiring more workers, and he’s going to give them big orders to help rebuild our infrastructure. For those of us who watch these things, it’s a little painful. The last time we had a program like this, it was for $800 billion, two and a half years ago. Now the president, when the situation is worse, is proposing a program whose price tag is about $400 billion. The problem is worse and the program is half as big. Hello. Where is this going? Nowhere.

And in that lies a lesson. Here’s what that lesson is: Capitalism has always been highly unstable. And here’s how the downturns of capitalism have always been managed: You wait. You wait for what? You wait for the unemployment to convince more and more people, based on their desperation, to offer to sell their ability to work for less money. Wages go down. As more and more businesses collapse because the economy is in such bad shape, guess what happens? They have to sell their equipment at secondhand, fire-sale prices: their computers, their machines, their fleets of vehicles. The price of the equipment, the inputs to business, collapse, just as the wages collapse.

Let me give you the example that’s so stark in America today. The autoworkers, who used to be among the best-paid workers in the U.S. They were getting up until recently roughly $28 an hour plus benefits. They had to sign a contract. It’s different now. All new employees get half of that—$14 an hour. And they have tens of thousands more people applying for those jobs than they have jobs in Detroit. If you want to see where the future of American capitalism is, go to Detroit. It will terrify you, what you see.

So the system corrects itself by waiting. What are they waiting for? Until the wages get low enough and the costs of inputs from collapsed businesses become low enough that those capitalists who have survived see an opportunity for profit. At such low wages, at such low costs of doing business, now it becomes interesting. So we wait as a society. We wait until it’s profitable again for capitalism to renew the investment process and hire people. Then the economy turns up until the next bounce down.

Then what is all this talk in Washington? What are all these events about policy? A thesis I want to ask you to think about—that it’s all a kind of diversionary political theater. We have the Republicans and the Democrats positioning themselves, arguing: What are we going to do? blah blah blah blah We should do A. No, we should do B. But in reality they’re just waiting. We’re all supposed to get excited in the debate between Republicans and Democrats, not because either of their policies can or will do anything. We’re waiting until the system can once again get going, when enough people have suffered enough to accept $14 instead of $28 an hour. And then the system comes back. Extraordinary.

And from some of your faces, let me drive it home with an example, with some numbers. Another thing we do as economists, numbers. We’re supposed to get you to believe that by talking about numbers it’s all more real than it otherwise would be. It’s a game, but it’s the game we know how to play. So let me do that for you.

The federal government’s budget right now in the U.S. is a peculiar one. Voted by Republicans and Democrats last year, the current budget works as follows: The government of the U.S. is scheduled to spend $3 1/2 trillion. That same budget has the U.S. government bringing in in taxes on individuals and corporations and a few other things, like rubber tires and gasoline and alcohol, about $2 trillion. Are you with me? The difference between what the government is supposed to spend is $1 1/2 trillion, the difference between 3 1/2 and 2. What is $1 1/2 trillion? It’s kind of a hard number to get your head around. It’s $1,500 billion: $1,500,000,000,000. That’s the deficit. If you’re upset about deficits, which every politician in Washington claims to be, you’d have to be upset about the fact that in this year alone we are going to be at deficit, that is, spending more than we earn as an economy, as a government, to the tune of $1,500 billion.

So what was the debate in Washington between Republicans and Democrats all about? The Republicans came in with a dynamic proposal to cut the deficit by the huge number of $100 billion. Hello. How big is the deficit? $1,500 billion. So if the Republicans proposed a draconian program to cut $100 billion, they’re not proposing anything. The Democrats came riding into the debate saying, That’s much too much. We only to want cut it $30 billion. And then they fought for months, threatening to stop the government, and they reached a historic compromise, $38 billion—that was the number— $38 billion out of $1,500 billion. To take this seriously you have to be crazy. You’re watching theater. Bad theater.

But it’s also dangerous theatre. We’re scheduled to have a deficit this year of $1,500 billion. Next year’s deficit is scheduled to be over a trillion dollars. We are borrowing money like it’s going out of style. Our debt now is about $14 1/2 trillion. That’s what we produce in an average year. Our debt is 100% of the output of goods and services. It’s so bad, the level of debt, that the Standard & Poor corporation a few weeks ago made a big splash by reducing the creditworthiness of the U.S., which you always do when someone is borrowing way too much, too fast, which we’re doing, and which neither political party is doing anything about.

Why? The answer is simple. The way to reduce our deficit is to tax the wealth. Since that’s politically impossible in the U.S., we can’t do it. But to appreciate the full irony, we are borrowing ourselves into oblivion. We are reproducing the exact behavior that got that little country of Greece into the mess it’s now in. And the reason is, we don’t tax the rich. So the government, in order to spend $3 1/2 trillion when it only taxes $2 trillion, has to borrow it.

Now, if you get the next point, you will understand modern economics. If the government has to borrow $1,500 billion to perform the activities we want it to perform, and therefore it has to borrow $1,500 billion, who do you think it borrows it from? Here it comes. Why, of course, from the rich people in the corporations who have the money because the government didn’t tax them. From the standpoint of corporations and the rich, follow the logic. Instead of paying taxes, the way they used to, they now have a much better deal. We corporations and rich people don’t pay the taxes, which if we did, the government would take it, end of story. Instead, much better: We lend it to the government, which has to pay it back. And while we wait, it pays us interest.

When I made my criticisms of capitalism as I was learning economics, I remember that the single most powerful critique of what I was saying, given to me by my professors, and later by my colleagues, was, Well, yes, there are these problems. But the bottom line is, Capitalism delivers the goods.

Well, you’ve got to stay with an argument like that through good times and bad, don’t you? Capitalism is not delivering the goods now. It’s delivering the bads, big time. And that’s going to change this country’s history.

Let me turn in the time I have left to offering two things briefly: one, a brief explanation of how we got into this mess over the last 30 years, and then a suggestion of what we need to do to get out of it.

First, how we got into it. Ours is a peculiar country. From 1820, shortly after we became independent, to 1970, the U.S. paid higher wages to its workers year after year. Stunning. No other capitalist country did it. It developed in the U.S. the idea that every generation lives better than the one before, there’s an American dream, if you’re an immigrant, come here, you work hard and you will make more money. And it worked. It was extraordinary. It happened because we had a labor shortage here. Capitalists were successful: they made money, they built their businesses up. But they always ran against the problem—not enough people. We weren’t very nice to those whom we found here—some of you know that story, particularly in this area—so they weren’t available. We had to bring people, and we had to have high wages to bring people here. And when they came here, they wanted to run off and have a farm somewhere in the West, so we had to keep paying higher wages to keep them here even once we got them.

In 1970, all that changed, stopped. We don’t have a labor shortage anymore. Here’s why. We replaced huge numbers of American workers with computers, starting in the 1970s. We moved jobs out of the U.S. because that 150 years of rising wages had made wages higher here. So corporations said, Oh, you see, the wages are higher here. I’m going to China. They’re much lower. So there was less demand for people to work. At the same time in the 1970s, women in America, for a whole host of reasons, demanded jobs, paid jobs, and immigrants, particularly from the South, came into the U.S., the latest wave. Women and immigrants looking at the same time as there were fewer jobs. All businesses in America, Main Street and Wall Street, discovered they didn’t have to raise wages anymore, there was no more labor shortage. So they didn’t. Statistic: The real wage in the U.S. today, the value of an hour’s worth of work for the average worker adjusted for the prices you pay, in 2011 is the same as it was in 1978. Thirty years of no increase of wages.

American families were traumatized. After all, we grew up in a society where you’re supposed to live the American dream, do better each year, give that to your children, etc. So Americans reacted, working people, the way traumatized people often do, particularly when you can’t discuss it. There was no discussion in America in the last 30 years about this sea change. So Americans did two things.

  1. They sent everybody in the family out to work. Another statistic, OECD: Americans do more hours of paid labor per year than the working classes in any other country on this Earth. We work ourselves to death.
  2. And when that wasn’t enough, the American working class became a pioneer in a new way. It undertook a level of debt no working class had ever undertaken before. We had to develop a whole new instrument, the credit card, and distribute it to everybody. And many of them. So you could really accumulate debt.

By 2007, of course, what? The American working class is exhausted. It can’t work anymore, it is stressed beyond words because with the women entering the labor force, they become exhausted, they can’t hold together the emotional life of American families the way they once had. The stress levels are unbearable. And then that debt which you’re freaked out about because you don’t think you can pay.

So the collapse happens in 2007 just where you would expect it—the inability of an overindebted working class to make the payments. Then the whole house of cards collapses. That’s why we’re still in it now. Corporations are not going to go invest and hire workers. Why should they? Nobody’s buying what they’re producing. And there is no prospect that they will. Yesterday’s Wall Street Journal contains a wonderful article about the Procter & Gamble Company and how it has to reorganize its investment programs. Because they used to direct much of their advertising and their production to the vast middle class of the U.S., and their extensive research shows them it’s not there anymore. So they’re cutting their business into two parts: the part that deals with rich people and the part that deals with—and I won’t use any pejorative terms—the rest. No middle. It’s over.

Now, 30 years later, the American people are coming to a recognition that they postponed for a generation the end of rising wages. They substituted borrowing to keep up the illusion that they were living the American dream. They can’t do that anymore. It’s over. The realization of that is just beginning to sink in to the American people.

The corporations already knew it. Forty years ago they moved production out of the U.S. Fifteen years ago they started moving white-collar jobs out of the U.S. And today they’re realizing that their markets are only outside the U.S. They’re done here. You’re watching that play itself out and the desperate struggles of a society trying to come to terms with it.

What do you do about this situation? Well, you could try to do what some folks suggest: Let’s get a bigger stimulus. What? How are you going to do that? Are you going to borrow even more money when you can hardly stand the level of debt of the government? There are lots of voices saying that. That’s not going to happen. Here’s another thought. Let’s regulate the businesses. They shouldn’t do this. We had the greatest explosion of regulation in American history in the 1930s. What has happened ever since? The business community used the profits they had to systematically evade, avoid, weaken, or overturn every regulation. What in the world makes you think, having learned how to do it over the last 50 years, if we throw them a new bunch of regulations, they won’t do the same. They’ll do it, and they’ll do it faster, because they know better how to do it.

Here’s the conundrum that I want to leave you with. If this is a systemic problem, if everything that has happened comes out of banks doing what they do and corporations doing what they do and workers doing what they do, trying to make a living within the rules of this game, if it’s a systemic problem, then we have to overcome a 50-year taboo in the U.S. We have to talk about the system. We have to ask the question, like mature adults, the way we question our educational system, our transportation system, our health delivery system. Does it work, is it serving our needs? We have to ask that question about the economic system, too. Capitalism. Does it meet our needs? Did it and does it continue, and is it reasonable to go that way?

I would submit to you that it cannot, that the benefits of capitalism have been won. The gains it is capable of have been achieved. It’s no longer working, and we’re not getting anywhere by refusing to face that reality. So what change would I propose? Would it be a return to the examples and experiments of the Soviet Union and China? No. No.

For me, the change has to come at the base of society. We have a problem in the way we organize the production and distribution of goods and services in America. We use an institution called a corporation. Therein lies the problem. Every day in America people come to work from 9:00 to 5:00, Monday through Friday. We help to produce the goods and services that we all depend on. At the end of each day, when our work is done, we go home. We don’t take with us the goods and services we’ve produced.

You might have wondered—and I’m sure you all did—what happens to those goods and services we produce that we must leave there? Well, someone makes a lot of decisions. That someone is a board of directors, 15 to 20 people, who run most of the corporations in this country. And who selects those 15 or 20 people? A group called the major shareholders, another group of 15 or 20 people. Fifteen or 20 people select the 15 or 20 other people. Who make what decisions? What to produce, how to produce, where to produce, and what to do with the profits.

Folks, what they do is understandable in this system. They use the profits to shape politics, they use the profits to shape the society they live in to keep themselves in the wonderful position of being among those who make the decisions and get the profits. They’re the ones who make the decisions that make our economy work the way it does. If you don’t want it to work the way it’s now working to deliver the bads, then you’ve got to deal with this problem.

And what would that mean? It’s an idea as old as the U.S. and older still. You’ve got to change the way organizations like corporations work. You have to make it for the first time the rule that the people who work in the corporation make the decisions. You come to work Monday through Thursday and you do your job. on Friday you come to work dressed down a little bit, relaxed, and you don’t do your regular job. You sit around all day Friday with your fellow workers having meetings to decide democratically, one worker, one vote, what to produce, how to produce, where to produce, and what to do with the profits.

How do you summarize what I propose? Here’s a thought. Democracy at work. Because, after all in, a society that prides itself on believing in democracy, that the people who have to live with the decision ought to be participants in making it, something we claim as a nation to hold dear, it’s kind of strange, if you think about it, that the most important activity of our adult lives, what we do five out of seven days, the key part of each day—work— should be organized in a way that isn’t democratic at all, where all of us who work have to live with the decisions of a board of directors over whom we exercise no power whatsoever. Why would democracy be good, but not at work? Either it’s good or it isn’t. This is long overdue. This is an alternative way of organizing your economy.

And, boy, would it lead to different results. Let me close by giving you a taste. Let’s go back to the 1970s, when corporations all over America realized the labor shortage was over and we don’t have to pay rising wages. Suppose a decision on wages was not made by the board of directors but by the collective of workers. Do you think they would have stopped the 150-year history of raising wages? Unlikely. Do you think they would have voted to move production to China, thereby depriving themselves of a job? Unlikely. You think they would have paid their executives staggering amounts of money while everybody else’s wage was stagnant? Probably not. In short, we would have had a completely different history as a nation over the last 30 years. If their wages had kept going up, as they had been able to do for 150 years, then they would have had to borrow so much, and we wouldn’t have had the credit explosion, and everything would have been different.

A mature nation that isn’t afraid should, especially now that the Cold War is 20 years behind us, finally be able to look squarely in the face at an economic system that isn’t working and to be able to say, Let’s have a national debate over the strengths and weaknesses of the capitalist system as it works in the U.S. and as we can compare it to alternative arrangements, one of which I’ve just sketched briefly for you. It is way too dangerous not to have that debate. It is way too costly. Think of the millions of families with which I began tonight’s talk.

In case you think it’s unthinkable or impossible, think about an unusual political party that arose in one of the most powerful capitalist countries over the last few years. I’m speaking of Germany. In Germany, a new political party, brand-new in many ways, formed 10 years ago. To make it clear what it believed in, it called itself Die Linke in German, meaning “the left.” Hint. Here’s one of its basic slogans: Germany can do better than capitalism. In the last national election they got 12% of the vote. Because Germany has a system of proportional representation, if you get 12% of the vote, you get 12% of the deputies in the parliament, which they have.

If it is possible among the German people, given their history, to have a party that makes this part of the national debate, which it is, then there is no reason why a determined American public, aware of the dilemmas it faces economically, cannot rise to the challenge of making a comparable determination.

It is very dangerous, the situation we’re in. To do less than that dishonors whatever we take seriously of the American tradition and is no service to one another or to the rest of the American people, who need once again to see a movement arise like the one, although it will be new and different, that got Mr. Roosevelt to change so dramatically in the 1930s. We can’t ask Mr. Obama to do that for us. As with Roosevelt, he’s going to do it, if he ever does it, because we have independently built the pressure below demanding different kind of responses.

I hope these arguments are of some interest. Thank you for your attention.

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