Richard Wolff on Capitalism’s Failure to Protect Americans During COVID-19 Pandemic
Interview by Andrew Perez and Kelly Wilkins
This interview was originally published by our partner Media For Us.
We spoke with professor Richard D. Wolff about the normalization of American workers’ sacrifice and how the contradictions of capitalism relate to the United States’ inability to adequately handle the COVID-19 pandemic. Wolff is a Professor of Economics Emeritus at the University of Massachusetts, Amherst, the host of the weekly radio program Economic Update, and the co-founder of Democracy at Work, a non-profit organization which produces media and live events and advocates for the democratization of workplaces.
This interview has been edited for brevity and clarity.
Media For Us: Can you speak about the contradictions of capitalism and how this relates to how a full economic closure can be justified that both requires workers to stay home and provides little or no relief?
Richard Wolff: The best way to describe the consequences of capitalist contradictions as they impact all of this is to give you a statistic, which in my mind exemplifies everything. The United States, with its roughly 325 million people, has roughly 4.5% of the world’s population. As we speak, it also accounts for 25% of the world’s COVID-19 cases, and roughly the same percentage of COVID-19 deaths. That is unspeakable. In a country that is arguably the richest in the world, with a highly developed medical system, transportation system, education system, and everything else, one would normally expect that the performance would be better than average. That the performance is not only not better than average, but wildly worse than average, is a screaming signal that something is terribly, terribly wrong. And while it might be tempting to blame president Trump, or anybody else, this is a system failure.
I’m going to articulate that by answering your specific question about the capitalist contradictions. Let’s start with the portion of blame that attaches to the private sector. In order for this COVID-19 virus to have been properly prepared for, and properly contained after it hit...And remember that viruses are nothing new, that a hundred years ago we had the so-called Spanish flu that killed 700,000 Americans and that more recently we’ve had MERS, SARS, and Ebola. There is no excuse for not being prepared, and indeed our epidemiology community had been talking about this and publishing research about this all along. So our private capitalist sector enterprises that produce everything — from the components of testing equipment, to gloves, to masks, to ventilators, to hospital beds, to IC units — did not produce them. They didn’t stockpile them around the country in proportion to where the population was concentrated. They didn’t do what would have been necessary and what we had the capacity to do to be prepared, and by the way they still haven’t, but the point is they didn’t as of March or February.
The way capitalism works is not to prepare a community to safeguard its public health, which has to be one of the three or four most important things any economic system would be tasked with performing.
Well then, why didn’t they? And the answer is always the same: it wasn’t profitable. The job of a capitalist enterprise, if you organize your production system around the profit system, that means that the people who make the decisions, the owners, the boards of directors of the corporation, their job under the rules of capitalism is to invest the money where the rate of return relative to the risk is best. That’s what they’re rewarded for. And if they don’t do that, they’re either punished, or fired, or both. They made the decision — which I understand and I would have made the same one — that this proposition is too risky. I’m not going to produce ventilators or masks, stick them in a warehouse somewhere, wondering whether six months or ten years from now there will be an occasion when somebody will want to buy these things. Many of them will deteriorate over that time and need to be replaced. Storage is expensive. Monitoring them is expensive. You put together the risk with the reward and there were better profit opportunities elsewhere. So, they didn’t do it. The way capitalism works is not to prepare a community to safeguard its public health, which has to be one of the three or four most important things any economic system would be tasked with performing. This system failed to meet that obligation.
Okay, what could have happened was the following: the US could have come in and said pretty much what I just said — our private enterprise capitalist system, for the reasons of its normal functioning does not do what public health requires, so we the government will do it. And here’s how it will work: as fast as we want we will buy ventilators, masks, and testing equipment. As fast as you produce it we will buy it. We will pay whatever is necessary to give you a rate of profit that makes this an interesting investment for you to undertake, and then we the government will stockpile it, monitor it, and replace it as needed until the virus comes. The government of the United States could have done that. It didn’t do that.
And let me give you a perfect example of how stark this is. It is similarly unprofitable for any company to make a machine gun, or a missile, or a fighter aircraft, or a navy battleship because of the same problem: it’s too risky. Because private capitalism works the way it does, the government has done in the area of military precisely what it didn’t do in the medical area. So we’re militarily prepared, and medically unprepared. Because here’s what the government does...it tells the producers of machine guns, missiles, aircraft, battleships, ‘We the government will buy them as you produce them, and then we will manage them, store them, monitor them.’ That’s what the Army, Navy, and Air Force do. That’s their major activity. So we know the government can do this because it already does it, it just didn’t do it for a pandemic.
Well why not? Here comes another contradiction: capitalists are afraid of giving the government that kind of role and power. It doesn’t look good for private enterprise if the government comes in and says, ‘You private capitalists are not doing what we need so we’re going to make you do it, because left to yourselves you’re a big fat bust’. That doesn’t work; that kind of ideology is proscribed in the United States, especially if you have Republicans and Trump in power. They’re not going to do that. So the government didn’t do it, and the private sector didn’t do it.
That means that capitalism is not efficient. It claims to the contrary and has just therefore been disproven.
And here’s another contradiction of capitalism: the cost of having done the preparation is infinitely smaller than the wealth we have already lost by not being prepared. If we had been as prepared as South Korea, or New Zealand, or any one of twenty countries that have done way better than us, the amount of wealth we could have avoided losing is much, much larger than the amount of wealth that would have been used to produce and warehouse all of the necessary preparatory equipment. That means that capitalism is not efficient. It claims to the contrary and has just therefore been disproven. This system is incapable of doing something as fundamental as protecting the health and the very lives of the people in it.
MFU: Can you comment on the gradual normalization of sacrifice that the worker must make to keep the capitalist system alive? For example, workers were receiving an additional $600 in unemployment for a period of time, but when this is taken away they are expected to just keep surviving.
RW: In order to talk about the burden of workers we have to go back a little bit historically, to give it a context. As best as we can tell, and the numbers are very fuzzy, from 1820 to 1970 the real wages on average of American workers rose. What that means is the money you got in your pocket at the end of each week was enough to buy more stuff this year than you were able to afford to buy last year. And the American working class got used to this extraordinary experience. I say extraordinary because most other countries’ working classes did not have 150 years of pretty continuously rising real wages. It was a sign of the wealth of the United States, the good climate, the good soil, the good rivers, and the fact that you had extinguished the population that had been here before you. All of that.
And it also developed in the American working class a notion that came to be called American Exceptionalism, that there is something super special about the United States. If you’re religious it means God really likes you better than the other people around the world because look, he’s giving you 150 years of rising real wages. Or maybe there’s something special about American people and they’re very creative, or productive, or entrepreneurial...all that — if you pardon my Spanish — horse shit.
The truth of it was that you had a labor shortage; partly because you killed all the Native Americans and partly because the only way to keep the system with enough people working since you killed all the local people was to bring immigrants in, wave after wave of immigrants the whole of the 18th and 19th centuries. Endless English, Scottish, Irish, German, Scandinavian, Italian, and Jewish immigrants. And you can define the history of every major city in the United States that way. And the way you got these waves of immigrants to come was by offering higher wages than they could reasonably expect to get in the countries they were leaving. Because after all, coming to America was very scary, and very dangerous. You left your home village, your family, your language, your culture, your community, and you went to a place where you didn’t know anything. You would have to have quite an incentive to do that.
So you had this period of rising wages. Then in the 1970’s rising wages stopped, and they stopped because of decisions made by capitalists, the people who run American industry. While raising wages brought the immigrants they needed to work, it also meant they had to spend more and more for workers and that ate into their profits. So fundamentally they made two decisions. The first decision was to ratchet up automation. They replaced people with machines. And in the 1970’s they got a doozie, they got what we call the computer, which replaces workers on a scale that is monumental. The second thing employers did was to move production. There had been two technical changes, the jet engine and the internet, and that allowed an employer in New York to monitor a factory in Indonesia or Africa or Brazil as easily as before when he had walked across the street to look at his factory. So there was no reason to produce at high wages in America because you could produce at low wages in China. The result of automation and jobs relocation was suddenly to collapse the demand for labor from Americans. And that drove down the wages.
So because of all of this, the last 30 to 40 years have seen for the first time in American history stagnant real wages.
So because of all of this, the last 30 to 40 years have seen for the first time in American history stagnant real wages. That is, whatever increase in money wage you get was eaten up by the increase in prices so that your real wages go nowhere. To make it as stark as I can, the real wage today in this country is very little above the real wage in the late 1970’s. So this is a traumatic transformation for the American working class. Up until that time, capitalism could and did justify itself on the grounds that it produced and sustained a middle class. In reality that is a well-paid working class. People get paid enough money that they can have a car, and a home in the suburbs, and a dog, and a two week vacation by the lake, and maybe even send their kid to college, which were things the working class before that had not dreamed it could ever get. Well, that was given to the working class particularly after WW2 but suddenly towards the end of the century it became harder and harder to afford.
That would have been a felt, conscious trauma, except for the way the working class responded. It responded understandably by making individual decisions to cope with stagnant real wages. And there were two that were important. First, adult white women, the majority who had been homemakers, housewives, mothers, but had not gone into the paid labor force, decided to do that. They weren’t going to get the American middle class dream on the husband’s salary, so women went out to work. The second thing that families did was to undertake debt. Americans had been raised until the 1970’s to believe that borrowing money was virtually sinful. You should save for a rainy day. You should not need to borrow. Borrowing is a sign of out of control behavior. Suddenly, the American population which had lived for generations under that ideology, completely flipped, started borrowing money the way nobody had ever seen before. You borrowed for your home a mortgage, you borrowed on your car to buy it, you borrowed on your credit card for daily expenses, and finally, you borrowed money to send your kid to college. You were working under four layers of accumulated debt.
The only reason you didn’t have a literal revolt in the United States in the 1970’s was because women went out to work and you borrowed money like there was no tomorrow. And so you could sustain the American dream on the fakery of debt. But it doesn’t take a genius to understand you cannot keep raising your debt if the underlying capacity to repay, which is based on your real wage, is unsustainable. And in 2008, that crashed. People suddenly discovered, I can’t, there’s too much month at the end of the money. I can’t cover my mortgage, and my credit card bill, and my car payment, and my student loan payment. I can’t do it, I just can’t do it. And so the system built up on all of this collapses.
And so the American working class has been undergoing growing pressure. What we are doing now in the past several months since this pandemic hit and the capitalist system crashed, is almost saying to the working class the following: ‘Yes, we’ve been squeezing you for forty years, but you ain’t seen ‘nothin yet. We are now going to squeeze the shit out of you. Watch, we are going to kill your income, while not giving you any way to compensate for that.’
By the way, over 50 million people have now applied for unemployment compensation since the middle of March. This is a stupefying statistic. And for many of these people they’re not eligible for unemployment compensation. For many more, they are eligible, but they are now in great difficulty in terms of their cash flow. They also don’t know whether the job they had will be there when the unemployment is over, or if it is, they don’t know whether it will pay them the same, whether it will have the same benefits, whether it will be equivalently secure, and anyone who’s a betting person would know that the odds are against them on all of this.
But here’s even worse. The millions who haven’t lost their jobs are also threatened by what’s going on. And for that, it’s a simple law of economics. If there are twenty or thirty, depending on how you count, looking for work, your job is easily replaceable by one or more of them. You’re not that unique. When you have that many people unemployed it includes lots of people with your skillset, with your educational background, with your qualification, or close enough. Because they’ve been unemployed, they’re desperate. They’ve used up their savings. They’ve used up what they can get out of their family and friends. They will take your job at 10, 20, or 30% lower pay because it’s better than their uncertainty and misery about getting a job. You know it, and your employer knows it. Since your employer has also taken some losses in this crisis, he or she is going to come see you soon and say, ‘I’m really sorry Fred, I’m going to have to lower your wages. I’m going to have to lower my contribution to your pension. I’m going to need you to come in 20 minutes early in the morning, and I need you to have your lunch at your desk.’ And you’re not going to say anything, because if you refuse, you’re toast. It’s over, bye bye. And by the way, the first reports came in from the United States Department of Labor’s Bureau of Labor Statistics -- wages are going down in America. That means even though you didn’t lose your job, you are going to lose income.
As if that weren’t enough, part of the suffering of the working class is watching their own situation get worse while that of the elite at the top get better. Two examples: One, Jeffrey Bezos. He was worth roughly $130-140 billion at the beginning of this year, and he’s currently worth roughly $160-170 billion. So during a time when 50 million Americans had to go on unemployment, the richest man in America was made very much richer. That’s an unsustainable economic system. It’s unsustainable before that happened, and it’s more unsustainable now. Second, over the same period of 16 weeks that over 50 people had to go on unemployment, the stock market basically recovered from its collapse in the middle of March. To give you the most important number, the NASDAQ (the most important stock market in this country now) index in January of this year was 10,000. At its low point in March it had dropped to 7,000. That’s a 30% drop. Today, it is higher than it was at the beginning of this year. Roughly 10% of shareholders own 80% of the shares, so that 10% made money, and the other 90% lost. This is unsustainable. Coming at the end of a period of thirty years, it’s unspeakably unsustainable.
It’s one thing to have extreme inequality in a society that has become used to it for centuries; it is a different phenomena to develop this kind of inequality so quickly in historical time.
But it goes even beyond that. It’s one thing to have extreme inequality in a society that has become used to it for centuries; it is a different phenomena to develop this kind of inequality so quickly in historical time. It comes after 150 years where the justification, the rational, the boasting point of capitalism, was that it produced a vast middle class. That argument is completely gone. The middle class is completely gone. A tiny portion went up, and the vast majority are in free fall down. And that is a very dangerous thing to do when you have built up the expectations by your pro-capitalist propaganda before.
And it explains the phenomena unfortunately called “populism”, which is really a euphemism for mass middle class rage at being betrayed, at being let down, being undone, which the last 30-40 years and today are doing. And they’re very angry, and they vote their anger — Brexit, where the British working class votes to leave Europe, which has about as much to do as if they had voted to make the British national flower the Rhododendron. It’s irrelevant. And the very same year, in a country where the working class is in trouble, they vote into office a crooked, sleazy, real estate millionaire from New York. I mean, it’s like a joke. it makes no sense at all. But it’s a sign that people are desperate, furious, enraged. They all want to give a finger to the system. They don’t know how, so the first one who comes along and says, “Here, I’m your way of doing that,” gets their vote.
It is very volatile, and it is all a sign. Every system in the history of the world — slavery, feudalism, tribal economics, whatever you want — every system we know of has been born, evolved over time, and then died. We had slavery, it evolved, it died. We had feudalism, it evolved, it died. We have capitalism. We know it was born, because we’ve got it. We know it’s evolved, because it started in England. So that means its next phase is...death. And the only real question for an analyst, is when, not whether. And then, if you look around you today, the thought enters your mind, maybe now, maybe this is it. Maybe the beginning of the end of feudalism was the bubonic plague in the 14th century, and maybe the end of capitalism is the COVID-19 plague in the 21st century. The signs of disintegration are everywhere…this catastrophic failure in the face of the pandemic…the fact that government, corporate, and private debt in America are all at historic highs…This system has kicked so many of its contradictions and so many of its problems down the road with the blithe ideology that private capitalism is a wonderfully self-healing system. They’re now facing too many problems they can’t handle. And the system begins to dissolve.
This system has kicked so many of its contradictions and so many of its problems down the road with the blithe ideology that private capitalism is a wonderfully self-healing system.
MFU: Given these horrifying statistics and the disintegration of the system, are there new opportunities that are arising for organizing in the workplace, or are things just becoming more challenging in this regard?
RW: It’s not either or; it’s both. They’re becoming more challenging and there are new opportunities. First, let me focus on the opportunities. This level of breakdown, this level of failure, shakes all the defenses of the status quo. The Ayn Rand Institute, devoted to the writings of the mediocre novelist who celebrated that tough guys come out ahead and that the government is neither useful nor necessary, applied for and got somewhere between one and two million dollars worth of government support to survive. What conservative who isn’t a total lunatic is gonna argue that we don’t need the government to support us when every major corporation is now on life support from the government? Starting with every bank in the country, and including virtually the entire corporate system. The federal reserve is now regularly buying corporate bonds. What that means is the government is printing money and lending it to the business community. That’s what it’s doing! And by the way, there’s only one reason why — because no one else would. It’s too risky, so the government is doing it for them. Don’t tell me about private enterprise, and the private enterprise system. It was always fakery. But now it’s fakery that makes this system ideologically naked. It can’t cover itself. And that creates all kinds of new opportunities because people who used to be satisfied or deflected or persuaded by all of that junk, that’s going to be a way harder sell than it used to be.
Number two, we are confronted everyday with a system that has endangered our health, that threatens us with a horrible disease, and even worse, with being the conveyor of that horrible disease to the people we’re closest to — our parents, our children, our lovers, our boyfriends, our girlfriends, and all the rest. What does it mean that last week the European Union allowed airplanes to land in Europe coming from virtually everywhere, including Mexico, Canada, and China, but not the United States? Even if you never pay attention, the question is gonna occur to you, ‘What’s that about?’ That’s because you live in a country that’s defunct, can’t function, is killing everybody and threatening the whole world. So ideologically I think people with a critical attitude towards capitalism have opportunities today they never dreamed they would see and that they haven’t had for 50-75 years.
Third, working class people are now discovering that the elites who run the institutions that they work in — the factories, the offices, the stores — are not doing a very good job. They weren’t able to survive in this crisis, they hadn’t prepared for it, they didn’t have a strategy for getting through it, they are now firing people to save their own skin, and they’re begging the government for handouts. This is a display that doesn’t build respect.
The argument I make is look, the world would be a better place, your life would be better, if the factory, office, or store that you worked in was run by all of us democratically rather than by a minority of us undemocratically, a minority we didn’t elect, a minority over who we exercise no restraint, no control, no accountability. If we were all together we could decide which is more important to us: to make a profit this year or to make sure everyone who works here has a job and an income and can feed their family? That’s easy isn’t it? It’s really easy. Are we interested in profit? Sure. But we’re interested in other things too. But you see if it’s a tiny group of people who live off the profit, that’s really all they’re interested in. They’re not interested in whether we’re happy, well-fed...It’s not because they’re bad people. It’s just this is the way the system is set up. So if we set it up differently, it would be different objectives that would govern the systems.
When I speak to groups of people about this they get it. And I can tell you very practically they’re getting it now much more readily, much quicker, than it took as little as a year ago — making the same arguments, to the same audience, in the same room. It’s tangible how much more interest and hunger for this people have. I can say what I couldn’t used to say: people agree with me overwhelmingly. What they don’t believe yet — and that’s a serious problem — they don’t believe it’s doable. They get it. It’s what should be done, they just don’t believe. They think that this society will go to its own death before it acknowledges let alone accommodates that kind of change. And if you ask me what does it take to change that? That’s the kind of the 64 trillion dollar question. I don’t know. My guess is it’s some kind of combination of our having to keep beating the drum and the system itself, because as I like to say to people because I think it will help them understand, the best organizer for me at this point is Donald Trump. He builds my audience way faster than anything I could do. His behavior, his persona, and above all the system he sits at the top of, that’s organizing my audience. And while that kind of makes me sad because I can’t control it, in another way it’s the best news possible because it means that what we’re trying to do doesn’t depend on us. We’re still relatively few, there are more of us everyday but still relatively few. The good news is it’s happening independent of us. It’s happening out of the kind of organic crisis as it deepens.