Ask Prof. Wolff

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Is war the usual affair of humanity that accompanies massive changes in the global economy?

the end of feudalism and massive shifts in the european economy corresponded to the 100 years war. WW1 and WW2 correlated with the end of colonialism, and were a massive re-organization of the global economy. Is there a risk that the decline of Capitalism is likely to precipitate something similar? Can we learn from history how such things occur for signs in today's world. I was listening on KPFA and think this might be a nice expansion on a theme you often mention - Ira Leifer, Santa Barbara

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Did the anarcho-syndicalists during the Spanish Civil War bring about cooperative enterprise?

I'm writing an essay on the workplace structure in the republican zone of Spain during the war and wanted to get your views on the organisation of collective farms and industrial syndicates in Spain as to whether they represented a genuine worker co-operative economy with high levels of economic democracy. Moreover do you think that changes in workplace organisation and the establishment of democratically operated enterprise in Spain during the war substantially effected the productivity and efficiency of the Spanish Republican economy. Finally do you think that the kind of experiments in worker self-management undertaken in Spain during the war can be considered representative of a socialist mode of production given the circumstances of being a war economy?

posted an official response

The short answer is yes, Republican Spain's experimentation with cooperatives contains all sorts of valuable lessons in how to begin to construct a genuine socialist alternative economy to capitalism. The Spanish efforts in the 1930s were constrained by (1) the official socialism of the time (which stressed state ownership of industry and state planning of the distribution of resources and products - and which correspondingly undervalued the transformation of the workplace into a cooperative versus a hierarchical organization) and (2) the urgencies of a vicious civil war. So lessons drawn need to always take those constraints into consideration. But Spain - like many other countries - has histories of experiments in cooperative workplace organization that can and eventually will be used in the new 21st century socialism that will be built around the revolution inside the workplace from capitalist to cooperative organization of production.

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Do you think china's economic system is travelling towards the capitalism?

Dear Professor Wolff, please explain me why communist china has free markets and free trading in their economic system.

posted an official response

The nature and meaning of "free" in the phrase "free markets" remains an issue of contention and debate among those who study the institution. Let me assume that you mean markets with minimal government interventions. In that meaning, there were free markets throughout most of the histories of most 20th century "communist" countries such as the USSR and the PRC. The USSR, for example, differentiated between major grain production and distribution (markets and trade but heavily shaped by government planning and interventions) and the production and distribution of meat, dairy, vegetables, fruits where the markets were enabled to function much more "freely." Modern Chinese economists tend to believe that markets - if limited and controlled and regulated - can be useful deployed in the service of economies such as theirs with heavy government involvement in the ownership and control of undustries. They also believe that case by case decisions can and should be made as to how free markets should be as mechanisms of distribution consistent with the government's plans and ownership/control projects and goals.

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co-op creation

How can I start a co-op from the ground up, with limited resources in the restaurant business?

posted an official response

Find the coop societies/organizations in your country that already serve as representatives for existing coops (including restaurants). They will have literature and contacts you can use to make a business plan on the basis of what others have already learned about the problems and solutions of building new coops.

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Is what you described in Detroit basically a time currency?

In your last Economic Update. Thank you!

posted an official response

It is one form of such currencies.

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It's Time for the Time-as-Currency Movement

Dear Professor Wolff, I have been trying to submit a repeatedly revised letter about the time-as-currency movement to the New York Times Op-Ed section for consideration for publication for months. I need support getting them to consider it. Most people don't know a thing about Time-Banks, Time-Exchanges, Time-Networks, etc., even though they exist across the United States and elsewhere. I wanted to ask if you had heard about the movement when I heard your great presentation in Los Angeles a couple of years ago, but my question was the only one of its kind from the audience, and only the questions that were in the majority were considered. (I spoke about it afterward with Alan Minski.) At the very least, I hope you will please consider Dr. Edgar S. Cahn's contributions on the subject to learn more, or advocate to have him as a guest speaker on yours or a related radio show. We all need to know about this viable, economic, grassroots alternative. As I have suffered with a disability that has resulted in chronic homelessness, the local Time-Bank came through as a support system many times, while social services did not. I have my own personal experience to offer on the subject too. Yours in service, Alicia Sterling Beach

posted an official response

The way I get into the subject of time-based currencies (or exchange systems) is to see them as interesting attempts to move away from the capitalist system and the currency arrangements it has favored. In capitalism, money involves two basic sorts of transactions. The first is simple exchange where a certain value of one commodity is exchanged for an equivalent value of another commodity. The second is a very different sort of exchange, one in which a certain value is extended by person A to person B who then responds by extending to person A more value than person B received from A. By such an exchange A appropriates a surplus value. The profit drive in capitalism is this second sort of exchange that involves inequalities. Critics of capitalism, of its profit drive, and of their social effects have always sought some way to negate the second sort of exchange.....and time-based currencies have been one result of that search. What we can say is that a time-based exchange of equivalents - as the rule governing such an exchange system - would at least expose the inequality at the base of profit in a way that capitalism, in contrast, hides and disguises.

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Worker Co-ops Then and Now

Dear Prof. Wolff, I'm very interested in your presentations about worker co-ops and agree that being a worker in a co-op is much preferable to working for a capitalist enterprise. Can you address why you think there is an opportunity now for worker co-ops to thrive and proliferate and become a true alternative to the mainstream, or even the new mainstream, as opposed to the 1960s and 70s which also saw a wave of worker co-ops spring up all over the USA? Most of these worker co-ops all too quickly faded away as their members burned out, moved on and, probably most important, capitalist enterprises took over producing the coops' products at lower prices, thereby putting the co-ops out of business.

posted an official response

The opportunity is far greater now chiefly because, since the 2008 crash and the failure of recovery since then (except for the richest 3-5%), millions are disillusioned and disappointed by the capitalist system. That is, they increasingly grasp that particular problems (student debts, grotesque inequalities of income and wealth, corruption of politics by money, poverty, ecological decay, etc.) are better understood as symptoms of a general disease, namely capitalism's profit-driven subordination of other social values and needs to private profit maximization. Seeing capitalism as the problem provokes thought and action toward identifying and then pursuing systemic alternatives. Right now, worker coops are the systemic alternative to capitalistically organized workplaces and work processes, so they get the attention and support of the increasing number disaffected from capitalism.

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This reporter claims that in 1980 a third of the American labor force was unionized

https://www.youtube.com/watch?v=cVBextju7jY in minute: 25 and from that point there is a debate about a law that is claimed to kill the unions - the union will have to pay for all representation costs even for workers that don't pay to the union... In your lectures you talk about the way in which the mass of Americans learned to identify the socialist with the communists who were identified as Russian enemy supporters and that this was a process of many years. How many Americans were actually unionized before this process? Were really a third of the American labor force unionized in the 80's? How many American workers were actually unionized at the "pick" of American unionization?

posted an official response

In the late 1940s and into the 1950s, about 1/3 of US workers - in both the private and public sectors combined - were represented by labor unions. Today, less than 7% of private sector workers are represented by unions and about 25% of public sector unions: a half-century of decline. In 1947, the US Congress passed and the President then signed the Taft-Hartley Act that required all unions to provide any and all job benefits they won from employers (wage increases and job benefit improvements) to all workers in a workplace (factory, office or store) regardless of whether such workers joined the union or paid dues or joined in strike action etc. It created an incentive for workers to not join or pay dues to a union since they would get whatever the union got from employers in any case. The goal of the Republican-led legislation was to weaken and destroy unions which it largely did.

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Do taxes fund spending at the federal level?

You often describe the dilemma of politicians -- corporations want the government to provide goods and services for them, and the people also want the government to provide goods and services for them, so these two groups pressure the politicians to provide for their own needs, while wanting to lower their own tax contribution at the same time. This puts the politician in a dilemma, which he or she often solves by borrowing -- satisfying everyone's desires, while not raising taxes. This is certainly true of state and local politicians, but is it also true of Congress? Since the federal government is the issuer of the U.S. dollar, does it really need to "tax" or "borrow" dollars to provision goods and services? Does the federal government even need to worry about "paying off" its "debt" at all?

posted an official response

Modern Monetary Theory (MMT) is a group of economists who focus on this point: that the government can (and in large part already does) print money - or what is the same, create accounts for banks that contain deposits they can use. To stimulate and expand an economy, it can create money, and if and when there is too much money it can withdraw that excess money from circulation. Thus the creation of money is not limited by some non-monetary standard; it is whatever the creators of the money want it to be (pubic and./or private creators).

Historically, the power to print/coin money was withdrawn from kings and other politicians who abused it for political gains. It was made to depend on the willingness of the private financial authorities (banks chiefly) to cooperate and thereby enable raising or lowering the supply of money in an economy. Thats why we go through the ritual of having the govt print bonds, sell them to the private banks for money and then enable the private banks to cash them in to the monetary authority (central bank, federal reserve etc) for fresh new money. But the point of MTT is that the banks' intermediation here can be excised out to get back to the ability of a sovereign govt to control money as a lever to shape economic life.

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Is stable GDP and negative GDP growth always an undesirable aspect of an economy?

It appears that the consensus in contemporary economics is that GDP growth is a good thing. Lets say, theoretically, that everyone in society has all their needs met, the population is no longer growing, GDP has leveled off and everyone is content. While this may be true for now, are there any views in which stabilized GDP can be a good thing.? Also, are there any theories on how an economy can prosper in the face of stabilized population growth or negative population growth (such as in Japan)?

posted an official response

The basic argument these days for a stable or even falling GDP comes from environmentalists who point out that because the GDP calculations omit discussion or calculation of the ecological damages entailed by GDP growth, if one adds such considerations it becomes easy to show how and why steady ir falling GDP can be a very desirable way to save the planet, etc.

Likewise the strongest arguments about how an economy could "prosper" (to use your term) in the face of stabilized population or stabilized GDP or declining population are these: (1) that redistributing income (in various ways) and/or wealth could achieve that result, and (2) that reorganizing human relations and interactions in the workplace and work processes could do that too.

 

There is a growing body of opinion that the economics profession and therefore much public discussion has fetishized GDP data and thereby missed much about economic life that is not counted in GDP calculations and yet affects our lives in multiple ways and shapes even the size and rate of change of GDP.

 

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Could you comment on Steady State Economics?

When I hear you speak about the abusive nature of capitalism I'm always reminded of the one college courses where we briefly discussed this theory. I haven't heard of it before or since, but I think it does a good job of putting things in perspective. Specifically, how inequality drives ecological degradation because the poor are cornered in to taking desperate harmful measures and the rich consume at an unsustainable rate.

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To what extent, if any, is Marx's labor theory of value relevant in current economics?

Marx's theory of value (derived from a neoclassical standpoint) has caused much controversy since its inception. Theories such as the Subjective Theory of Value have come to take over economics and even claim to disprove Marx. Is there any validity in Marx's analysis and how does it show? Thank you very much.

posted an official response

Marx's approach to analyzing capitalism had different objectives from those of his major predecessors, Adam Smith and David Ricardo. They loved capitalism, celebrated it and did their analysis within that framework. Marx was a critic of capitalism and approached it as a transitional system that could and should be gone beyond to something better. The classical and then later neo-classical economists made assumptions, used logics, and focused on empirical evidence that were all different from the assumptions, logic and empirical evidence that Marx deployed. Thus the issue is not (and never was) whether one approach is valid and another not - or one "more" valid than the other. These are different approaches using different methods to achieve different ends. Each theory illuminates different aspects of the economic system - capitalism - they seek to analyze. And which of the two theories you choose to learn and work with or how you make use of both of them, in what relation or balance will determine many of the conclusions you reach about capitalism. Of course, here in the US - where very few teachers expose their students to a systematic study of Marx's analysis - few people have the education needed to deploy Marxian analytic concepts - such as, for example, the labor theory of value, the theory of surplus value, and so on. This hobbles and narrows mainstream economics. In my view, knowing Marxian economics has always been a very helpful component of the tools of analysis I bring to my work. For a full, detailed analytical comparison among alternative economic theories, let me recommend R. Wolff and S. Resnick, Contending Economic Theories: Neoclassical, Keynesian and Marxian (Cambridge: MIT Press, 2012).

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Time banking and time-based currencies?

eg Ithaca HOURS and new blockchain-based attempts such as chronobank.io. The idea being that individuals assign tokens to their labor time and buy/sell those tokens from each other for hours worked. My feeling is that they have well-meaning intentions, though even a decentralized labor token will ultimately result in individuals competing for scraps and thus working longer hours to generate a sustainable income. Thoughts?

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Hierarchical Structure in Worker Co-ops

Dear Prof. Wolff. I am very much persuaded by your passionate pleas to move beyond the dying system that is capitalism and towards a system based around worker co-ops. However, a question always arises when I follow the reasoning through to its conclusions, and is the following. If all the workers in an enterprise are to be considered as occupying both roles of employer AND employee, how do we ensure that the enterprise doesn't fall into anarchy and that it can continue to be effectively operated? I am of course referring to the important skill of managing a workforce, and the way that any joint effort appears to necessitate leadership so as to avoid a scattering of resources and dissipation of the workers of efforts in unfocussed directions. In such a case, it seems that we would be forced to return to situation similar to the one we sought to escape, namely one in which we now have a (pseudo)-employer directing the work activities of the rest of the (pseudo)-employees. I am wondering if it is even possible for a workforce to be organized without this necessary hierarchical structure, or whether this is even a critical component in your understanding of the notion of worker co-ops. Thank you very much for you time and your valuable insights.

posted an official response

It is my hope that communities of workers owning and operating enterprises will be able collectively to manage their individual efforts so that they achieve the best possible outcome, where best is a standard debated and developed democratically within the community. If it turns out that some workers believe that they need particular individuals - rather than the coop as a collective community, as a whole - to function as managers, etc., then the question becomes how to achieve such management while also preserving the democratic structure and functioning of the worker coop. One way to doing that would be to insist that managerial functions be rotated among all members of the worker coop, sequentially, so that no solidifying of some people into managers and others as managed occurs. 

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The Stock Market and the working class

Rick, You seem to say/think that only rich people "profit" from the stock market. Perhaps that is true statiscally, i don't know. I do know that many, like my family, through the prosperous years of the 1950s were able to invest some funds in the stock market and, if lucky, came to have a nestegg from these investments. In my generation, we were encouraged to put aside some money in 401k or other investments and, again with luck, managed to come to retirement with money to supplement social security. I see the stock market like all other gambling. If you are lucky you win, but most come out not winning. If you are lucky, you will have more money than if you left it under the pillow or in a savings account. Can you please address this. I think there are a lot of people like me who are in this position. When you generalize about the rich living off the profits of the rest, it doesn't ring true and challenges your credibility. Thanks for your presentations and all your work. It very useful and illuminating. Yours in solidarity. Steve

posted an official response

Yes, of course, some non-wealthy people can and do set aside sums they save from current expenses - voluntarily or via job-related mandatory pension withholdings - to invest them in stocks and bonds. And those, as you say, can go up or down with the gyrations of securities markets. However, lets look at the statistics to see whether and how this matters. First, a tiny percentage of the population owns the vast bulk of securities purchased privately and not through pensions funds etc. Second, most Americans own little or no appreciable quantity of stocks and bonds, either individually or through pensions. Third, most pensions are managed by professional pension managers such that pensioners have neither control nor knowledge of what investments are made and often pay inflated fees for the management as well. 

What I have said is that government policies (e.g. trickle down economics of the sort practiced by most US governments, Republican and democrat alike) can target either the corporations and the rich or the average incomes and poor. The trickle down policies can, for example, increase money supplies to the corporations and the rich and thereby boost the stock markets and thereby make the rich richer and thereby perhaps see some of that wealth trickle down to the masses.. Or they could target the mass of people - say via money disbursements to them or rising minimum wages or public employment programs - and thereby practice trickle up policies that enrich the mass first and from there perhaps benefit the corporations and the rich. In that framework, it is clear who profits most from stock market rises, etc.

It is usually the case that generalizations about major group differences in economics have exceptions. So, yes, there are average and maybe even a few low-income Americans with stock and bond portfolios. Likewise, there are a few top corporate executives who also do labor for wages to supplement their incomes. But these exceptions do not invalidate the generalizations all economists use to usefully designate major group differentiations in analyzing economies.

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