Ask Prof. Wolff

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Cooperation Jackson and the Community Production Initiative

Greetings to the whole team. I can not remember if you have talked about Cooperation Jackson on your programs. It is an organization in Jackson MS focused on the development of economic democracy by building a solidarity economy anchored by a network of cooperatives and other types of worker owned and democratically self-managed enterprises. While they run many important programs, I would like to draw your attention to the Community Production Initiative. This project is working on building a Fabrication Laboratory (Fab Lab), a center for computer coding and 3D printing. What I love about this idea is their singular focus on the creation of economic democracy while wrestling commodity production away from the capitalist mode of production, and not just 'job training' or creative development. I urge you to talk about this important development for the African American Community on your show, they are currently fundraising for the Fab Lab and they need a total of $600K before the middle of January. My hope is that likeminded listeners may visit their website and help build this important development in one of the poorest states in the nation.

posted an official response

Excellent suggestion, will pursue. I would also appreciate inviting someone from Cooperation Jackson to do an interview with me on my radio show. That requires being in Manhattan. If you know of anyone from there who might do this effectively, please let us know via email to the website.

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Daer prof. Wolff

I would really like to hear your opinion on my ideas on how to build better and more stable socio-economic system:

https://www.linkedin.com/pulse/economic-crises-unavoidable-sašo-tomažič

https://www.linkedin.com/pulse/7-steps-towards-better-more-just-stable-society-sa%C5%A1o-toma%C5%BEi%C4%8D

I am also writing a book on this subject, so your opinion would be very helpful.

Best regards

Sašo Tomažič

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Effect of Dow Jones increases

Hello Professor Woff, Just recently discovered Economic Update and have found it immensely informative. Thank you for your work. As Obama is exiting office I am seeing metrics along the lines of the Dow Jones industrial average has increased by approximately 10k points and is getting close to this perceived “magical” milestone of 20k. I am curious as I have been for some time how this metric affects or doesn’t really affect the average American. It seems to be some sort of barometer as to the economic health of the nation but it seems that whether it rises or falls by 1,000s of points it doesn’t seem to impact for instance my standard of living or really anyone else I know who seems to exist in the middle to lower classes. Is this something you could speak about or if you already have could you point me in the direction of a previous episode or possible a good book on the subject of the correlation between the Dow Jones and for lack of a better term the “average” American worker?

posted an official response

Your instinct is quite right; there is no direct connection, no necessary linkage between movement in the Dow Jones industrial average (DJ) and the economic conditions of average Americans. The DJ is just the average price of a group of major industrial companies' stocks. These can and often move in one direction while most stocks move in the other. Endless possible combinations of movements have and continue to characterize the price movements of companies, industries, etc. These movements can happen with improving or deteriorating conditions for average Americans. One has no necessary linkage to the other. In particular, dont be fooled by the ideology that seeks to get you to believe that a rising DJ (a sign the stock-owners are making money as the values of their stock holdings rise) is somehow a good sign for average Americans. It is not. The goal of saying something patently untrue is to line up average Americans behind the old idea that what;s good for Wall Street is good for the rest of us. Not so;never was.

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Co-op Banks?

Dr. Wolff, I recently spent an afternoon helping my college-student son fill out applications for student loans with Sallie Mae. Coincidentally, that evening I received an email from Sallie Mae asking if I wanted to 'receive a better interest rate for my savings.' I'm already contributing $80k from my own pocket to my son's college education, and the fact that he must borrow a further $40k is galling. But the email highlighted a troubling situation: people with money can expect a guaranteed return while my son, whether he's able to or not, must repay the money he's borrowed plus interest. I suppose theoretically the lender's interest rate has a direct relationship to the aggregate ability of borrowers to pay, but this is a future ability to pay and impossible to predict. Is there some way (co-op banks?) that a lender's eventual return could be directly linked to the borrower's eventual ability to repay?

posted an official response

There already exist plenty of precedents and models that link a lender's rate of return to a borrower's rate of return using the borrowed money. This is an old idea of shared risk that often accompanies shared gain as when a nominal interest rate attached to a loan can be raised or lowered depending on the results of the borrower's investments made with the borrowed money. Of course, a certain sharing of risk has always been part of most loans since a borrower's possible default on a loan would impose shared risk on the lender.

A coop bank could work out various shared-risk-shared reward arrangement - and likely would do that much more readily than atypical capitalist bank. That's because the cooperation between borrower and lender follows from the cooperation in a worker coop among the different types of workers contributing to the final output.

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How do we keep one Worker Co-op from exploiting another Worker Co-op?

I keep thinking of a "Gig Economy" as a way to undermine Worker Co-operatives. You are now an independent worker-owner contractor not an employee.

posted an official response

I suspect this is a matter of how one understands terms like "Independent worker-owner" or "Worker Coop." If the latter is just a gathering of the former (more than 1 of them) then there is little difference. The individual self-employed person who produces a good or service under contract to its purchaser is, in effect, both the producer of a surplus (more total value produced than is kept by the producer for his own consumption) and the appropriator of that surplus and thus the person who decides how that surplus will be distributed and used to reproduce this economic system/structure. A worker coop is simply a collection of individuals who organize work collectively among themselves (rather than individually) the produce an output that they divide into (1) the part they sell and use the revenue for their own consumption, and (2) the surplus part that, as a worker coop, they collectively appropriate from themselves and then decide how to use, distribute etc. Whats gone in both the individual and collective versions here is the basic opposition of employer and employee as different persons with correspondingly opposed interests. These two version need not exist or function as competitors, enemies, mutual "underminers." They could simply co-exist as options for each individual to consider and decide for himself/herself as to their own workplace choice.

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The Economics of the Green Party's Platform

Jill Stein, the presidential nominee of the Green Party, proposes using quantitative easing to erase student debt in a similar fashion to what was done during the bail out for banks in 2008/2009. She also proposes a Green New Deal that will create millions of jobs while addressing the issue of climate change. http://www.jill2016.com/platform I'm very curious to hear Richard Wolff's insights into the feasibility of these ideas and their potential outcomes.

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Jill Stein and Student Debt

I'm wondering if you could speak to the viability of Jill Stein's plan for the cancellation of student debt and comment on the accuracy of her statements regarding this plan (https://www.youtube.com/watch?v=lelEx10_PMQ). In particular: To what extent is her claim that Wall Street debt was canceled through the use of quantitative easing a valid statement? How likely is it that, if she were elected president, she'd be able to make Federal Reserve appointments in such a way as to ensure her plan gets put into practice, and what kind of time frame would this involve? Would each individual's forgiven debt inevitably be taxed as income? Any insight you could offer into these questions would be welcome. Thanks.

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What steps can a person do to join a national or international coop?

Hi Professor Wolff, Thank-you very much for your excellent and insightful GCM's and weekly economic updates and for taking the time to read my question. I am a 35 year old, caucasian male with a communication degree and an information systems degree - a sucker for learning. I agree with a lot of your world views. I have an interest in creating and/or participating in worker cooperatives but I have limited capital, resources and influence. I also agree with Noam Chomsky's perspectives, and, perhaps more surprising or interestingly, Nassim Taleb's views on risk. Ideally, I'd love to work/cooperate with people with a reasonable understanding of these views to create a genuine, cooperative consultancy. What general steps could I take to create or join this type of national or international coop? I should mention I am not a U.S. citizen. Cheers.

posted an official response

There are some cooperative consultancies, but I am not familiar with their rules for adding member etc. What is more needed is for interested, committed people like yourself to start them. For a few years, I and my associates have been pondering how to organize a website that would serve as a kind of clearing house where individuals with your interests could register for others to find you as you would find them to build the cooperative sectors of economies all over the world. The point would be to institutionalize a fuller response to the questions you pose than I can do ad hoc here and now. Thanks for your kind words about out work.

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Commentary on MMT (modern monetary theory)?

Could you please offer your opinions and/or commentary on MMT (modern monetary theory), Hyman Minsky, Warren Mosler, Stephanie Kelton, Randall Wray, Bill Mitchell, etc. and how this explanation of monetary systems might relate to economic democracy and socialism.

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Review Joel Koel; The Enemy of Nature: The End of Capitalism or the End of the World

Suggest this author or book for review.

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Steady State Economics

Hello Prof. Wolff. I was wondering how you felt about steady state economics and whether it was worth pursuing as an alternative to the impossible growth dreams of capitalism ( http://dalynews.org/learn/blog/ ). I am particularly interested in how this topic pertains to sustainability and the climate. I also wondered if you could do a radio show/segment about it. I searched the Democracy At Work website for various related terms and it didn't seem to have been covered before. Thank you!

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I am unclear

So what event will cause the govt to raise rates to at a minimum 1 percent from .5 and while they are at it why not set it at 0. Who cares? What is this mickey mouse monopoly money created and lent and consumer borrowing and spending joke economy and society we got here in north am....

posted an official response

FED fears that all the new money it pumped into the economy to offset the massive 2008 crisis and its aftermath (that the bottom 90% have still not recovered from) might start running after hard assets (land, real estate, gold, commodities, etc.) and so drive up prices (i.e. a massive inflation). FED fears it might be hard to stop that once it got going. So best policy is to raise rates now to slow economy and thus hopefully dissuade people from borrowing to bid-up prices still more. Its a long shot policy, but the FED's record in predicting or solving the 2008 crisis is awful so why imagine it can see and act well now? System is careening from one crisis and "policy" to another as it spirals downward. Hence the votes for Brexit and Trump as people seek to escape a declining system or magically put it into reverse. Neither will happen. The only real solution is system change and that still scares folks.

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Benjamin Rodriguez

Hello Prof. Wolff. Just want to start by thanking all the work you and your team do. Spreading the concept of Co-Ops and the even thought it may not be a panacea, it will solve a lot of the ailment afflicting the failure of capitalism. Not sure if you have in your many updates address the specifics of the sham of the debt-to-GDP ratio. Being that we're not under a "War Economy" experts keep talking about the need to lower the deficit. Below I have added the article from "Business Insider- America Is Not Drowning In Debt: These 5 Charts Destroy The Biggest Myth About The US Economy" that provide a very good explanation in my opinion that the assets to liabilities ratio of us companies outweigh the worry that "our national deficit" cannot be repaid in a prudent manner, a combination of higher taxes and higher capital investment (cascading into decent productivity growth) under a Co-op socialist system could fix in a few years. If could please address this manner when possible, I would gladly appreciated. link, http://www.businessinsider.com/america-is-not-drowning-in-debt-2013-4 Thank You. PS. Hoping to get a group of people inspired to listen to the podcast so we can have you over in Denver, Colorado.

posted an official response

The Business Insider type article works with assets and liabilities as if the social effects of debt were captured by comparing them alone, but that is a mistake. Rising debts have consequences independent of assets just like creditors react to rising debts of debtors and dont simply accept debts when assets are larger in value. Whether and how valuations are made matters. Whether and how assets can be converted into cash to settle debts matters. And so do many other aspects of debt and its social effects. This kind of sensationalist article implies that all who study debt and debt-related social problems across the centuries are all wrong; they should have measured assets in relation to debts and GDP.

I am currently planning a trip in 2017 to Denver and Boulder, Colorado. Keep watching our events page on our websites to find out exact times and places for the Denver area visit.

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Is it true that the only way to create money is through debt?

Please review the attached documentary. Is it true that the only way to create money is through debt. Did the producer have an agenda? I feel like this is not the whole story. https://youtu.be/jqvKjsIxT_8

posted an official response
Thank you for your question, Joseph. I apologize in advance I do not have the time to watch the entire video, but I will do my best to answer: Debt is the major way that money is created now chiefly by banks (when an individual or enterprise obtains a loan from a bank, the bank simply credits that person or firm's bank checking account with the amount of the loan thereby "creating" money). When governments create money they do the same thing by giving banks loans via crediting their accounts with the government with an additional sum equal to the loan. However, governments can also simply print and distribute money and/or deposit sums of new government-created money into the accounts of persons or firms. Banks have wanted to tightly control the government's money-creating powers lest governments choose ways of increasing or decreasing the money supply in an economy that do not profit banks or, worse still, hurt banks' profits. Limiting money to debt is one way of exerting such control. It is not the only or the necessary way to do it.
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Could you please comment on this article?

http://www.businessinsider.com/volkswagen-cuts-jobs-globally-germany-restructuring-programme-closely-after-emissions-scandal-settlement-2016-11

posted an official response

Basically, VW is in deep difficulty because it gambled on a deceptive program, made a fortune, relaxed into the normalization of the deception and then got caught, dealing a major blow to its global reputation and to Germany's global reputation. It is now taking all sorts of steps to try and cope with all that. Needless to say, as a capitalist corporation, it seeks to push off its costs of adjustment to its deception onto governments, workers, and public. These cutbacks are part of thatr.

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