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Labor Based Economics Analysis

Prof. Wolff i have listened to many of your lectures online and i find a lot of what you say speaks to me. I also listen to other economists such as Mark Blyth and read some Mises and Adam Smith. I have conducted my own look into capitalism and i find that i agree with you. If we take Marx's C-M-C and M-C-M framework and apply some variable to understand them better we can show the following: MP = CC - (MI+MW) [Profit = End product value - Cost of Production] CC = MI + CL [End product value = Initial investment + Labor Value] MP = (MI + CL) - (MI + MW) [substitute in values] MP = CL - MW [Profit = Labor Value - Wages paid to Laborer] *where MI is investment money for equitable labor, and MW is Money payed to wages or living labor. I am not aware if this has been done before, it seems like a fairly straight forward representation of marxs argument. It points out the inherant flaw of capitalism which is that Labor is necessary for the economy to function and the motive of capitalists is profits. This puts wages and profits in direct competition with each other and to the capitalist increasing profits is the name of the game so we can already see who the victor is. combining that with your EL + LL = TL equation Raw Materials + LL = EL (goods) [Which the capitalists buys] EL + LL = TL [capitalist supplies the goods laborers supply the labor] Cost - TL = Surplus. [Cost is the markets willingness to pay a price that was above and beyond the combination of equitable labor and living labor] This means that in the capitalist system the only way to protect wages is to secure the surplus so that it belongs equally to the investor and the laborer. At the end of the day the cost compensates the equitable goods to the investor as well as the laborer and both own the surplus. This in the long run dismantles capitalism does it not since if a company is to grow they use the profits generated to grow and the equitable goods purchased with cooperatively owned surplus belongs to both the laborers and investors. This changes it from a capitalist enterprise to a socialist one. Have i understood the lectures so far would be my question? Am i missing anything important a subtle argument perhaps or is this understanding good? Because the investor is supplying property and the laborer is supplying Labor

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What is the current state of worker co-ops in the educational system?

I'm a credentialed teacher working as a substitute for the last four years, and finding it difficult to find a permanent position, since my suject matter isn't a STEM subject. Not to get too deep into it, but I'm not convinced that the way public schools are/have been run are conducive to learning. Too often these issues are left to charters to solve, and all I see as a result are underserved communities and admin dressed like bankers, driving fancy cars, funneling tax money into their pockets. Are co-ops a viable solution? Are they being utilized in this country? How are they being used? Or why aren't they being used?

posted an official response

Coop schools have existed for a very long time (although often not labeled as such), including in the US. Some charters started that way. Many public schools chose to operate that way over recent decades in the US. But there is no organized program to construct such schools, to compare their democratic functioning to that of conventionally operated (i.e. hierarchical, top down, and undemocratic) schools, etc. There is no good reason not to offer citizens a choice of sending children to democratically operated schools as opposed to hierarchically operated schools. Indeed, choice might enable the population to observe or even try one versus the other to form judgements about what mix of schools might work best for any society. As to why coop schools remain few, I suspect there are many interacting reasons including the bias against worker coops in the business world, Cold War history and ideology that associated Soviet communism with all efforts collectively to run institutions, lack of familiarity with cooperative ways of functioning, government tax breaks and subsidies pour into capitalistically organized enterprises but much, much less so into worker coops.

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What is your wisdom on tax breaks for the wealthy?

History shows that tax breaks for the wealthy and the national debt going up coincide. The graft shows it. Arguing that tax breaks for the wealthy does not increase wages, job, or lower GDP, it only goes into the pockets of the wealthy and the social programs and social security are under attack. Minium wage has not increased with inflation. Please explain your view.

posted an official response

Cutting taxes for corporations and the rich risk arousing political anger in the population as a whole. To mitigate that, tax breaks are often extended to the mass of people on some modest scale. Since political problems would likewise arise if such tax breaks were accompanied by corresponding reduced spending on social programs, the typical end result in capitalist economies are government budget deficits covered by govt borrowing (national debts). This is OK with corporations and the rich because they just lend to the government the money they retained when govt reduced their taxes. From their perspective, lending to the govt is far better than having that money taxed away by the govt. For the mass of people, the deficit just postpones the reckoning for a bit, but eventually they will be taxed more and/or have govt services reduced by the extra burden of servicing the national debt on top of struggling with insufficient govt revenues resulting from the tax cuts. That this system is unjust and ineffective is clear from the historical record. Yet the ability to obtain support for this behavior has been reproduced repeatedly and especially in recent decades.

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Are many of today's Republicans...

Are many of today's Republicans descendants, or the actual people who participated and who payed for Roosevelt's New Deal to bail out America from the Great Depression? And if yes, is that why they are so hell-bent (against all common sense and decency) to erode or siphon off, money from those same social programs, set up during the GD? To get, "their money back."

posted an official response

No, too much time has passed for the New Deal even to linger in the minds of most Americans. The New Deal happened first and foremost because millions of Americans responded to the Great Depression by joining labor unions and/or the socialist and communist parties and fighting back. That forced enough corporations and enough of the rich to recognize the risk to the capitalist system of not spending some of their money to help the masses through the Great Depression. In blunt terms, they grasped that they better part with part of their money or else risk losing it all. So they supported the politics of FDR: they provided him with the high taxes and also loans to establish Social Security, federal unemployment benefits and federal jobs. Of course, a portion of the corporations and the rich disagreed, wanted the govt instead to repress the unions, socialists and communists. They raged against what FDR did in the New Deal. And they are the ideological, political and sometimes literally family ancestors of today'r right wing Republicans gathered in support of Trump. They got part of what they wanted in the McCarthyite purges of the decade immediately after WW2 ended and FDR died. But they always wanted to go further, to expunge forever the risk of another period when taxes on them would be raised to help average Americans.

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Venezuela - shortages of food & medicine

Please discuss the situation in Venezuela. I have heard it referred to as a failure of socialism. I wish I were knowledgeable enough to respond appropriately. Thank you.

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Dear Drs. Wolff and Hudson

Considering the enormity of households in America, and in the general population, paying rental stipends to the landlord. If a general relief law paying a guaranteed income were in effect now, the entirety of it naturally is vacuumed into the landlords' pockets?

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Are you aware of the chronic diseases caused by the corporate food industry?

Robert H. Lustig, M.D., MSL, is professor of pediatrics in the Division of Endocrinology and a member of the Institute for Health Policy Studies at University of California, San Francisco. He is the former chairman of the Obesity Task Force of the Pediatric Endocrine Society. He is the president of the nonprofit Institute for Responsible Nutrition, dedicated to reversing childhood obesity and Type 2 Diabetes. https://www.youtube.com/watch?v=gmC4Rm5cpOI http://www.penguinrandomhouse.com/books/310422/fat-chance-by-robert-h-lustig/9780142180433/

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What do you think of this story coming from a privately owned factory in Egypt?

http://www.madamasr.com/en/2017/05/23/news/u/police-disperse-sit-in-at-tourah-cement-company-arrest-22-workers/?platform=hootsuite

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Philanthro-capitalism rearing (one of it's many heads) towards democratic workplaces?

The question is Kellogg Foundation (W.K.K.F) in partnership with NCEO / Employee Ownership & Economic Well-Being - just published a study in May 2017 about "Employee Ownership" . Is this one of many efforts for large funders and money holders to 'coop' the worker owner and democratic workplace movement? With the "Ownership Economy"? To do one of many things such as grab the attention of potential business owners (large and small) to perpetuate their idea or mental model of what transitioning into a worker owner/democratic workplace looks like, how it's done, why it's done? A way to use 'worker ownership' to promote economic growth? Please elaborate if you all at D@W have time. I don't sense any democracy in their article, philosophy or study - nor any mention of some of the more social and health factors of worker owner businesses.  I sent the pdf. to the info@daw email. please find it more directly it at this link https://www.ownershipeconomy.org

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Democracy at work in academia

Dear Professor Wolff, I very much enjoy your regular economic update and other work. As you open your broadcast, you have worked in academia most of your life. Given the recent hunger strike at the Yale University, could you address in one of the following Economic updates the question of democratic running of academic affairs (departments, schools)? The current model, promoted worldwide, is at best meritocratic, but more commonly managerial and business-derived. It produces the results you described for Yale. How should an academic department or an institution conduct itself in a democratic manner, without compromising quality of teaching and research? I am aware that the Mondragon Cooperation has founded its own university. If you are familiar with it, could you perhaps talk about how it is organized and run, and if it is different from other institutions at all?

posted an official response

Thanks for the suggestion. I shall do that in a forthcoming Economic Update program.

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Update on Australia's new banks tax

Hi Professor, and greetings from a listener in Australia.

Several episodes ago you spoke about a new tax being levied by our Government on big banks.

It may interest you to know that Australia's unique (and terrible) tax arrangements mean the taxpayer will likely pick up the entirety of this new levy, rather than the banks themselves.

(Ref: http://www.theaustralian.com.au/business/financial-services/tax-deduction-rules-mean-bank-levy-wont-raise-62bn/news-story/20d484723266cf0db48fe7d382404808)

Many wealthy Australians take advantage of a system called 'negative gearing', which allows property owners to lose money on their property and then claim the loss on their taxes, vastly slashing their taxable income.

(Ref: http://theconversation.com/why-we-should-topple-the-sacred-cow-of-negative-gearing-1565).

This system is one of the (many) reasons why property ownership for the lower classes in Australia, particularly young people, has become an unattainable dream that the majority have given up on.

Our Governing Liberal Party (who are actually conservative, despite the name!) are staunchly in favour of negative gearing as a policy because their supporters benefit from it (and indeed the electorates with the most negatively geared properties are those of major Liberal politicians and ministers!).

Thanks again for your show. I'm a trade union officer here in Australia, but when America sneezes Australia catches a cold as they say, so I'm always keen to hear sharp, accurate analysis of what's happening over there.

Tim

posted an official response

Dear Tim,

Much obliged for your enlightening clarification of Australia's bank tax incidence. I will more carefully check such implications of reports in the future. Sadly, the tax structure of Australia as you explain it replicates closely the comparable class structures in most capitalist economies. And the logic is clear: as wealth and income inequality deepen, so too do the incentives of the rich to protect themselves from the people and from governments subject to universal suffrage by buying politicians, political parties, and government agencies so as to nullify what little democracy might be left. We live in a capitalist system spinning out of control in the supreme confidence that it needs to observe no limits. This has often been the recipe for system self-destruction. POssibly this time too.

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Warren Buffet

Hi Richard, You had an economic update on youtube recently whereby you poked at Warren Buffet for his over-forgiving attitude toward one of the big banks, I think it was Wells-Fargo. He gives a good interview on how he thinks the super rich are actually under taxed here- his opinion is evident within the first few minutes. Could you comment? You're doing great work by the way! Thank you, Stephen (Ireland) https://www.youtube.com/watch?v=WQc0KiAXynY Youtube- Warren Buffet- How to get Wealthy in 2017

posted an official response

Warren Buffett has indeed repeatedly made clear that he believes wealth individuals like himself are undertaxed and that the growing US income and wealth inequalities are dangerous for social stability - inequalities worsened by the existing tax structure. Buffett's stance has endeared him to US liberals, etc. That is fine as far as it goes. There have always been members of elites who call upon their fellow elites to slow down their rapacious self-aggrandizements lest they provoke social revolution and thereby kill the proverbial golden goose. The question is always whether Buffett-type elites do or do not win support from their fellow elite members. In the case of the US these days, the answer is a fully unambiguous NO from fellow elites who keep rushing headlong toward ever greater economic, political and cultural inequalities. Trump (see his new budget proposals) has the enthusiasm of the military, big banks, major corporations and their top ranks - the 1% - because he promises them what they want and expect...no matter mass dissaffection for his regime....at least so far. I poked at Buffett only because I wanted my audiences to see how much solidarity he has always felt with the very fellow elite members whose capital accumulation he wants to slow down so as to keep their elite status in tact.

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Books on Dialectics?

Dr. Wolff, I have read several of Resnick's books such as "New Departures in Marxian Theory" as well as attended his (recorded) class in Marxian Economics at Umass-Amherst but, I feel that the concept of dialectics is a potential weakness in my knowledge. Specifically, one of the difficulties I have in "New Departures in Marxian Theory" is the concept of negation when applying overdetermination for practical use. I follow that an overdetermined totality's negation is to find a set of essentialist causes then relate this back to the overdetermined totality and repeat the sequence in order to find contradictions or insights for the development of the relative truth/thought-concrete/theory. What would you recommend as books for understanding dialectical concepts as negation? Considering the radical nature of Marxian epistemology, would I find any use in taking an undergraduate philosophy course over Hegel and Marx?

posted an official response

On the matter of the course, everything depends (as is often the case) on the teacher and his/her background and approach. The literature on dialectics is vast. Some key works are Marx's own musings especially in his Grundrisse, but also see Theodor Adorno's Negative Dialectics, Richard Norman's work on Hegel, David Guest's on dialectics, Kojeve and Hyppolite and Althusser have all done crucial work on Hegel's dialectics; in the US Fred Jameson had done so although in ways different from how Resnick and I worked on the topic in our 1987 Knowledge and Class, especially Chapters 1 and 2. For us, overdetermination worked better as a way to see the relatedness between thoughts and other (epistemological dialectics) realities and among all realities (ontological dialectics). Besides, the term dialectics had become devalued and abused awfully so we wanted to use new language that could get passed all that.

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Protugal vs Spain/ no-austerity vs austerity

What do you think about the situation of Portugal right now? A left government, no austerity, growth through the last 13 quarters, low unemployment rate and yet their bonds are being rated as being garbage by the big rating companies. http://www.economist.com/news/21719753-socialists-say-their-keynesian-policies-are-working-others-fret-about-portugals

posted an official response

Partly the progressive (Keynesian) tilt of fiscal policy by the left coalition government (socialists, communists and greens), partly good luck enables the Portuguese to avoid the downward spiral of, say, Greece, or even the ongoing difficulties of Spain and Italy. The bg rating companies' judgements should always be taken with an extra-large grain of salt since they need to curry favor with the big governments whose debt they rate, and those governments (especially Germany and France) have worked extra hard for years to demonize Greece and any other govt leaning left much as the major private banks have.

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Here is my RD Wolff-inspired Blog post about worker exploitation

Here is the link to my blog post about the relevance of the song, "Sixteen Tons" to exploited workers, both in the past, and in today's world: http://thesuspicionist.blogspot.com/2017/05/is-this-classic-song-real-national.html

posted an official response

First of all, I am flattered by your inclusion of my explanation of the theory of surplus to Abby Martin in your fine work on Merle Travis's "Sixteen Toms." Second, it might interest you to know that I was enormously taken by the Tennessee Ernie Ford rendition that I heard on the radio as a teenager years ago. I was not yet politically interested so perhaps that son played a role in my own development.

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