Ask Prof. Wolff

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Have a question for Professor Wolff? Want to suggest a topic or article? Post it here! Professor Wolff receives hundreds of questions per week covering a wide array of topics, from economics and socialism, to historical movements and current events. While Professor Wolff does his best to reply to some questions on Economic Updatewe receive more questions than we can handle! Ask Prof. Wolff allows his fans to ask questions publicly and also vote and respond to others questions.
 
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Who is ripped off? Worker, or consumer?

Dear professor Wolff, I was watching your second session of introductory course to Marxian economics on YouTube when a question came to my mind. Merchants and money-lenders enter the market with money and leave it with more money. What they do for gaining more money is to buy the commodities at the price of their value and sell them at a price higher than their value, which is certainly unfair. Now in Marxian economics we argue that the industrial-capitalist pays the workers less than what they added to the value of the tools and raw materials he has bought, but there is another possibility; he might pay the workers a wage equivalent to their labor, but sell their product at a higher price than its value. In this situation it is the consumers that are ripped off, not the workers. Is my described situation possible? If so, how can we distinguish between the consumer-exploitation (profiteering), worker-exploitation and hybrid case where there are elements of both kinds of ripping off present in the activity of the capitalist?

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Depressions and Recessions

Hi Dr. Wolff. I was hoping you might answer a question I had regarding the poverty that is concomitant with recession and depressions. My question is really quite simple: where does all the sudden and new poverty come from in a recession/depression? I find it strange since the raw materials of the economy have gone nowhere. There is no crop failure and yet there are food shortages. The goods, services, and raw materials of the economy don't simply vanish and yet, apparently, all the money does and hence availability to these goods and services. It appears as though depressions aren't even real features of the material world, but rather our economic system. I was hoping you might explain what exactly is going on, how do we get this apparent contradiction in the scarcity of money but not of goods and if our capitalist system is partially or entirely to blame.

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How do "employee owned, privately held companies fit the economic structure?

http://wincofoods.com/

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Who owns company profits and uninvested savings?

Dr . Wolff, Some time ago I read Heilbroner and Milberg's __The Making of Economic Society__ They seemed to lean towards Public/Private Partnerships. I am unclear how they differ from your co-ops that receive government assistance. Can you please clarify? They further discussed that company savings comprise a component of withheld wages. I would argue that uninvested savings are wages that need to be returned to working class people that helped establish and perpetuate the company. Do you agree that Company savings comprise a component of wages withheld from the company laboring class?

posted an official response

Since there is virtually no private capitalist industry that does not receive "government assistance" (usually in multiple direct and indirect forms), the term covers too much. To get at this another way, public-private partnerships usually refer to something much more intertwined that "receiving government assistance." A partnership usually means some pooling of private and public funds as investments in an enterprise from which at least the private investors aim to draw a profit. It is thus currently touted for infrastructure spending by conservative governments seeking to keep down fiscal deficits. The worker-coops I discuss are not public private partnerships in general (although it is possible to imagine a worker coop whose working capital comprises both a public and a private component). The worker coops I envision are wholly private enterprises that demand and should obtain the range and size of government assistances (direct and indirect) that have been provided to private capitalist enterprises over the last few centuries. There should, I believe, be a level playing field on which capitalist and worker-coop enterprises might compete for the allegiance of the public, so it can choose freely between the enterprises both as places in which to work and as producers from whom to buy.

 

On your second question, I think it was Marx who got at this issue more clearly and systematically. Company savings he called part of the surplus, the value of output over and above the values of the labor power and material inputs used up in production. For Marx, that surplus, produced by labor, was appropriated by capitalist employers and used as they saw fit. It might thus be said to have been "withheld" from the workers who produced it. In Marx's conception, capitalism arrogated to the small minority of employers the power to dispose of the surplus, whereas true democracy required that the workers who produced the surplus should rather be those who decided its disposition.

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how are undemocratically appointed city managers possible in a democracy? why cant we stop it?

I have been following Governor of Michigan Rick Snyder's misbehavior for a long time. and in all the articles I have seen, no one has ever explained how its possible in the USA. I am not finding it in online searches either.

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Alternative Currencies? Crypto Currencies? Community Currencies, etc. A Solution For Today?

I am tickled pink that you opened this channel for communication. Before I would just reply to your infrequent status emails and would rarely get a reply. That said, and this may be too big a topic for this forum but perhaps deserve a few words on the radio show as well, could you speak a bit about alternative currencies? Discovering Bitcoin also led to the discovery of a whole history of community currencies in the US and elsewhere. I think perhaps your audience, and myself for certain, would enjoy hearing a bit more about these alternatives to our current monetary system. For example many people know the Fed is bad news but arent aware that other alternatives exist, have existed, and have been successful throughout our history. Also of potential interest is the particulars of how they are eventually forced out of circulation, often times becoming too successful to succeed. A word or two about their killers and the killers motivations wouldnt hurt either. Thank you for this opportunity to communicate with you directly. I am trying not to hog the service but have had a growing list of questions for you for years now. Keep up the great work!

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Trump Owes Deutsche Bank $300 Million?

What does this mean for American support of European austerity? Isnt Deutsche Bank one of the main drivers behind European austerity? I guess this means Uncle Sam definitely wont be coming to rescue Europe. What else does it mean? Will Trump start taking his cues from Deutsche Bank and their economic models? Is European style austerity going to be imported to the US courtesy of Trumps debts and Deutsche Bank? Or am I perhaps over reacting? Your thoughts are appreciated.

posted an official response

The Deutsche Bank deal is already in. It was resolved last month to save embarrassment for Trump who will be (1) incharge of the US Treasury that has fined Deutsche Bank $14 billion now reduced to a fraction of that by last month's deal and (2) at the same time a debtor to Deutsche Bank for $300 million. Dont read too much into these deals that are the sort of thing Trump always did and does in his role as a real estate hustler. Many other factors promote austerity policies in Europe which will continue until either (1) capitalism there nears collapse or (2) the labor and left movements revive and topple them (and 1 and 2 may well happen together and mutually reinforce one another).

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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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Using Professionals Over 50 To Assist in Creating Worker Coops?

Dr. Wolff, As you are well aware many professionals over the age of 50 have been marginalized out of the work force. Could we make use of their significant skills in the effort to spearhead and expand worker co-ops and WSDEs? It would appear they would be a very good fit for this endeavor. This might utilize a very wasted resource the traditional capitalism model has decided to abandon.

posted an official response

Your idea is excellent and compelling. What it needs is a core of individuals with the time and imagination to organize its realization. Democracy at Work has the platforms to facilitate that organization. Might you be able and willing to begin the organization?

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When Residents Take Ownership, A Mobile Home Community Thrives

Hello Professor Wolff. I think you'll appreciate this article if you haven't seen it already. http://www.npr.org/2016/12/27/503052538/when-residents-take-ownership-a-mobile-home-community-thrives

posted an official response

I saw this and have prepared a segment on it for my weekly one-hour radio and TV show, "Economic Update" that will be broadcast across the US starting this Thursday, Jan 5. Many thanks for sending it and please do so with future such items as you encounter them.

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Is state capitalism a safe way of transition from private capitalism to socialism?

Dear professor Wolff, do you agree with thinkers who thought and think that the right way for replacing capitalism is to first occupy the state (either evolutionarily or revolutionary), become the capitalist and then reorganize the production systems? It seems to me that when the state becomes the only capitalist around, then it may become reluctant to redistribute its wealth and power to the proletariate. Am I right in thinking so?

posted an official response

Yes, I think history supports your inference. That is not to deny that state capitalism might sometimes function as a way-station from private capitalism to a socialism or communism that did away with exploitation. Lenin hoped for just that process in early USSR history. However, consolidation of power in the state coupled with the pressures and consequences of a still-capitalist relationship within state enterprises can block the transition beyond state capitalism. A fully elaborated and documented argument about how and why that happened in the USSR can be found in the following book which would, I think, interest you a great deal:

S. Resnick and R. Wolff, Class Theory and History: Capitalism and Communism in the USSR, New York and London: Routledge Publicshers, 2002.

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Surplus in Russian Communism

Dear Prof. Wolff, why did the Russian Communism ignored what I understood to be the most important part of Marxism: the distribution of wealth or surplus? Thank you so much

posted an official response

I do not think that most Russian Communist Party leaders thought about or focused policy on the surplus as it functions in Marx's economic theory. For them, following Stalin, socialism meant the replacement of private capitalists as key decision-makers in the economy (and society) with Communist Party/Soviet state functionaries as "representatives of the whole people." Simply put, in place of private property and markets, the USSR favored public or state property and state planning. Notice here that the precise organization of the production and distribution of surpluses inside enterprises was NOT the theoretical or practical focus. This was not merely a Russian or Soviet problem; the whole history of Marxism and socialism after Marx died in 1883 focused on the state versus private dichotomy much, much more than on the organization of the production and distribution of surpluses. These points are all dealt with in great detail and empirical specificity in the following book that I strongly recommend to you: S. Resnick and R. Wolff, Class Theory and History: Capitalism and Communism in the USSR, New York and London: Routledge Publishers, 2002.

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Do worker coops produce for profit or do they produce for use?

Dear professor Wolff, capitalism is criticized for its profit-directed production policy. Capitalists produce what makes more profit rather than what society really needs. Whenever possible, they even try to induce false needs in society to sell what they have produced. You have helped many worker coops to form and establish so far. I am curious to know what policy are these coops pursuing for their production? Do they have to produce for profit in order to compete with their capitalist counterparts, or are they producing for use?

posted an official response

Worker coops have both choices to make and contexts within which to operate. The surpluses produced in worker coops can and will likely be used in different ways from how surpluses produced within capitalist enterprises are used. In the latter, major shareholders and the boards of directors they select will use the surplus to reproduce this capitalist system over which they preside. That generally requires profit maximization. For worker coops, their goal is presumably to reproduce the worker coop organization which requires a much more varied distribution/usage of the surplus than mere profit maximization. And then , of course, the people deciding how to use the surplus are radically different in the two alternative enterprise organizations. The result will be different decisions shaping altogether different economic histories.

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Will the College Tuition bubble burst during Trump's Presidency?

https://fred.stlouisfed.org/series/FGCCSLQ027S Default rates are down, but since 2010 the amount of money being repaid has halved. What will happen if the 44 million borrowers who owe $1.3 trillion cannot repay their loans?Could a correction in the cost of college degrees cause another financial crisis?

posted an official response

All sorts of problems and risks attend higher education in the US and the Trump era will likely make matters worse. For example, the anti-immigrant, anti-Moslem, etc. noise from Trump administrators is already turning foreign students away from US colleges and universities. This is serious because over the last 20 years, foreign students' payments of tuition and other fees/costs at US institutions have become much, much more important for their financial viability. For another example, declining quantities, qualities, and pay scales for US jobs are leading ever more US high school graduates to question whether college makes sense for them financially. Rising interest rates make that problem worse, and likewise moves to reprivatize student loans will do that too. Major defaults of current student loans will drive lenders to compensate by raising loan rates and thus college costs for borrowing students. Lastly (and there are many more examples), fiscally strapped states will continue to cut allocations to public colleges and universities exascerbating all the above problems.

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How Are Europes Coops Coping With Growing Austerity?

I keep seeing in the headlines that Portugal, Italy and Spain are the next austerity dominoes to tumble. I am curious how Mondragon in Spain and the Italian coop sector is faring during these tough times. Are their businesses failing at the same rates as other business sectors? How are their sales holding up compared to other enterprises? Employment data, wage rates, benefit cuts, etc. are all of interest. Thank you for your time.

posted an official response

So far - and despite the fact that these worker coops are embedded within an otherwise capitalist economy - they are generally experiencing less unemployment, less austerity, and so on. No mystery here either. Worker coops do not subordinate everything to the profit bottom line in the manner that capitalist enterprises normally feel constrained to do.

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