Ask Prof. Wolff

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Is the petrodollar a real thing?

Hello prof. Wolff, I've come across this expression, the 'petrodollar' as a device to explain the US-Saudi alliance, but I have not been able to find any information on it from sites or journalists I trust. I was hoping that you, as an economist, might perhaps have come across it before and can confirm or deny whether this is an important thing or even a real thing? Lots of love from Denmark.

posted an official response

Yes it is important. It basically refers to the dollars used to buy oil - long priced in dollars on international markets - and to the fact that these dollars were mostly then invested in US financial and other US dollar-denominated assets. This made all sorts of money for dealers in dollars (e.g. US banks especially) and also enabled the US dollar to function as a world currency while bringing the dollars back into the US from which they had issued originally. There might have been real costs had those dollars been used otherwise. So yes, these dollars were an important asset now being challenged as oil-producers and consumers are exploring non-dollar denominated oil pricing (such as certain mid-east countries are doing and as the new Russia-China oil deal entails).

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I'm interested in your opinion on this organizing proposal I wrote:

Title: Restoring the Heartland and Rustbelt through Clean Energy Democracy: an Organizing Proposal Summary - https://ecology.iww.org/node/2220 Proposal - https://ecology.iww.org/PDF/x344543/Restoring%20the%20Heartland%20and%20Rustbelt%20through%20Clean%20Energy%20Democracy.pdf

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Worker cooperatives -- necessary, but are they sufficient for a systemic overthrow of capitalism?

Of course, I have no problem arguing that there are many openings -- in the Gramscian sense -- where Capitalism is weak, vulnerable and can/should be exploited. Under a capitalist system, workplace democracies are far from widespread and prevalent, and thus instituting them is a direct attack / challenge to capitalism's hierarchical, top-down approach to running enterprises. Ultimately, I see these steps of changing the nature of capitalist management / ownership as a form of 'reformism' similar to and along the same lines of other attempts at making capitalism friendlier, more compassionate, etc. (e.g. 'conscious capital' movements, eco-friendly firms, B-corps and other triple-bottom line accounting initiatives). As the following article points out, cooperatives are a nice maneuver for those who get to take part, but can/will they really lead to transcending the capitalist demands for accumulation, growth and out-competing all comers? http://isreview.org/issue/93/are-workers-cooperatives-alternative-capitalism

posted an official response

This question arises from time to time. First, transitions from capitalistically organized enterprises to workers self-directed enterprises (WSDE's) is, buy itself, no guarantee of anything. Changing one aspect of society does not guarantee how the society as a whole will change. To argue otherwise is a kind of essentialism: imagining that one has found the essential aspect of society whose change will somehow necessarily change all else in determinate ways. Our advocacy for worker coops has always been an advocacy based on correcting an omission in classical socialism. That omission followed from classical socialism's essentialist focus on socializing property ownership and planning instead of markets as mechanisms of distributing resources and products. We want to add the democratic transformation of the workplace to projects of property and distributional transformations to achieve the social changes we have long wanted but so far have largely eluded us. Might worker coops be somehow blocked, stopped, constrained so that they become mere reforms of a persisting capitalism? I think not but the possibility cannot be dismissed and needs to be in our minds as we push for workplace democratization. Any project that focuses on one or a few aspects of a society in the quest for broad social transformation faces the same problem (and always as). But that does not mean the problem cannot be solved; it means that we need always to see what other social changes might be needed (and thus be put on our agendas) to be more successful. Indeed, that is how and why the democratic transition of workplace organization got added to the classic socialist agenda items.

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Credit Unions and Banks

Since the great recession, Credit Unions have gained major ground when compared to Banks. And now (at least in Wisconsin) the Bankers are complaining about an uneven playing field. What are your thoughts on these financial institutions? Personally I really like them and I feel they provide a much better service than Banks. Here is the article I read and I wanted to share it with you: http://host.madison.com/wsj/business/wisconsin-credit-unions-ruffle-feathers-as-they-gain-ground-against/article_fefcbb8b-15ea-53dd-a91f-fcc93a21494a.html

posted an official response

It is stunning to read that banks are complaining about level playing fields. It is the banks that have everywhere limited and constrained what credit unions could do in the interests of protecting the banks from competition from the credit unions. Now that a very few of those long-standing bank-friendly constraints are moderated, their PR folks are trying to shift the blame onto the credit unions. Gross!

Meanwhile, I agree that credit unions were and are an interesting step toward the cooperative enterprise institutions we advocate. A partial step, yes, but nonetheless valuable. Indeed, I only wish they would be more interested in supporting and collaborating with other cooperative forms to move the whole idea forward.

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What are outlays, and how are they used in the context of Trumps Infrastructure Initiative?

Hello Professor Wolff. I have a long-winded question for you. I'm a Public Policy major and I'm in the middle of reading Trumps budget. There is a section about providing $1 Trillion in Infrastructure Support. I've watched your April lecture many times now and have grasped the idea of a PPP but I've found to what I believe is a contradiction. In an earlier section, Trump wants to cut funding to Non-Defense Discretionary Spending and i think infrastructure funding is one part of that. However, when the Budget explains that they want to use PPP's to invest in infrastructure, they claim that more Federal investments are not the solution, yet it says in the next couple of sentences, "$1 Trillion will be met by more Federal funding and non-Federal incentivized funding. While the Administration will propose additional funding, those funds will be used on incentivizing additional non-Federal investments. The budget includes $200 Billion in outlays related to the infrastructure initiative." So my question is what is an outlay and how are these outlays being used in this context of incentivizing corporations to loan money to the government for this infrastructure initiative?

posted an official response

I am no budgetary expert, but I think what the $200 billion are for is to "juice" infrastructure projects so that whatever private interests invest (what their "outlays" are) will get a return based on the total value of the infrastructure project. So the public funds will, in effect, subsidized the private return to the private investors. That is what the banks and other likely investors drool at the prospect, while ignorant (or sleasy) conservatives drool at the prospect of a big infrastructure project they can boast about that does not entail too large, budget-busting government investments (i.e. government outlays).

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Comment on election of NDP-Green Party alliance in BC, Canada?

In the provincial election of May 9 2017, the ruling BC Liberal Party won 43 seats, with the NDP winning 41 and the BC Green Party 3 seats. The NDP and Green Party recently signed and ratified an agreement to cooperate as a coalition government with combined seats of 44 (a 1 seat majority in the BC Legislature of 87 seats). The NDP-Green coalition has agreed to work together on electoral reform (move to a system of proportional representation), kick big money out of government, and increase the carbon tax. Both NDP and Green are opposed to the massive Kinder-Morgan pipeline projects and the "Site C" hydroelectric dam project, which would saddle BC rate payers with enormous debt for amost 90 years and provide cheap electricity for private, foreign-funded LNG projects (exporting fracked natural gas to Asia). For progressives in BC and Canada, this is a great day. The ruling BC Liberal party has been called the most scandal ridden political party in recent Canadian history, raking in millions of dollars in unregulated political contributions. The BC Liberals are a right-wing conservative party with strong connections to the federal Conservative Party of Canada, enacting numerous neoliberal policies through their 16 year period of governing.

posted an official response

Well, looking at these developments in BC from the US, the first thought is to congratulate you on the democratic voting system of proportional representation. We do not have that for our elections (except in certain states' primaries). Thus the majority NDP-Green coalition can govern and make the sorts of changes you indicate. I am envious because if we enabled small parties to contest with proportional representation, more interest in elections would be generated, more eligible voters would bother voting, and small parties cold make big differences in so far as they could, together, comprise majorities. That's how electoral democracy ought to work. Instead, in the US, we have two major parties - both financed by and deeply embedded with the corporate elites - and thus no major differences on the multiple issues of capitalism as the system and on most foreign policy matters. 

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What is the big economic picture globally of waste?

G'day Professor Wolff, The state-owned public broadcaster over here in Australia has just finished airing a 3-part TV documentary in prime time (and heavily advertised beforehand) that examined the disgusting amount of waste that's produced by Australians, a trend that's been dominant since the end of the 1980s (and still going strong) and lamented that before then Australia was very forward-thinking when it came to recycling. Covered was fresh produce & packaged food waste, plastic waste & what can be recycled, and both the waste & environmental damage created by fast fashion. I literally can't find the words to adequately articulate in text form the obscene level of waste and excess that was shown. One thing that will always stick with me from watching the documentary series is the fact that over a tonne of bananas at least are thrown out by banana farmers every day during harvest season because they don't meet the "cosmetic" requirements set by the national supermarket chains. What I would like to know is: what does this waste look like globally on an economic level and how does capitalism drive it? Here is the link to the ABC's website for the documentary series, called "War On Waste": http://www.abc.net.au/ourfocus/waronwaste/

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Is Germany annexing the Eurozone?

Angela Merkel recently stated Europe can no longer rely on the US or Britain following Trump's visit. I noticed she did not say "Germany can not rely" but seemingly spoke as some sort of official spokesperson for the whole of Europe. Are we seeing the economic annexation of Europe by Germany through the Euro and if so, how much of it's political will can we expect Germany to start imposing on it's neighbours similar to finance minister Schäuble's interference in Greek policy making?

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Is capitalism the systemic rental of human beings?

In 'Property and Contract in Economics: The Case for Economic Democracy' [1], World Bank economist Prof. David P. Ellerman point out that since slavery was abolished and people can no long be bough and sold, capitalism is basically nothing more than the economic system based on the rental of people. He's not alone it seems in this regard, as some capitalist economists seem to have come to the same conclusion: "Interestingly enough most of society’s economic income cannot be capitalized into private property. Since slavery was abolished, human earning power is forbidden by law to be capitalized. A man is not even free to sell himself: he must rent himself at a wage. Paul Samuelson, Economics 1976 (10th edition)[p. 52]" "One can even say that wages are the rentals paid for the use of a man’s personal services for a day or a week or a year. This may seem a strange use of terms, but on second thought, one recognizes that every agreement to hire labor is for some limited period of time. By outright purchase, you might avoid ever renting any kind of land. But in our society, labor is one of the few productive factors that cannot legally be bought outright. Labor can only be rented, and the wage rate is really a rental. " [p. 569] "The commodity that is traded in the labor market is labor services, or hours of labor. The corresponding price is the wage per hour. We can think of the wage per hour as the price at which the firm rents the services of a worker, or the rental rate for labor. We do not have asset prices in the labor market because workers cannot be bought or sold in modern societies; they can only be rented. (In a society with slavery, the asset price would be the price of a slave.) " Fischer, Dornbusch, and Schmalensee, Economics, 1988[p. 323] Would you agree? Is such an approach useful to tackling global capitalism? Ellerman further postulates that if slavery ought to be abolished, even in the case wherein a worker voluntarily sells themselves for a guarantee of job opportunities (in today's US economy , could you imagine the look on Conservatives faces when you point out the solution to job insecurity is self-enslavement, but I digress) because people can't take on the role of non-human thing, then the voluntary self-rental is also ought to be abolished as well, as tenure doesn't change that fact, and replaced with an economic system based on universal self-employement either individually or jointly in a cooperative, ie economic democracy. Would you agree with Ellerman here then, that economic democracy is a form of neo-abolitionism? If Ellerman is correct, doesn't this give us a new ideological weapon to use against the capitalist PR machine? I mean, if correct, Ellerman just pointed out that capitalism is only slight a rung above slavery in ethics (people are only temporarily treated as things, instead of completely by their employers), which is not exactly something that's easy to shake off. [1]Property and Contract in Economics: The Case for Economic Democracy', David P. Ellerman , http://www.ellerman.org/Davids-Stuff/Books/P&C-Book.pdf

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Universal Rent Guarantee

Hello, Professor Wolff. I'd like to know what you think about universal rent guarantee, a housing policy that was almost implemented in France. The idea is to compensate the landlords when their rent isn't paid, to avoid expulsion of poor people from housing. It is funded with a contribution of 2% of the rent from both the landlord and the tenant, and comes with strict rent control. Do you think this idea would help fighting homelessness and ending the housing crisis ?

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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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