Ask Prof. Wolff

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Recent Ford lay off.

Your recent episode of D@W you talked about Ford's decision to lay off 10,000 workers. According to research by the CAW, one job inside the plant will support 8 jobs outside the plant. so that 10,00 worker lay off represents a loss of 80,00 jobs for the community! Staggering numbers.

posted an official response

Indeed, those numbers are staggering and more auto layoffs are coming as the irrationality of mass buying (low interest rates, discounts to climb out of the 2008-2010 crash, and endless promises of "recovery") led to way too many auto purchases on long-term credit deals that are now too much for the US working class to cover. Another bubble - the auto/credit bubble bursts and threatens economic repercussions all over the place.

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What is your analysis of the Chavez/Maduro regime in Venezuela?

https://www.nytimes.com/2017/05/30/business/dealbook/venezuela-bonds-goldman-sachs.html?mcubz=0&_r=0 https://www.nytimes.com/2017/04/21/world/americas/venezuela-riots.html?mcubz=0

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What are the economic consequences of privatizing air traffic control?

http://thehill.com/homenews/administration/336315-trump-to-announce-plan-to-privatize-air-traffic-control-reports This article was written and released today 6/4/2017. When Republicans suggest privitazing something, they tell us it will "make it more efficient" but what are they really trying to acheive by this? Would be great to hear you discuss this on one of your programs. Seems that privatizing means hiring less workers and making them work longer hours for lower wages, which could result in an increase in errors made in sending off and landing planes. The airline CEOs are in on this, and with Trump, I think we can safely assume someone is getting rich off of this and it's none of us.

posted an official response

You have it right. The Republican Party has for many decades served its corporate and wealthy patrons by getting rid of government regulations that impede their profit-making ventures. The way they have done this is to mount and spread an immense propaganda operation suggesting that government economic activities are inherently and always less efficient and less socially productive than private ventures for everybody, for society as a whole. Under this ideological umbrella - for which there is no evidence at all - they get into office and then remove the regulations or other government economic activity that their patrons want removed. This is again what privatizing air traffic control is about. It is pushed by major airlines who believe they can get more profits that way than with government control.

Basically, for every instance of government enterprises messing up, there is one for private. The big debate between private and state is a political distraction from the real issue: democratic or non-democratic workplaces.

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Fiscal or monetary policy as proper US government response to current economic demands?

I understand that hawkish fiscal policy can function as a gap-filling mechanism for aggregate demand by increasing public debt in order to circulate much needed money in the economy. I also understand that hawkish monetary policy creates private debt via encouragement of private actors to borrow from banks in order to stimulate aggregate demand. Moreover, after the US central bank underwent QE, inflationary pressures affected only real estate and equity prices, and not other goods/services. To me, QE demonstrated its ineffectual nature since aggregate demand did not pick up due to lower borrowing costs. However, I have heard from intellectuals like Michael Hudson that if QE targeted private individuals (central bank deposits money into all its franchised depository institutions like BOA, Chase, etc. for the purpose of eliminating private debt/increasing private savings for the use of stimulating demand), then QE would be effective. At the same time, I've heard from intellectuals like Warren Mosler that fiscal policy is a better tool in affecting aggregate demand. Assuming that the central bank does not undergo Hudson's version of QE, if we rely on individuals to take on debt in order to stimulate the economy, it puts a heavier burden on an already debt-saddled private sector. In addition, those who can borrow understand that using such funds for real investments gives lower returns than the equity markets. If one is a corporation, the corporation will likely borrow to sit on the money or perform share buybacks instead of expanding employment or R&D (since corporation acknowledges the lack of demand). I was wondering whether you can comment on the difference between fiscal and monetary policy, and whether such difference affects your judgment in what the proper course of government action should be?

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Could a "Negative Income Tax" help to relieve Capitalism's chronic problem?

I first heard of NIT from William F Buckley on his show. As a liberal, I thought he must have gone off his trolley. Later on I think I heard Milton Friedman had proposed it. More recently, I read Theodore Herzl proposed something like NIT in his book,"The Jewish State". It struck me as a very perceptive idea.

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A NY Times article claims budget cuts are not the cause of high college expenses. Really?

I thought years of tax-cuts were the big reason. Am I wrong? Here's the url of article--------https://www.nytimes.com/2015/04/05/opinion/sunday/the-real-reason-college-tuition-costs-so-much.html?_r=0

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On the cure for capitalism.

Dr. Wolff, first of all I applaud your effort to get the truth out about where capitalism has been, and what is has also done in the last 50 years (essentially socially strip mining and exploiting the labor markets over periods of decades in Europe, N. America, and Japan, to increase the wealth of the few, who hold sway over said capitalist systems) so as to inform the public, especially in those places that are rapidly watching their States and their economies tank, due to companies fleeing to more rapidly developing capitalist parts of the world. That this is a depressing fact, doesn't need to be said, but, the solution seems to be a democratization of the work place throughout the old capitalist centers of the West, which makes sense. However, and you mentioned in your May economic update (which I saw on YouTube) that all of this perilous history we're living through will eventually lead up to another "spark" which will most likely not be as gentle or kind as "Occupy" or "Bernie Sanders." My question is, do you have a match? How do we get this to happen sooner rather than later? What I see is a land filled with zombies, who only know THIS SYSTEM, and will die believing it works, to their very last...breathe. Or, that this is all there is, so we just have to...make due. I don't even think they know how to define what they think, or feel it's just all they know. It's like asking yourself, can a politician ever consistently not rely on subterfuge to make a living? Because, although there are some who can, there aren't many. Because again, they only know how to navigate *this* system. It would seem that, education, by people like yourself to those who are willing to listen, would be a first crucial step. Are there any other steps you'd recommend? Because I will help in any way I can. Thank you. Donald Bellunduno

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The "step" that is needed is for those who can and do listen and learn must in turn be teachers. Remember that the same world you inhabit is the one "they" do and that if you offer a different interpretation from what they get from TV, radio, teachers, clerics, etc. it will affect them. Perhaps not the first few times, but if you and others persevere, you will find sympathies as a declining capitalism provokes people to wonder, to question, to challenge, and then to listen and think in ways they dared not do before.

That has been my experience for the last 8 years; I think it can and will be yours as well.

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deindustrialization and the financialization of the US economy

With deindustrialization and the financialization of the US economy, it means corporations makes greater profits. Does it also mean that the wealthiest persons in small devastated communities across America also benefit financially by allowing jobs to leave their communities? Would you please try to explain how, if it's the case, loss of jobs benefits local wealth holders.

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why do you use European countries to support your thinking of equality?

I think when you are looking at individual countries this is an error because the banking IBan system is united in the hole of Europe and has given birth to the biggest capital flight in the history of financial institutions.

posted an official response

On your title question, I use the European countries to show how even with capitalism, it is quite possible, over long periods of time, to have significantly less inequality than what the US now has. The subtext is to argue that a mobilized working class (in trade unions and in socialist and labor parties - even when their anti-capitalism is muted or altogether gone) can restrict and limit capitalist inequality (a point also that emerges from Piktetty's book on Capital in the 21st Century). And in its self consciousness, that ability can readily be extended to going beyond the restriction of capitalist inequality to the bigger issue of systemically "solving" inequality by going beyond capitalism (say toward an economy built on worker coops as the core enterprise organization).

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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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