Richard D. Wolff

Transcripts Below

DHARNA NOOR, TRNN: Welcome to the Real News Network. I'm Dharna Noor.

New statistics from the U.S. Census Bureau has raised hopes that the economy is finally recovering from the 2008 crash. The figures released on Tuesday show that the US median household income has gone up by 5.2% between 2014 and 2015, putting it at $56,516. They also showed a 1.2% decrease in the official poverty rate. These figures are being hailed as a victory for the American middle class but are average Americans really benefiting?

Joining us from New York City to discuss this is Richard D. Wolff. Richard is a Professor of Economics Emeritus at the University of Massachusetts Amherst and currently a visiting professor of the graduate program in international affairs at the New School University in New York. His latest book is Capitalism's Crisis Deepens. Thanks for joining us today, Rick.

RICHARD WOLFF: Thank you for inviting me.

NOOR: Now Rick, some commentators like the New York Times' Neil Irwin are saying that these new figures mark the first time in years that the U.S. economic expansion has helped the middle class rather than just the super-rich, and you, too, have pointed out in recent years that economic growth has really only been benefiting the 1%. Does this new Census Bureau report mark a shift away from that trend?

WOLFF: Absolutely not. Let's remember, in order to understand what happens, say, to the middle class, or to any large group of people, your span of attention has to be more than one year. Things bounce around in a capitalistic economy because of its instabilities, because of the contradictions that are besetting it always. So a few months, a year or two, never explain anything. You have to have a longer vision.

So yes, it's perfectly reasonable to say and to celebrate that over the last year things have gotten better. But the reality is that it's remarkable because over the last 20 years, they've gotten steadily worse. So, for example, the $56,000-plus median household income that we celebrate today is lower than what the median income of a household was back in 2007, the last year before the crash hit. And it's even lower further behind what it was 10 years earlier in 1997. Which means that over the last 20 years while the output of the American economy has grown very much, while the productivity per worker hour has grown very much, the median household income, an average kind of number telling you how people are doing, has been declining.

In other words, not only have the working people, the vast majority, not participated in their own growing productivity in the growth of wealth, but they've declined. And that explains why the gap between rich and poor has gotten so much worse. So to forget about all that, to put it in the background and look at this one-year number is a bizarre and not too very praiseworthy effort to focus on a shred of positivity in a long story that points always in the other direction.

NOOR: Right. And for a bit more context, we know that the labor force participation rate is at a roughly 40-year low. Worker productivity, as you said, is at a general all time high. Wage growth has been in an overall decline since late 1970s. So are we just seeing a growth in median income that's just sort of a result of the regular bumps of capitalism's ups and downs? Or is there something else going on here. Is there something going on here? What's accounting for this rise in the median household income?

WOLFF: Well, I think you have a number of factors. We did over the last year see an increase in employment. You're right that the stunning reality isn't really so much that as it is the vast, the millions of Americans who've dropped out of the labor force, because they're so depressed about their opportunities there and their prospects. But if you put together a low rate of inflation and a little bit of pressure on money, wages to go up. Then you can have a good year.

I would remind everyone that this last Friday's statistics from the Bureau of Labor Statistics about real wages shows that over the last month had gone down again. Again a month doesn't prove anything but it sure suggests that the very terrible stagnation of wages in America, which explains why we're at a 20 year low in terms of the median household income, that is not going away anytime soon. And even with rising employment, the kinds of jobs people are getting means that the real wages are actually going down of the American people.

NOOR: And it's worth noting that the actual growth in the median income has not affected all populations equally. Rural areas in the industrial rust belt in Appalachia, for instance, haven't really experienced the same rate of growth as major metropolitan areas in their suburbs. Why is this? What accounts for this disparity?

WOLFF: Well, I think you'd see a number of disparities. You'd see the rural urban disparity. You obviously see the whites versus African American and Hispanic disparity. But I think the biggest one to focus on is the fact that these average numbers and these median numbers don't foreground for us the fact that if you took away the top 5% or 10% of wage earners, salary earners, or anything else, then you would quickly see how deteriorated are the situations from most other people.

Let me give you one example. Most of the jobs lost in the depressed, almost now, decade--2007 the crash really began, and we're getting close to 2017. So we're really looking at a lost decade. During which the number of jobs lost is enormous. But even if you look at the jobs recovered, over and over again you see that a job that was secure, a job that had good benefits and a job at a high wage gave way for the same person to have to go back to work at job with less security, less benefits, and lower wages. That's what's really fueling on the left the support for Bernie Sanders, on the right the support for Trump, as symbols of wanting to get away from a status quo that is for the massive people very bad news one year after the next.

NOOR: Now, this new Harvard Business School report says that the growth of the U.S. economy has slowed by the failure of the Obama administration and the Republican-led Congress to work together to improve things like healthcare and education policy, tax laws, business regulation. Do you see any truth to this? With the presidential elections quickly approaching, as you said, how should we remember Obama's 8 years of presidency with regard to economic growth?

WOLFF: Let me start by commenting on the Harvard Business School report. You know capitalism has been the dominant system of the world economy increasingly across the last 300 years. Started in England, spread to Europe, and is now global. That system is extraordinarily unstable. It has an economic downturn every 3-7 years. Every 20-30 it's a really bad one. Then if you look at the 1930s or the one we're still in that crashed in 2008, you can see that instability is sometimes catastrophic in terms of its global impact. Therefore, it has always led people to confront the problem, maybe the system we have, with such instability, and put aside the question of the inequality that it breeds, maybe the system is the problem. This frightens a lot of folks. They don't want to go in that direction, let alone pursue it.

So they look for alternative explanations. One of the most durable, one of the oldest, is the notion there's nothing wrong with this system, it's just the government that's the problem. So you have the libertarians who literally blame everything they don't like on the government. Then you have partisans. For them it's the Republican or the Democrats. Then you have the Harvard Business Review and the Harvard Business School who like to make it a more balanced argument, so it isn't the Republicans or the Democrats, it's both of them in gridlock. If only, if only the government were better.

My response is: stop looking outside of a dysfunctional system and finally be honest enough. The Cold War is behind us. There is no Soviet Union you have to worry about. Why don't you finally face up to the criticism of capitalism as a system which is as old as capitalism itself, and maybe think about whether there are structural dimensions here that are the problem of our economy, and that they shed a lot of light on why the government is gridlocked or why the government behaves the way it does.

NOOR: So do we have any reason to believe there's enough stability in the financial system now to ensure that another crash won't wreck the economy and wipe out millions of jobs, and destroy household wealth again?

WOLFF: Well, to tell you the truth--and here I'll take off my hat as a professional economist and I'll just be an American citizen. If after the crash of 1930s, which was the worst so far, we believed as a nation that we had come up with a solution to avoid it happening again, which indeed every president kind of promised us, starting with Franklin Roosevelt. If we believed it then it's shame on us. If we kept believing it, after the next crisis happened and there were 11 economic downturns between the end of the Great Depression in 1941 and the beginning of the one we're in in 2008, then it's really shame on us. And if we believe that now having been told that the monetary system is under control and that the Federal Reserve will manage things, then it's beyond shame on us. Then it's beginning to be a question of whether we are blind to what we're seeing.

So the answer is no. We don't have the mechanisms to control the capitalism's instability. Capitalist people, people who like capitalism, have been trying to avoid economic downturns for 300 years. They were very smart people. They meant to solve that problem. They haven't been able to. That's why we now see 8 years after the latest one that wasn’t supposed to happen, that we can't get monetary policy to solve the problem. We're now having negative interest rates. We haven't seen that most of the history of the last 300 years. Things are desperate to hold on to an economy because in part we won't have a national debate about whether capitalism is a system whose internal dysfunctionality maybe means we’ve come to the point where we ought to talk about alternative systems, because it's urgent.

NOOR: Well, Rick, thanks so much for joining us to pick apart some of these new statistics, and we hope to talk to you again soon to talk more about some of these solutions that you just mentioned.

WOLFF: My pleasure, and I'd love to talk about those alternatives and why we ought to pay attention to them.

NOOR: And thank you for joining us on the Real News Network.