by Redwhitenblack, TC|TW Editor
Hopefully this is installment #1 in a four part audio/video series on Sundays.
“Capitalism Hits the Fan” is an economic lecture by Dr. Richard Wolff and turned into a documentary film due to his compelling narrative of the forces that brought about the economic crash of 2008 and what will forever be termed the “Great Recession” afterward (ye gods of historiography please, oh please find a better name for it than that). He’s taught previously at Yale University and the University of Massachusetts – Amherst.
I would urge anyone encountering Dr. Wolff’s ideas for the first time not to agree with him or disagree with him on first viewing, but to hear the entire story before going back again to make judgements. While the runtime is an hour and 44 minutes, the lecture is only 37 minutes. Then Dr. Wolff speaks about his experiences since the documentary.
For you, dear reader with Bulls games and Oscars to watch (go Django!) if Dr. Wolff’s message can be encapsulated in a small portion, if there is only one portion of this lecture that you should get it is this part that begins at 17minutes 30seconds:
“As the 70s became the 80s, and the 80s became the 90s the profits were unbelievable. They began paying themselves levels of wages and bonuses nobody ever heard of before. Large corporations paid their people [executives] tens, hundreds of millions of dollars in annual salaries. Where’d that money come from? I just told you [profits reaped from keeping wages stagnant while productivity increased]. What else did they do?
They began to go through an orgy of what’s called mergers and acquisitions, they bought each other. Companies had huge amounts of money and bought other companies. Are you annoyed by a competitor? Buy ‘em! Are you troubled by a foreigner who’s stealing your market? Buy ‘em! And you had the money to do it. What else did they do?
Interesting. They put their money in the bank. And the banks suddenly discovered wild amounts of money coming in from corporations deposited in the banks. That’s what you do with your profits while you figure out what else to do with them; you put them in the bank. And the banks became repositories of enormous amounts of money. And then the corporations and the banks (about the same time) discovered a remarkable thing that they could do with these profits.
They would lend them to the employees! That is, the way that the employees could raise their consumption [as they expected to due to 120 years of rising wages in America before the late '70s] when their wages didn’t go up anymore was to borrow the money that their frozen wages made possible to their employers.
To understand the American economy in the last 30 years then, amounts to this: Employers no longer raised the wages of their workers. Instead, they lent them the money.
That’s why it’s an employer’s fantasy come true. “Instead of raising my workers’ wages, I lend them the money – which he has to pay me back with interest! Isn’t that better than paying them wages?”
”This is nirvana…or as close as business gets to nirvana.”
I’m actually posting this partially in response to a long conversation I’ve been having with a friend about how to address America’s current economic difficulties. It was a very long conversation. You know, “nerds of a feather…” and so-on. We talked it out for as long as we could until finally it became impossible for him to understand where I was coming from without encountering this lecture. So, here it is!
There are a exactly 3 other explanations of the economy I would love to post for discussion. And hopefully the discussion would turn into an understanding on how to move forward. And the understanding of how to move forward could very well turn into a movement.
So, let me know what you think in the comments and if I hear good things, I’ll do part 2 next Sunday – or some other day when there are no Oscars or Bulls games with which to contend. Because, idealist that I am, Django will run the table, and Nate-Rob’s going for 40 against OKC tonight. I can feel it.