Capitalism Hits the Fan

page type::article thing type::lecture subject::economics subject::2008 financial meltdown

About
Capitalism Hits the Fan is the name of a book and lecture video written and performed by Richard Wolff. This title is also used to refer to one or more lectures covering the arguments made in the video.

Item 1: Productivity and Wages before 1970

 * From 1820 to 1970, American productivity (output per worker) rose every year
 * From 1820 to 1970, real wages (dollar wages adjusted for inflation) also rose, at least averaged over each decade
 * This was rather unusual, gave rise to American exceptionalism and the idea that each generation should be slightly better off than the previous one, and also made America a powerful magnet for immigration
 * Americans began to think of success in terms of consumption, and became wedded to consumption as a habit.

Item 2: Productivity and Wages after 1970

 * In 1970, real wages stopped going up.
 * Productivity continued going up as before.

Item 3: Why?

 * Other countries saw us as the competition, and learned to replicate our productivity.
 * American businesses reacted by:
 * leaving, to get cheaper labor overseas
 * bringing cheap labor over here

Item 4: Results for employers

 * Companies began to make unbelievable profits.
 * They concluded that this level of profit was due to their skill at running businesses, and therefore entitled them to proportionate bonuses
 * They had so much money that they had to find new things to do with it:
 * buy up the competition (mergers and acquisitions)
 * reshape politics through lobbying
 * invest in novel financial instruments such as credit default swaps
 * loan it to employees, with interest
 * explosion of unsecured lines of credit (credit cards)

Item 5: Results for employees

 * People were traumatized.
 * They found other ways to continue the "dream" of greater consumption every generation:
 * more work:
 * increased hours -- worked themselves to exhaustion
 * sent women out to work
 * children entered the workforce sooner
 * Family life began to fall apart because of this focus on more and more outside work.
 * borrowed money
 * ...using the new unsecured credit cards
 * ...taking out 2nd mortgages on their homes

At this point there is an interesting juxtaposition: employers are taking some of the money that they would have, if trends had continued, been paying their employees, and instead loaned it to them at interest.

In the Amherst version of the lecture, Wolff argues that the Republicans did a very clever thing by (a) being among the strongest advocates for the legislation which enabled these changes to continue and thereby destroy many families, while (b) presenting themselves as the party that would save "the family" from the depredations of the Democrats, whom they blamed for causing the problem (via such things as tolerance of homosexuality and other "moral panic buttons", as well as "government intervention in free markets").

Item 6: The next phase

 * Americans couldn't keep borrowing; their debts were unsustainable, and at some point even the employers didn't want to lend to people who had unsustainable debt.
 * Nobody knew what to do.
 * Conservatives suggest less regulation as a solution; liberals suggest more regulation.
 * This didn't work the last time we tried it, in the 1930s, because corporations would find ways around them and find ways to get rid of them -- the regulations did nothing to prevent the corporations from undoing the regulations
 * nothing to stop them from trying or punish them for doing so
 * nothing to remove incentives to do so
 * nothing to remove the resources they could use to do so

Item 7: Suggestions for Reform

 * Companies should be organized democratically (use Silicon Valley garage entrepreneurship as a model)
 * Communities should demand representation on corporate boards (not sure if this suggestion was in the main video or in one of the other lectures)

Official

 * official site
 * video preview: full-length, but watermarked and low-quality; this link is hidden in the embedding code on the official site
 * book: ISBN 156656784X
 * 2009-09-07 official announcement

Media

 * 2009-12-02 lecture at Brown University - no accompanying graphics (note: audio is terrible at first but improves dramatically starting at about 0:02:06)
 * 2008-10-07 lecture at University of Massachusetts - Amherst: "a Marxian analysis" - using blackboard

Reference

 * : see Richard D. Wolff