Americans cast a vote of no confidence to the government of today – leading economist

The American election campaign is bringing the issues of inequality and economic dysfunction to the forefront. Millions are upset with the current state of the economy – they are disillusioned with the capitalism system. Thus, people are throwing their support behind candidates that wouldn’t even have appeared on the political scene just 10 years ago. With Donald Trump and Bernie Sanders gaining unprecedented support among the masses, will the future of America be changed forever? Are we going to see shifts in the economic model that has existed for more than a century - and is it possible that big corporations will have their power cut? We ask a leading economist, professor emeritus at the University of Massachusetts - Richard Wolff is on Sophie&Co.

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Sophie Shevardnadze: Dr. Richard Wolff, professor of economics emeritus at the university of Massachusetts, author, welcome to the show, great to have you with us today. So, doctor, the Panama Papers, the biggest leak in financial history highlights how the world’s elite dodge taxes and hide assets, politicians like the PM of Iceland, Ukraine President, plus celebrities, athletes - I mean, it’s really amazing how billions and billions of dollars can be just concealed from the world economy. Does the whole other backstage economic world exist for the rich and famous?

Richard Wolff: Absolutely, and the leaks, these latest leaks from Panama are really only one more in the long list of leaks from the media, but also research by academicians. The basic explanation is this: trillions, more than billions - trillions of dollars are regularly secreted around the world, mainly by wealthy individuals and businesses to escape taxes, and they stand as a mockery of the claim by the rich and famous around the world that they can’t be required to pay more taxes because of their economic situation. The truth is, they are much richer than they are even publicly known to be, and their wealth could solve many of the world’s economic problems if they paid the taxes they are legally required to do.

SS: Well, according to Bloomberg, the U.S. is becoming the world’s new favorite tax haven. American is resisting the new global disclosure standards and they are now attracting rich foreigners who want to store their cash in places like Nevada or South Dakota. Why did Washington refuse to sign the international tax evasion regulations?

RW: Well, our government here in the U.S. more than ever has become a kind of a representative above all for the richest, the biggest corporations, the wealthiest individuals. They are the ones that are hooked up with the international elites that are hiding money, so those elites bring the money here, they have the friends here to get the political arrangement so that they have the power in this country to escape what they might not be able to escape in their own countries. The U.S. has been a place where wealthy individuals around the world legally or illegally pock their money by buying real estate, by putting their money in secret accounts in the various states that make that easy. So this is just the continuing role for the U.S. that has some ancillary benefits in terms of bringing capital here, but is fundamentally about those who have the most making sure they keep hold of it.

SS: When Obama took office, the U.S. economy was in freefall, and now unemployment is down to healthy 5%. Nine million new jobs have been made, and the stock market is at all time high. Would you say that the Administration has done a good job?

RW: No! I think the Administration of President Obama, and of course, the Republican party is at least as much responsible for this, has done an awful job. Let’s be real on this: the so-called “recovery” has bypassed the vast majority of the American people. For example, a large part of the reduction of the unemployment rate is because people have left the labor force. People are no longer accounted in the labor force. Not because they found a job, but because they are not looking anymore. It’s a number that’s largely a mirage. Number two: the vast majority of jobs that have been founded over the last 7 years since the collapse have been jobs of much lower rates of pay than the jobs that the people lost, jobs that are less secure, jobs that have fewer benefits that go with them. That’s why the American economy is having such trouble despite getting people back to work, a smaller number than they claim, it’s jobs that don’t pay with insecurities that really shake the whole family and personal life structure of Americans, which is why so many are voting for Trump, so many are voting for Sanders, expressing their anger that the recovery has really only affected the richest at the top, the ones who brought the crash in the first place, who got the bulk of the bailouts, who now enjoy a recovery that is making the rest of the society increasingly angry and bitter.

SS: We’re going to talk about the upcoming elections soon, but as you’ve said, every three to seven years, America faces an economic downturn, and now we’re hearing predictions that the next one is just around the corner, and it’s going to be big. What do you think? What should we be preparing for?

RW: I think the illusion in the U.S. has been that somehow the so-called “recovery” in the U.S., even though it has only affected the top 10% of our people, if even that, would eventually trickle down and help everybody to recover. We’re still waiting for the famous trickle-down - it hasn’t happened. Number two: we are part of the world economy, more than ever before, a world economy no part of which is independent of any other part. We know that the economic growth of the People’s Republic of China, which has carried the world economy for the last 15 years, is slowing down. We know that the so-called “third world” as we used to call it - Asia, Africa, Latin America - is slowing down as a result in part of China. There is no way that those slowing down, together with the problems of Europe which has still not emerged from the great crash of 2008, those problems everywhere in the world will come to the U.S.. It’s not a question of whether that happens, it’s only a question of when that happens, and the guessing now is later this year or 2017, and we are very worried in the U.S. how bad that will be and how disruptive of our society, coming on top of the crash of 2008, it promises now to be.

SS: But at the moment, people are preoccupied with Presidential race, not so much about the looming economic downturn. So, Bernie Sanders, the surprise Democratic candidate, may not get nominated, judging by some of his defeats, but over the course of his phenomenal campaign, he has built a huge grassroot support base. What will happen to that? Will it rally around Clinton, will the movement he has inspired outlast its leader?

RW: I think there are many things that are happening. First, let’s be really clear. In terms of the long history of the U.S. and of the world economy, Bernie Sanders has already won. Here’s what I mean: he was expected by the leaders of the both parties to get somewhere between 1% and 3% of the vote. He has shown that that was completely wrong. That was a complete underestimate of how angry the majority of Americans are. He is doing way, way better. He has mobilized millions of people, he has made it possible in the U.S. to talk seriously about the flaws of capitalism, to consider socialism as a serious alternative. This is something that will change American history, and in that sense he has already won. Number two: even if mrs. Clinton becomes the official nominee, the movement for mr. Sanders is already in high gear. Think of it this way - in 2011, the OWS movement exploded. Tens of thousands of people were involved. Four years later, the Bernie Sanders movement explodes, and it now involves many millions of people. The line of development is obvious. The economic problems that produced the OWS, have not gone away, they’ve gotten worse for most Americans -  that’s why mr. Sanders is so successful. No matter what he does, whether he endorses ms. Clinton because of the horror of either mr. Trump or mr. Cruz as the Republican candidate, or whether he goes independently, there will be a new left political movement in the U.S. in the years ahead, much stronger than anything we have seen before.

SS: Okay, then tell me where is Bernie Sanders falling short, why are voters choosing Clinton over him? If the economy, like you’ve said, isn’t benefiting common people, surely they should turn to candidates who promise to fix exactly that, or other 3rd party candidates. So why they are choosing Clinton over Sanders?

RW: I think there are two basic reasons. The first one is very-very important for people around the world to understand: for the last half-century at least until 1947-1948, we have been in the U.S. in a condition of an endless demonization of everything that is socialist or communist or anarchist. We have been told as a people in our schools, in our newspapers, by our politicians, that anything that calls itself socialist is evil, is dangerous, is unpatriotic. For a candidate like mr. Sanders to accept the label “socialist” and thereby be seen to commit a political suicide is an earth-shaking change, and that takes time for people. Many people cannot yet vote for something they’ve been taught to believe is so terrible. The very fact that millions of people are doing it despite all of this, that’s the most important factor that will make the rest of them come along. That’s why his ability to do so well now is such an important sign for what’s coming. Number two: ms. Clinton is part of the establishment, ms. Clinton is part of the kind of the politics in both of the Republican and the Democratic party, that has run this society for the last half of the century. Therefore,  she holds on to the people who believe that our current problems are temporary, who believe that anything that changes this country will be more troubling and dangerous than holding on. It’s like the devil that you know is less frightening than the devil that you don’t yet know. So, those two forces give ms. Clinton her vote. But if you look, for example, at the statistics about how young people are voting, people between the ages of 19 and 35, mr. Sanders in election after election, when he wins and loses, he gets between 70% and 80% of the young people vote. That tells you where we are going in the U.S.

SS: Now, Sanders, Clinton, even Trump, everyone is pouncing on Wall St., saying how it has to be reigned in, proposing plans to keep it under control. Is big business now seen as a danger to the American society? Or is it just easy to blame everything on it? And can anybody really take on Wall St.?

RW: Well, let me answer the last part first. Of course, one could change Wall St., one could take on Wall St., one could reduce its influence. That’s simply a question of political will. If  that will is produced by this election or by what follows, then Wall St. will be changed and perhaps even dramatically. At this point, there isn’t that while, there isn’t that political organisation that can make that happen. Number two: we live in an economic system, it has a financial center in Wall St., but it has all kinds of other dimensions, and you’re absolutely right that part of this attack on Wall St. is because it’s easier to attack a part of this system than to confront the reality that it may indeed be our system and not just one part of it that is the problem. So, there’s a little bit of this hopefulness that we can fix the whole system’s problems by focusing just on the Wall St. part - frankly, as an economist, I think that’s silly, that doesn’t work. We have tried that in the past. If you don’t change this system as a whole, then even if you’re lucky enough to change a part, the unchanged other parts will undo what you’ve done - and I can give you the best example: the last capitalism collapsed in the 1930s here in the U.S., we passed the Banking Act of 1933. When that was finally undone by the banks who didn’t want it and by the rest of the capitalist system, when president Bill Clinton signed the bill that cancelled that Act, 8 years later, we had the same collapse from the same financial behaviour. The joke is that if you don’t change the whole system, even when you do change the Wall St. story, it will come back and be undone by the same forces you haven’t changed by not changing this system. I think we’re seeing a slow learning of that reality, and in the months and years ahead, it will be the system that finally comes into clear view as the problem we have and not just the Wall St. or any other part of it.

SS: What needs to be changed? What kind of total change you’re talking about?

RW: I think we’ve learned from the efforts to change capitalism, starting in the XIX century, across the XXth century, that something was never changed, that is, in a way, a core problem - and that is how we organise enterprises, factories, offices, stores. The basic enterprises of our system. We organise them in a following way: a tiny group of people own them and a tiny group of people run them. In most corporations which do the business of capitalism these days, major shareholders are a handful of people and institutions and they elect a board of directors, typically 12 to 20 people. They make all of the decisions: what to produce, how to produce, and what to do with the profits. Here’s a simply reality of economics - if a tiny group of people owns the businesses and if a tiny group of people they select make all of the decisions, they will run the economy for them, and not for the rest of us. And if we don’t like the outcome, which is where we are now in the global capitalist system, then we have to change that arrangement. To be as simple as I can - if you want the economic system to serve the people, you have to put the people in charge, and until we do that by making enterprises democratically owned and operated, we are going to be playing games that don’t solve our problems.

SS: So you’ve been saying that Americans are becoming more open to these socialist views, so to say. How will the next president manage to keep these left ideas in line and not to lose popular support?

RW: Well, I believe that if any Republican becomes the next President or if ms. Clinton becomes the next President, and that looks like the likely outcome, one or the other of those, then every effort will be made to push socialism off the agenda, to use the metaphor of the genie that comes out of the magic lamp, to take this genie of socialism and push him back into the lamp - that’s what they will try to do. I am firmly convinced they will fail at that effort. This is a genie you cannot put back in the lamp. The younger generation, particularly, in the U.S. is now in huge numbers against the capitalism that has destroyed their job prospects, which has destroyed their income prospect, which has saddled students with tens of thousands of dollars of debt at the time of the increasing economic difficulty. Those people are going to be interested in socialism more and more. So, the real question is, how will a government that wants to prevent socialism from spreading deal with a population that is going exactly in the opposite direction? That will be the key political question in the months and years ahead.

SS: Let’s talk about Donald Trump. So Trump’s campaign was expected to be a publicity stunt, more or less. But, fluke or not, he now has a real shot. Are people supporting him because he’s not from establishment? Is fringe politicians like Sanders or Trump becoming more influential than mainstream in America?

RW: Absolutely. Both mr. Sanders in one way and mr. Trump in a different way, are cashing in on the feeling of huge numbers of the American people that their government is corrupt, that their government is in the hands of a few very wealthy interests who use it for their own growth and their wealth and power and have no concern about the rest of the American people. There’s a feeling that a large part of the elite in the U.S. have moved their interests to China, to India, to Brazil, where they do more and more of their production, because the wages are so low, et cetera, et cetera, and for whom the mass of the American working class is of no interest. . Those people are feeling that, their jobs are disappearing, their wages are going down, security of their job is gone, benefits that they were counting on in their old age are disappearing in front of them. They are very, very angry. If they are right-wing and conservative - they express that through mr. Trump. If they are open to the left or to socialism, than they do it through mr. Sanders. But it is absolutely a vote of no confidence in the establishment of the U.S. in both parties and the capitalist system that both parties are seen to be servants of.

SS: Trump also is a unique candidate in many other regards. For instance, one of the most interesting things about him is, of course, he’s independent from Wall St. money, because he simply doesn’t need it, he’s rich enough. Political issues aside, could this business-like approach be good for the American economy?

RW: I don’t think so, I think that what’s happened is that whatever mr. Trump says, everybody knows that the truth is what you’ve just said - every American knows that mr. Trump can do what he is doing because he is a billionaire and can buy his way into political importance. So, even though he’s a critic of the establishment, he also exemplifies, illustrates, proves the very argument that the government is now something for rich people to play with. This is not what Sanders’ campaign is doing, but it is what mr. Trump is doing. He, in a sense, mocks the establishment even as he underscores the very corruption by money that American politics has now become. So I don’t think he will fundamentally solve or overcome the disaffection, even of the people who vote for him. They will see him as caught up in the very system that they don’t like anymore, and his biggest problem will be holding on to the popularity he had this time, once he’s in office, and has to be seen by the people as perpetuating the very system that is their problem.

SS: So, one of Trump's most impressive promises is eliminating U.S. debt - $19 trillion in 8 years. How much does the U.S. debt really matter at this point? Is it too big now so it is like it doesn’t even exist?

RW: It is a feature of our economy. No one that I know, including mr. Trump’s supporters, believed for one minute that is anything other than overheated rhetoric. There is no way to pay off a debt of that size in that amount of time, unless he was prepared to tax the American people on a scale they’ve never seen before or to cut government spending on a scale no one has ever seen before, in order to free up the money to reduce that debt. He can’t do that with this Congress and he can’t do it by himself. The bottom line is: he can’t do it and it is just the kind of rhetoric to portray him as the man who can get things done when the rest of Washington can’t. It is an illusion and it will fade from everyone's memory within days of the election being behind us.

SS: Dr. Wolff thank you very much for this interview. We were talking to Dr. Richard Wolff, a leading economist, professor emeritus at the University of Massachusetts, author of numerous books, the latest one called “Democracy at Work: a Cure for Capitalism”. We were discussing the current state of the American and the world economy, the growing concern over the global inequality and if it's possible to break the existing system. That’s it for this edition of Sophie&Co, stay with us next time.