The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself

by Richard D. Wolff

“The eradication of the reforms and regulations in our capitalist democracy, which once put limits on capitalism, have given birth to a rapacious and unfettered corporate state. This corporate state preys on the population, dismantles institutions that serve the common good, orchestrates tax boycotts for itself and loots the U.S. Treasury at will. The corporate state, which has bought out the two ruling parties, has, however, severely weakened the ability of the state to cope, as we are seeing with the pandemic and its economic fallout, with external stress or a crisis. Richard Wolff in his new book examines these frightening and anti-democratic configurations of corporate power, offering not only a blueprint for how we got here, but a plan for how we will rescue ourselves and create new models of economic and political justice.”

“Even multi-billionaires today lament the inequality capitalism produces, arguing for measures to curb it. Richard Wolff stands out for his brilliant exposition that, if capitalism appears unjust, it is because it is irrational, inefficient and wasteful of human and natural resources. The same ‘production lines’ that pump out untold wealth also produce industrial scale discontent and physical sickness. And yet, for most people it was hitherto impossible to imagine a world without capitalism. Covid-19 has put a dent into this corrosive certainty and, now, Prof Wolff’s new book turns this dent into a magnificent source of hope and insight.”

Back in 1973, the average hourly wage in this country was $4.03 an hour. I did a little calculation that we economists do to take a look at what you could get for $4.03 an hour in 1973 and then adjusted it to 2018 – the last year that we have numbers for. How much money would you need per hour in 2018 to be able to buy the same bundle of goods that you could buy for $4.03 in 1973? You’d need an average of $23.68 an hour. An average wage of $23.68 would be what you’d need for a worker to be able to buy, on average, as much today as he or she could with the average hourly pay in 1973.

We have redistributed upward the wealth and income in our country over the last 40 years, away from the poor and middle class to a small group at the top.

unemployment and unemployment compensation are inventions of capitalism. Capitalism needs to fire people when it’s profitable. And it needs to have a “reserve army of the unemployed” so that all workers are well-disciplined. So, don’t be fooled. Even though unemployment is bad for capitalism in so far as it erodes profits, it is good for the system as it helps capitalists stay on top. For the worker, though, unemployment is unilaterally bad. But they get no choice, because the system has decided for them. Capitalism would rather suffer the loss of unemployment than suffer the risk of a workforce unafraid to demand adequate wage conditions, safe workplaces, a decent work-life balance, etc.

We are living through a collapse of capitalism in the face of a virus and in the face of its own unfortunate tendency to think that unemployment is a reasonable thing for society. It never was and it isn’t now. What it always has been, is a cataclysmic waste. As stated, we can do better than unemployment.

The organization and manipulation of government debts (to finance budget deficits and development projects) have been core components of world capitalism’s real history for centuries. The system fosters those swindles. The system also rejects or ignores the critics of those swindles including Modern Monetary Theorists, Marxists, and “populists” of varying persuasions. Change comes when finally, the swindle’s critics and its victims merge to end it.

Capitalism as a system has always ripped off the working class. Most workers know it. They know it if for no other reason than the bar they pass on the way home always invites them in for a “happy hour” because it knows that the hours at work weren't. But this takes it to a whole new level. You are going to be forced to go to work, you're going to have to bear the risk of illness and death, and you're going to have to accept that you can't go to court and recover for the horror that your employer has imposed on you. That is because the government has freed the employer from liability in court. If ever there was an economic system that no longer deserved the loyalty of the people living under it, we have now arrived at a capitalism that has brought us to just that point.

We are in the midst of a prolonged war, a class struggle in which the employer class (a small minority) wages war on the labor force (the hundred and sixty million Americans who produce the goods and services we all depend on). Those hundred and sixty million are under assault. They have been for decades. Their real wages, which is the money they earn compared to the prices they have to pay, have not gone up in 35 years. They compensate for the loss of a rising income by having more members of the family go out to do more labor hours, and by borrowing more money than any working class in the history of the world.

Will US capitalism survive? Or will this be the time when white and black people understand that the system is the main problem, not each other? It will be hard. That's why it's worked so well to keep capitalism in place. But it's the system that’s the key issue.

We will not solve the poverty problem and the racial problems of this country without a fundamental change in how people get jobs, incomes, homes, automobiles, vacations, university educations, you name it. That's the social change that ought to come out of the courageous people reminding us that black lives matter; that equality is something we can continue to fight for and that we need it because the alternative is a society no one will want to live in. This system is over. It cannot support the society into which it was born, in which it grew, and changed. Now it must pass away to make room for a system that works better for most people than this one has shown it can.

By attracting buyers, internet shopping is defeating brick-and-mortar stores; it is fast absorbing their equipment, physical space and some of their former employees. There are other reasons for this. Because average U.S. wages have been stagnant for decades, price has become ever more important to buyers. Then the coronavirus pandemic made matters worse. As government bailouts allowed millions to become unemployed, they have focused even more on price. As government directives have urged them to stay at home, they have valued delivery even more.

There is an answer ― a mechanism that can bring democracy into the workplace: worker cooperatives. Under the cooperative model, workers have decision-making power that corresponds to the risks and productivity of their employment. Each worker gets an equal vote on decisions, which are made on a majority basis. All share democratically in the company’s gains and losses. If mistakes are made that threaten, weaken or even destroy the enterprise, those mistakes will flow from the affected workers’ democratic decisions. Some capitalist economies have already made concessions to workers demanding more than undemocratic dependency.

Worker co-ops put the workers in direct control. They democratize the direction of companies, rather than just giving employees a stake in some of the management decisions. Workers decide democratically who to hire and fire as managers, and direct their management activities. They become, in effect, their own board of directors. In capitalism, benefits of improvements, for example in technology, flow mostly or only to one level: to directors, who are almost never workers as well. So, there is little incentive for workers to look for or make improvements in the efficiency of production. The same cannot be said of workers in co-ops, who have the dual roles of workers and directors.

Worker co-ops also move away from huge pay disparity between those at the top and those at the bottom. All workers democratically decide on wages and bonuses, making it unlikely that they would give huge salary packages to only a very few. Likewise, there are differences when it comes to the distribution of any profits or surpluses. Nothing plays a greater role in the dichotomy of 1 percent versus 99 percent than the undemocratic nature of capitalist decisions about how to distribute profits or surpluses.

Capitalist employers often distribute them as top executives’ salary and stock option packages, dividend payouts, buying back their company’s shares, and so on. Worker cooperatives take a democratic approach. They also typically decide how much goes to, for example, advertising, research and development, politicians, artists and civic contributions. Society is shaped in countless ways by corporate decisions about how profits are distributed. However, in worker co-ops, the decision-making structure on distributing profits is an effective mechanism to reduce poverty, and income and wealth inequalities.

Sen. Kirsten Gillibrand (D-N.Y.) recently introduced legislation that would begin to rectify some of the anti-worker and anti-co-op discrimination in U.S. government policy by offering to help small businesses convert to co-ops and gain access to capital. Similarly, the Labour Party in the U.K. is on record with a commitment to establish a major worker co-op sector of the U.K. economy if it is elected.

The vast majority of Americans have no significant interest in the stock market. They either own no shares, or they own a quantity of shares in a pension fund that is managed by a big company, a big bank, etc. Maybe they have a few shares but not enough to make much of a difference.

What should come as no surprise to most of you is an awful lot of the Fed’s newly pumped in money never trickles very far down. Where does it go? Into the stock market. The rich, the big banks, the insurance and money management companies: those are the main players on the stock market. As they get tons and tons of new government money, they lose the incentive to plow it into the Main Street economy. The millions of unemployed are not buying as they did before. Businesses in huge numbers have closed. There's no profit to be made in producing goods and services which your population in crisis cannot anymore afford. So, they put it into the stock market with the hope that they can buy the shares today and sell them two weeks, two months, two years from now at a higher price. The profit opportunities in the stock market are big and the profit opportunities in much of the rest of the economy are poorer.

Proposing worker co-ops as frameworks for re-employing the millions deprived of work in capitalist crashes has a particular objective. Workers in worker co-op enterprises would much sooner see and act on unemployment’s basic irrationality than capitalists typically do. The Italian region of Emilia-Romagna provides a useful example of a region where worker co-ops are institutionalized and comprise 40 percent of the economy. Its large co-op sector is a major contributor to the region’s low unemployment rates (lower than Italy and also lower than the EU), its higher productivity rates, its outstanding GDP figures, and so on.

Building such a sector in the United States would enable its residents to genuinely choose economic systems. Citizens could observe, purchase from, and work within enterprises organized as worker co-ops and thus compare them to their capitalistically organized counterparts. Then informed, democratic choices could be made as to what mix of the two alternative economic systems are wanted by the U.S. population. Moving in such directions would go a long way toward finding and building on positive possibilities now buried under the catastrophic pile-up of a viral pandemic and a major capitalist crash.

America's billionaires have gotten nearly half a trillion dollars richer over the course of this unfolding crisis. Jeff Bezos added $34.6 billion in wealth; Mark Zuckerberg added $25 billion. There is no excuse for that. It is unethical, immoral, and unnecessary. It is nothing short of perverse and obscene that the richest man in the United States, Mr. Bezos, should have become much richer while 160,000 people die and millions more are still being infected. It is a critical time for a shift in social consciousness.

Capitalism has so extremely redistributed wealth and income to the top 1 percent, so mired the vast majority in overwork and excess debt, and so extinguished “good jobs” (via relocating them abroad and automation) that the system itself draws ever-deeper disaffection, criticism, and opposition.

In the wake of the pandemic and the massive unemployment used to “manage” it, wages and benefits will take major hits in the months and years ahead. Wealth will be further redistributed upward. Social divisions will deepen and so will social protests.

Suppose we had an economic system that was different, which didn’t have private profit as its goal. Suppose workplace decisions, including hiring and firing, promotion, and the use of profits, were all made democratically, with everybody in the workplace having one vote equal to everybody else. In this scenario you wouldn’t have the lives, incomes, and jobs of the majority in the unaccountable hands of a minority. There wouldn’t be the employer–employee division allowing, enabling, and inviting employers with severe psychological and sexual issues to use their positions to cause the damage Weinstein and Cosby did, or relying on profit motives to justify the efforts of saving thousands of lives from the coronavirus.

This is a true national social emergency. It affects all of us. It threatens all of us. If ever there were justification for a democratic response in which all of us, who are affected by this crisis, can share and participate—one person, one vote—it’s now to decide how best to cope. That’s the honorable, ethical, moral, democratic way to cope, but we’re not doing that. What the government has done so far is to throw, yet again, an even more enormous amount of money mostly at the business community.

Whether it’s the Fed making money available, cheap loans on a scale we’ve never seen before (counted in the trillions), or it’s the passing of a stimulus law that, again, sends trillions into the economy, it’s mostly going into the hands of businesses. This means that in a typical corporation, the people at the top, the average 12-15-person board of directors is making the decision of what to do with whatever the government gives to “stimulate the economy.” That’s not a democratic mechanism. This is allowing a tiny group of people inside each enterprise, who are committed to its profit as their bottom line, to make all the basic enterprise decisions (like how exactly to use Fed money or stimulus funds given to the enterprise). That’s a terrible mistake, which we should recognize after what happened the last time the American capitalist system crashed in 2008. Again, trillions were thrown at the business community by, again, the Fed and by the U.S. Treasury. Again, the people at the top took the money. And what did they do? Did they rebuild the economy the way it was before? Not at all. Did they put billions of people back to work in the jobs they once had? Not at all. After the subprime mortgage crash, bailed-out businesses and banks raised the salaries of top executives and bought back their own stock in the stock market, which drove up the prices of those stocks which were owned by the shareholders of the company. That’s right. Corporate executives and shareholders did w...

If you become unemployed in Italy, you need not become anxiety-ridden, lose your self-esteem, have worsening psychological problems, or drink too much. Instead, in Italy, unemployed workers can collect their unemployment insurance funds as a lump sum and together with other unemployed doing the same thing, use those funds to start and build a worker co-op enterprise. Imagine such a law that gives unemployed Americans stimulus money to start worker co-ops. Not only would it offer important, creative opportunities for the unemployed. It will also build a worker co-op sector in the US like the Emilia-Romagna region in Italy, where 40 percent of all businesses are worker co-ops. Doing that would give Americans freedom of choice: to work in and buy from a worker co-op or a capitalist enterprise. If we don’t implement programs like these, we’re going to get again what we got after 2008. The same capitalism that existed before 2008, which waltzed us into the crisis of 2008-10, was then re-established afterward. It gave ...

I need to distinguish between the three main kinds of socialism in the world today. The first kind simply means that the government takes a more active role intervening in the economy. It regulates more, it taxes more, it redistributes wealth through the tax system, and it manages a social safety net. This is one kind of socialism, often called democratic socialism, social democracy, etc. There are lots of terms for it. The second kind often goes by the name “communism.” Here the government does more than tax and regulate, the government actually owns and operates enterprises, stores, factories, and offices. The third kind of socialism doesn’t focus on the state and what it does. It stresses rather a transformation of the workplace from a top-down hierarchy, in which very few people (the owner, the board of directors) make all the key workplace decisions. The transformation of workplaces into democratic communities means that all participating workers make the decisions: one person, one vote. It’s no longer employer/employee, neither private nor state. It is the workers themselves who take over and operate the enterprises. Now let’s take a look at how all three kinds of socialism would have prepared us differently. We know how the first kind, democratic socialism, would have handled this because it exists in a number of countries, governed by socialist parties. Spain is governed by a socialist party, Portugal is governed by a socialist party, and so on. Here’s what the soc...

Before the 2020 crash, class war had been redistributing wealth for decades from middle-income people and the poor to the top 1 percent. That upward redistribution was U.S. employers’ response to the legacy of the New Deal. During the Great Depression and afterward, wealth had been redistributed downward. By the 1970s, that was reversed.

What then is to be done? First, we need to recognize the class war that is underway and commit to fighting it. On that basis, we must organize a mass base to put real political force behind social democratic policies, parties, and politicians. We need something like the New Deal coalition. The pandemic, economic crash, and gross official policy failures (including violent official scapegoating) draw many toward classical social democracy. The successes of the Democratic Socialists of America show this.

Second, we must face a major obstacle. Since 1945, capitalists and their supporters developed arguments and institutions to undo the New Deal and its leftist legacies. They silenced, deflected, co-opted, and/or demonized criticisms of capitalism. Strategic decisions made by both the U.S. New Deal and European social democracy contributed to their defeats. Both always left and still leave employers exclusively in positions to (1) receive and dispense their enterprises’ profits and (2) decide and direct what, how, and where their enterprises produce. Those positions gave capitalists the financial resources and power—politically, economically, and culturally—repeatedly to outmaneuver and repress labor and the left.

Third, to newly organized versions of a New Deal coalition or of social democracy, we must add a new element. We cannot again leave capitalists in the exclusive positions to receive enterprise profits and make major enterprise decisions. The new element is thus the demand to change enterprises producing goods and services. From hierarchical, capitalist organizations (where owners, boards of directors, etc., occupy the employer position) we need to transition to the altogether different democratic, worker co-op organizations. In the latter, no employer/employee split occurs. All workers have equal voice in deciding what gets produced, how, and where and how any profits get used. The collec...