By Richard D. Wolff. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne). His work is available at rdwolff.com and at democracyatwork.info.
As economic crises, declines and dislocations increasingly hurt or threaten people around the globe, they provoke questions. How are we to understand the forces that produced the 2008 crisis, the crisis itself, with its quick bailouts and stimulus programs, and now the debts, austerity policies and deepening economic inequalities that do not go away? Economies this troubled force people to think and react. Some resign themselves to “hard times” as if they were natural events. Some pursue individual strategies trying to escape the troubles. Some mobilize to fight whoever they blame for it all. Many are drawn to scapegoating, usually encouraged by politicians and parties seeking electoral advantages.
Leading German politicians saw the “bailout of Greece” as an opportunity to serve their big-bank supporters.
For example, Germany’s recent history has featured reduced wages (especially via increasing part-time jobs), fewer social welfare protections, major bank bailouts in the crisis of 2008, rising inequality of income and wealth, austerity policies and so on. Its leaders around Merkel have responded by carefully rescripting their recent financial maneuvers as “Europe’s bailout of Greece” in a classic exercise in scapegoat economics. Three institutions (the “troika” of the European Central Bank, the European Commission and the International Monetary Fund) lent the Greek government money since 2010. Those loans were used chiefly to pay off the Greek government’s accumulated debts to private European banks (including especially German, French and Greek banks). The “bailout of Greece” was thus really an indirect bailout of those private banks.
Without that indirect bailout, those private banks would have suffered the usual losses that come when banks make loans that cannot be repaid. Those losses would have been costly for shareholders in those banks. The major shareholders among them include some of Germany’s richest and biggest capitalists. With their usual political power, they might have gotten the German government to bail them out directly again (since the German government had already done that directly a few years earlier in the 2008/2009 crisis). But such a second direct bank bailout would have been wildly unpopular with German voters and therefore politically dangerous for Germany’s top politicians.
Leading German politicians saw the “bailout of Greece” as an opportunity to serve their big-bank supporters with a second but indirect bailout that was disguised as “for Greece.” This gambit protected their political careers from voters’ wrath while getting all of Europe to share the cost of loans to Greece. German leaders then took the lead in insisting loudly that Greeks pay dearly for Europe’s loans. Merkel imposed a crushing austerity regime – with the cooperation of Greece’s two mainstream political parties – that shifted massive resources away from Greece’s public services for use instead to secure interest on and repayment of the troika’s loans.
The opportunism of German leaders was also an exercise in scapegoat economics. German bankers and political leaders – supported by many other European leaders – distracted and deflected their own people’s resentments over growing economic problems. Instead of popular anger turning against German, French and other European bankers, capitalists, their political servant and the capitalist system itself, it was redirected against Greece and Greeks. German media dutifully led the way in recasting the European loans to Greece (that ended up mostly in private European big banks) as supports for “lazy, overpaid and over-pensioned” Greeks that were unfair and costly burdens for hardworking German and other European taxpayers.
Politicians demonize public employees as lazy, greedy and overpaid – all remarkably similar to German depictions of Greeks.
By means of this heavily staged public “Greek” drama, Germany added international economic scapegoating to the domestic scapegoating already widespread in Europe. It had repeatedly targeted communities of immigrants. Typically, the immigrants first arrived to provide employers (who often encouraged immigration) with lower-paid workers and thus higher profits. Then when the inevitable next capitalist business-cycle downturn arrived, the resulting discontent of unemployed and recession-burdened people was deflected and turned against immigrants. They were blamed as if they “took away jobs” from nonimmigrants rather than unemployment being the periodic burden, for immigrants and nonimmigrants alike, imposed by the profit-driven, fundamentally unstable capitalist system.
The United States has repeatedly displayed the same blame game with immigrants and with ethnic minorities. In the wake of the crisis since 2007, it is extending domestic scapegoating to still others. Governors in the US now increasingly attack state employees, their unions and pensions as if they, rather than the crisis, had suddenly become the economic problem. Mayors across the country do the same to municipal workers. Of course, both state and municipal budget problems since 2007 are primarily the results of high unemployment and reduced consumer spending. In short, it was and remains the crisis since 2007 that played and plays the key role in cutting governments’ tax revenues and hurting government budgets. Growing and more effective tax-evasion strategies of business and the rich have had the same effect. Responding to lowered tax collections, politicians fearful of damage to their careers refuse to raise tax rates. Instead they embrace spending cuts that they justify by means of scapegoat economics.
Thus they demonize public employees as lazy, greedy, overpaid, underworked, over-pensioned, etc. – all remarkably similar to German depictions of Greeks. Governors practice scapegoat economics by promising to protect “the public” from tax increases by “not pandering to” public employees and their unions, by “reining in” their pensions, etc. Those politicians act as if public employees and their pensions were suddenly the problem rather than a dysfunctional economic system. They similarly miss the stark reality of the dysfunctional political system they operate: It cuts government help to people in economic crises just when they need it most. Instead, US political leaders, like their German counterparts, use scapegoat economics to justify their selective spending cuts.
Capitalism’s relocation deepens economic inequality at both poles.
Scapegoat economics this time also serves capitalism’s global relocation. For decades, existing factories, offices and stores have been moving from old capitalist growth centers (western Europe, north America, and Japan) to new centers (China, India, Brazil, etc.). Similarly, enterprises are growing more in the new rather than the old centers. Headquarters sometimes remain in the old centers even as enterprise facilities locate elsewhere. Jet travel, computers and telecommunications make all this manageable. The capitalist competition that impels this relocation also means that the old centers lose many well-paid occupations with ample benefits and job security. Workers in places like Germany and the US are increasingly forced to settle for lower-paid, insecure jobs with fewer benefits. While jobs and wages grow more quickly in the new centers, wages there remain so low that huge profits reinforce capitalism’s global relocation.
As capitalists relocate, populations everywhere must adjust to and accommodate all the usually attendant frictions, sufferings and costs. In the old centers, unemployment and lower-paid jobs undermine governments’ tax revenues. Given resistance to tax increases, governments turn increasingly to expenditure cuts in their accommodation to capitalism’s relocation. This often worsens unemployment and wage rates. More importantly it further depresses mass standards of living. Consumption, household finances and relationships, marriage and career decisions: All are caught up painfully in the adjustment process. The same applies, likely more traumatically, to capitalism’s new centers. There, formerly agricultural and rural people are transformed quickly into industrial and urban populations living in extremely overcrowded and poorly provisioned slums.
A new politics organized around scapegoat economics appeals to voters by promising to “protect” them from austerity policies.
Capitalism’s relocation is socially disruptive in yet another basic way. It deepens economic inequality at both poles. Profits rise and wages stagnate in the old centers. Employers distribute the rising profits chiefly to shareholders and top executives and secondarily to upper management and professionals helping them operate corporations. An often spectacular growth in income and wealth inequalities afflicts the old centers. In the new centers, arriving capital needs and makes partnerships with local capitalists and government officials. The latter become extremely wealthy more quickly than local wages rise, and so inequalities of wealth and income deepen in the new centers too.
The gains and losses of relocating capitalism are very unequally distributed in both its old and new centers. This only aggravates the social tensions already emerging from the many adjustments and accommodations people are forced to make. Suffering from personal, financial and community losses, individuals and groups often feel betrayed by “their” political and economic organizations. In the US, for example, many working people believe that the Democratic Party and labor unions had promised to “protect” them but failed to do so, especially in the crisis and debt-funded bailouts since 2007. They have come to fear that now they will be required to absorb the costs of dealing with those debts by being subjected to austerity policies while “others” get protected from those policies. Feeling betrayed or abandoned by their traditional political representatives, many become susceptible to a new politics organized around scapegoat economics.
As exemplified by new Republican governors in the upper mid-West sensing electoral opportunity, this politics appeals to voters by promising to “protect” them from austerity policies (in the US, unlike Europe, “austerity” is not the name used). This means, first and foremost, that voters will be spared tax increases. These are demonized as always and necessarily “bad” economics for everyone. But the Republican Governors now go further and promise to protect voters also from spending cuts by making sure that those cuts focus on “others.” Enter scapegoat economics. The governors find “others” to be scapegoated in response to crisis-driven and capitalist relocation-driven declines in tax revenues. First of all, those others are – you guessed it – the traditional targets: those on welfare, in inner cities, immigrants, etc. The often-racist overtones of such appeals are only too well known. Nowadays, the second set of those “others” has come to include public employees, their unions, salaries, pensions, etc. To secure their careers, politicians promise voters to protect them by cutting government spending on both sets of scapegoated others.
When it works, such politics sets one part of the population suffering from capitalist relocation, crisis and austerity policy against another part. This permits big banks, large corporations and the rich, who own and direct them – those with the most responsibility for causing the crisis – to escape paying for it. They escape in part because their wealth and power made sure that they benefited first and most from the government bailouts in 2008 to 2010. They also escape because scapegoat economics enables them and their political friends to shift the burden of paying for the crisis onto certain of its victims while “protecting” other victims from further victimization. Perhaps capitalism inherited scapegoat economics from prior economic systems, but capitalism’s crises keep renewing that ugly injustice.
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Eventually, though, they will max out on scapegoats, as austerity plans always cast too wide a net. Hopefully “peak scapegoating” will come sooner, rather than later.
Hope so, but scapegoating is like Orwell’s “boot stamping on a human face”: it goes on and on regardless of circumstances. That’s because economic well-being however defined isn’t really the issue with the people wearing the boots. For them, it’s all about power.
Welcome to reawaking of Boss Tweed and Five Points NY.
Perhaps I should be more clear then. When it’s “only the Greeks” or “only the blacks,” scapegoating might have some limited value in preserving a reactionary status quo. When the scapegoaters are obliged to scapegoat MOST of the public as a whole in order to justify their reactionary practices, then they’ve lost public credibility altogether. That’s “peak scapegoating.” It has nothing to do with the endless ability of fools to babble nonsense.
With peak oil, the questions are about what transpires as we go downward from the peak, as is now occurring. At present in this neoliberal austerity imposed world peak scapegoating -and peak bullsh**- is inversely correlated to peak oil -and other resource scarcities like potable water. The criminality in the financial sector is in part due to hitting the limits to growth due to resource scarcity and depletion. If you can no longer “earn it” -as John Housman used to say in an old Smith Barney commercial- you’ve got to steal it.
The problem with “peak oil” is that it doesn’t come soon enough, thus oil becomes an increasingly deadlier commodity as global warming accelerates. We’re probably not at peak oil yet, unfortunately.
Very well said! Nice to see someone spell this out so clearly.
Syriza seems to be at the forefront of this battle.
Stathis Kouvelakis in his recent interview in Jacobin ‘Dangerous Days Ahead’ describes some of the problems of trying to take on such an entrenched system.
“We’re in a moment of crisis. At such a moment even the adversary, not only our side, is hesitating between various different strategies. For the moment, though, the dominant strategy isn’t the one you mention, though it does exist: part of the German elite also agrees with Giscard’s position, that it’d be better to cast off the Greeks, from some points of view even at any cost.
But what the dominant forces in Europe really want now is to shake down the country. They want to keep Greece in the “iron cage” and force Syriza to do what all the other governments of the Left in Europe ended up doing. They want to show that Syriza is just the same as all the others, that it’s inevitable, that there is no other way. That’s their real strategy, to show that Tsipras is no different from [French President] François Hollande, no different from [former Italian Prime Minister] Romano Prodi, no different from what we recently got from the social-democratic left across Europe.”
Such anger arises in me from the reality of what capitalism means: that word has more dirty connotations than communism has, as far as I am concerned.
Communism and Capitalism are “dirty” in regard to abuse of power. That is the lesson for Milleniums!
Communism was the rediscovery of tribal solidarity in an era of empire, as described for instance in the New Testament, Acts 4: 32: 35:
— which was Christian communism in a nutshell. The “abuse of power” came in nineteen centuries later, when a fraction of the Russian intelligentsia used “Communism” as a hegemonic instrument, to get its public to go along with the obviously-wrong idea that “the Party” constituted the people.
(Note for Leninists: There may in fact be a vanguard in any revolutionary society, but the test of revolutionary intensity is one of whether or not the “vanguard” is a merely sociological entity, composed of individual people who are willing to do the work and thus to keep the groups motivated, or if it is merely an official measure of doctrinal allegiance or bureaucratic power. You should all have learned from six years of the Obama administration that it’s deeds, and not words, that matter.)
Capitalism, on the other hand, is a system for exploitation based on the appropriation of the surplus. It advertises itself as a collection of “sovereign individuals” engaged in “trade,” but the capitalist power-game was brutal from the beginning to the present moment. It started with the expulsion of the peasantry from the commons and their forcible evacuation into English big cities where they were obliged to work in the factories all day. Its real purpose is what Marx called “capital accumulation.”
Unlike communism, capitalism had “abuse of power” built into its inner workings. Communism, on the other hand, was and is capable of further refinement into the social concept of a world without “abuse of power.”
The abuse of power came a little sooner than you describe. In Acts 5, a couple of people withheld some of their property from the Christian community, and were put to death as punishment (supposedly by God, but I don’t believe in miracles, so I suspect St. Peter had a hand in their deaths):
Perhaps the Koch brothers are the best evidence we have so far that God is dead.
& do we know how Ananias really got his wealth? Brutality in that time and place didn’t invoke the moral censure that it does not.
I suggest that the Soviet Union counted as “abuse of power” because it quickly ran afoul of the standard marxist objection to regimes (such as, but not limited to, capitalism) which operated “behind the backs of the workers,” of which the USSR was one.
“Under capitalism, man exploits man. Under communism, it’s just the opposite.”
— John Kenneth Galbraith
A system with floors, ceilings and rules would be good.
International Herald Tribune published on September 13, 1999 an article: “Who lost Russia? finger-pointing in Washington is widespread 3 years of dashed hopes /free-market democracy based in Moscow seems remote”, by Michael Dobbs and Paul Blustein (Washington Post Service). One fragment:
[via the joke as told in Spanish in the film Mondays in the Sun].
Another scapegoat: so-called “deadbeat dads,” used to justify dismantling FDR’s AFDC program and replacing it with punitive child support enforcement on working class divorced fathers who need to “man up.”
It is a pleasure to read Richard Wolff. He is as clear and sensible as Michael Hudson. If the recent practices of capitalism are meant to organize and promote social well-being, then capitalism fails miserably. And before too long manages to destroy itself. If we were reasonable people, we would all insure there were good safety nets for people, good services. Good societies – because that is the thing that allows capitalism to exist. Inequality has become the result of productivity. Very strange.
What seems to be required here is an economic model somewhere in between capitalism and communism that recognizing and rewards genuine wealth creation while recognizing that, given the growing productivity of technology and the increasing technical sophistication required for the employment opportunities that remain, not everyone can any longer be gainfully employed. It remains to be seen just how much Wolff’s much esteemed working class can really contribute to the advancement of human knowledge and cultural development given a chance to join the ‘leisure class’ and access to the resources required. But that seems like a much safer wager than feeding industrial technology’s growing surpluses to a military industrial complex (MIC) so ruling elites in the US (Russia and China?) can have another go at each other – this time with weapons of Mutual Assured Destruction, the claims of the MIC super salesmen and Wall Street gamblers who craft US foreign policy notwithstanding.
Much remains to be done that isn’t being done because there isn’t enough wealth to satisfy both the insatiable desire for ever MORE money and power by Western elites and the real technological requirements for a sustainable future for the world’s industrial civilization. But that isn’t going to happen until economists and the rest of us do a much better job defining what is really wealth and honestly admitting just how much we are really capable of contributing to its creation.
Frederick Soddy’s “Wealth, Virtual Wealth and Debt” (2nd edition) is a good place to start looking. If you don’t like to read just give a little thought to the last several hundred years of history and something called the Industrial Revolution.
No economic system is immune to regulatory capture.
Communism/socialism: sharing, public ownership/ control over the means of production
Capitalism: private, for-profit ownership of the means of production
There’s no in-between. Either society is controlled by a private entity controlling production for capital accumulation, or it isn’t. I vote the latter. There’s also a problem here with this term:
“rewards genuine wealth creation”
Capitalism, which threatens to turn the world into “genuine wealth” and thus terminate its ecosystems, offers a glorious reward: either work or die. You’d be amazed at how wonderful life feels when you’ve stopped thinking about your imminent death! At any rate, the capitalist system is the most efficient system yet devised at “genuine wealth creation,” and yet I still want no part of it. Can you imagine why?
Oh, and:
” It remains to be seen just how much Wolff’s much esteemed working class can really contribute to the advancement of human knowledge and cultural development given a chance to join the ‘leisure class’ and access to the resources required. ”
All inventors are workers, thus all “advancement of human knowledge and cultural development” is by definition a product of the working class. The problems with class ideology, and thus the prospects for further advancement, arise when the advancement of human knowledge is directed by a leisure class. For instance: Fox News journalists, commentators, film crews etc. are members of the working class, just as those in the employ of MSNBC are as well. The fact that both groups are well-paid to reproduce ruling class ideology doesn’t make them any less working-class.
So, to summarize.
Working class: works for a living. Is paid at vastly-differing rates in order to keep it under control.
Owning class: owns the lion’s share of investment property and makes the lion’s share of investment income. Under capitalism the owning class controls the society’s ideology through a paid intelligentsia.
Global capitalism: global society directed by “capital,” an entity consuming the world for the sake of “genuine wealth creation” to be mostly possessed by an owning class. (And by “mostly” I mean the sense in which the Walton family owns as much by itself as the poorer 42% of the American public.)
Global communism: Undefined utopia of human solidarity and sharing, without fixed hierarchies of wealth or power. All attempts to make it possible, so far, have only resulted in its simulation, thus rendering communism still undefined to this day.
In pursuit of making more concrete your undefined utopia what are your assumptions about the future structure of the State? How will this undefined utopia be governed?
What kind of organizing strategy would be necessary to begin to take concrete steps to reach this utopia?
There were partial successes in organizing in the late 19th century populist revolt, different types of union organizing between 1900 and 1935, civil rights and anti-war organizing in the 1950s and 1960s–has anyone figured out even the first steps of organizing in the climate of 2015 where farmers and unions are almost extinct and street protests seem to get nowhere?
1. So the real question to ask on whether there will be a new Greek deal is whether German capitalists need another indirect bailout. If they do, the deal will happen so they can keep scapegoating.
2. I’ve been saying for over 30 years that the relocation of capital was a plague that would destroy us. When The Blessed St. Ronnie told everyone to “vote with their feet,” my first thought was, “That’s a lot easier when all you have to move is your cash and not your labor.”