Wolff featured in new film on economic crisis
Economics professor emeritus Richard Wolff is featured in a new film, “Capitalism Hits the Fan,” produced by the Media Education Foundation in Northampton.
In the documentary, Wolff traces the source of the economic crisis to the 1970s, when wages began to stagnate and American workers were forced into a dysfunctional spiral of borrowing and debt that ultimately exploded in the mortgage meltdown. By placing the crisis within this larger historical and systemic frame, Wolff argues convincingly that the proposed government bailouts, stimulus packages, and calls for increased market regulation will not be enough to address the real causes of the crisis, in the end suggesting that far more fundamental change will be necessary to avoid future catastrophes.
Wolff said there has been a huge increase in productivity across the last 100 years, most of it in the last three decades – the same period when wage increases stopped. “This led to spectacular profits for U.S. corporations,” he said.
After the 1970s, Wolff said, unprecedented corporate profits fueled an unprecedented stock market boom. The results were a fast-growing inequality of wealth and income dividing Americans, a bubble that burst first in the stock market and then in the real-estate market, and now the worst downturn since the Great Depression.
“What did the corporations do with that money? They paid salaries to executives no one had ever heard of before. They went on a binge of buying up other companies - mergers and acquisitions - bringing huge profits also to the financial sector that handled all the proliferating profits, bonds connected to mergers, initial stock offerings of new companies, and so on,” he said. “And most importantly, banks and large companies discovered a very profitable way to use their new, huge profits: They would lend the money to the employees. The way the employees could raise their consumption when their wages didn’t go up anymore was to borrow back from their employers a portion of the extra profits that their frozen wages made possible. Personal debt has zoomed up. So you have an economy built on a house of credit cards.”
According to Wolff, the Obama administration and most of the Democrats and Republicans in Congress fear to admit that the crisi extends far beyond Wall Street. “We’ve run out of ways to keep this going, the wages are not going up and the credit is now tapped out. It's not a ‘financial crisis’ -- finance is just the symptom – it’s a crisis of the fundamental structure of the economy.”
The film is produced and directed by Sut Jhally, professor of Communication.
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March 13, 2009.
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