Richard D. Wolff

Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Socialism, and Understanding Marxism, the latter of which is now available in a newly released 2021 hardcover edition with a new introduction by the author.

Market Fundamentalism’ Is an Obstacle to Social Progress

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A changing world order, a shrinking U.S. empire, migrations and related demographic shifts, and major economic crashes have all enhanced religious fundamentalisms around the world. Beyond religions, other ideological fundamentalisms likewise provide widely welcomed reassurances. One of the latter—market fundamentalism—invites and deserves criticism as a major obstacle to navigating this time of rapid social change. Market fundamentalism attributes to that particular social institution a level of perfection and “optimality” quite parallel to what fundamentalist religions attribute to prophets and divinities.

Yet markets are just one among many social means of rationing. Anything scarce relative to demand for it raises the same question: Who will get it and who must do without it? The market is one institutional way to ration the scarce item. In a market, those who want it bid up its price leading others to drop out because they cannot or will not pay the higher price. When higher prices have eliminated the excess of demand over supply, scarcity is gone, and no more bidding up is required. Those able and willing to pay the higher prices are satisfied by receiving distributions of the available supply.

The market has thus rationed out the scarce supply. It has determined who gets and who does not. Clearly, the richer a buyer is, the more likely that buyer will welcome, endorse, and celebrate “the market system.” Markets favor rich buyers. Such buyers in turn will more likely support teachers, clerics, politicians, and others who promote arguments that markets are “efficient,” “socially positive,” or “best for everyone.”

Yet even the economics profession—which routinely celebrates markets—includes a sizable—if underemphasized—literature about how, why, and when free (i.e., unregulated) markets do not work efficiently or in socially positive ways. That literature has developed concepts like “imperfect competition,” “market distortions,” and “externalities,” to pinpoint markets failing to be efficient or benefit social welfare. Social leaders who have had to deal with actual markets in society have likewise repeatedly intervened in them when and because markets worked in socially unacceptable ways. Thus, we have minimum wage laws, maximum interest-rate laws, price-gouging laws, and tariff and trade wars. Practical people know that “leaving matters to the market” has often yielded disasters (e.g., the crashes of 2000, 2008, and 2020) overcome by massive, sustained governmental regulation of and intervention in markets.

So then why do market fundamentalists celebrate a rationing system—the market—that in both theory and practice is more replete with holes than a block of Swiss cheese? Libertarians go so far as to promote a “pure” market economy as a realizable utopia. Such a pure market system is their policy to fix the massive problems they admit exist in contemporary (impure) capitalism. Libertarians are forever frustrated by their lack of success.

For many reasons, markets ought not claim anyone’s loyalty. Among alternative systems of rationing scarcity, markets are clearly inferior. For example, in many religious, ethical, and moral traditions, basic precepts urge or insist that scarcity be addressed by a rationing system based on their respective concepts of human need. Many other rationing systems—including the U.S. version used in World War II—dispensed with the market system and substituted a needs-based rationing system managed by the government.

Rationing systems could likewise be based on age, type of work performed, employment status, family situation, health conditions, distance between home and workplace, or other criteria. Their importance relative to one another and relative to some composite notion of “need,” could and should be determined democratically. Indeed, a genuinely democratic society would let the people decide which (if any) scarcities should be rationed by the market and which (if any) by alternative rationing systems.

Market fetishists will surely trot out their favorite rationalizations with which to regale students. For example, they argue that when buyers bid up prices for scarce items other entrepreneurs will rush in with more supply to capture those higher prices, thereby ending the scarcity. This simple-minded argument fails to grasp that the entrepreneurs cashing in on the higher prices for scarce items have every incentive and many of the means to prevent, delay, or block altogether the entry of new suppliers. Actual business history shows that they often do so successfully. In other words, glib assurances about reactions to market prices are ideological noise and little else.

We can also catch the market fetishizers in their own contradictions. When justifying the sky-high pay packages of mega-corporate CEOs, we are told their scarcity requires their high prices. The same folks explain to us that to overcome scarcity of wage labor, it was necessary to cut U.S. workers’ pandemic-era unemployment supplement, not to raise their wages. During times of scarcity, markets often reveal to capitalists the possibility of earning higher profits on lower volumes of product and sales. If they prioritize profits and when they can afford to bar others’ entry, they will produce and sell less at higher prices to a richer clientele. We are watching that process unfold in the United States now.

The neoliberal turn in U.S. capitalism since the 1970s yielded big profits from a globalized market system. However, outside the purview of neoliberal ideology, that global market catapulted the Chinese economy forward far faster than the United States and far faster than the United States found acceptable. Thus the United States junked its market celebrations (substituting intense “security” concerns) to justify massive governmental interventions in markets to thwart Chinese development: a trade war, tariff wars, chip subsidies, and sanctions. Awkwardly and unpersuasively, the economic profession keeps teaching about the efficiency of free or pure markets, while students learn from the news all about U.S. protectionism, market management, and the need to turn away from the free market gods previously venerated.

Then too the market-based health care system of the United States challenges market fundamentalism: the United States has 4.3 percent of the world population but accounted for 16.9 percent of the world’s COVID-19 deaths. Might the market system bear a significant share of the blame and fault here? So dangerous is the potential disruption of ideological consensus that it becomes vital to avoid asking the question, let alone pursuing a serious answer.

During the pandemic, millions of workers were told that they were “essential” and “front-line responders.” A grateful society appreciated them. As they often noted, the market had not rewarded them accordingly. They got very low wages. They must not have been scarce enough to command better. That’s how markets work. Markets do not reward what is most valuable and essential. They never did. They reward what is scarce relative to people’s ability to buy, no matter the social importance we give to the actual work and roles people play. Markets pander to where the money is. No wonder the rich subsidize market fundamentalism. The wonder is why the rest of society believes or tolerates it.

This article was produced by Economy for All, a project of the Independent Media Institute.

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The Debt Ceiling Debate Is a Massive Deception Against the Public

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Future historians will likely look back at the debt ceiling rituals being reenacted these days with a frustrated shaking of their heads. That otherwise reasonable people would be so readily deceived raises the question that will provoke those historians: How could this happen?

The U.S. Congress has imposed successive ceilings on the national debt, each one higher than the last. Ceilings were intended to limit the amount of federal borrowing. But the same U.S. Congress so managed its taxing and spending that it created ever more excesses of spending over tax revenues (deficits). Those excesses required borrowing to cover them. The borrowings accumulated to hit successive ceilings. A highly political ritual of threats and counterthreats accompanied each rise of the ceiling required by the need to borrow to finance deficits.

It is elementary economics to note that if Congress raised more taxes or cut federal spending—or both—there would be no need to borrow and thus no ceiling on borrowing to worry about. The ceiling would become irrelevant or merely symbolic. Further, if taxes were raised enough and spending cut enough, the existing U.S. national debt could be reduced. That situation has happened occasionally in U.S. history.

The real issue then is that when borrowing approaches any ceiling, the policy choices are these three: raise the ceiling (to borrow more), raise taxes, or cut spending. Of course, combinations of them would also be possible.

In contrast to this reality, U.S. politics deceives by constricting its debate. Politicians, the mainstream media, and academics simply omit—basically by refusing to admit or consider—tax increases. The GOP demands spending cuts or else it will block raising the ceiling. The Democrats insist that raising the ceiling is the better choice than cutting spending. Democrats threaten to blame the GOP for the consequences of not raising the debt ceiling. They paint those consequences in lurid colors depicting U.S. bondholders denied interest or repayment, Social Security recipients denied their pensions, and government employees denied their wages. The unspoken agreement between the two major parties is to omit any serious discussion of raising taxes to avoid hitting the debt ceiling. That omission entails deception.

Here are some tax increases that could help solve the problem by avoiding any need to raise the debt ceiling. The social security tax could be applied to all wage and salary incomes, not only those of $160,000 or less as is now the case. The social security tax could be applied to nonwage income such as interest dividends, capital gains, and rents. The corporate profits tax could be raised back to what it was a few decades ago: near or above 50 percent versus the current 37 percent rate. A property tax could be levied on property that takes the form of stocks and bonds. The current property tax in the United States (levied mostly at the local level) includes land, houses, automobiles, and business inventories, while it excludes stocks and bonds. Perhaps that is because the richest 10 percent of Americans own roughly 80 percent of stocks and bonds. The current property tax system in the United States is very nice for that 10 percent. Another logical candidate is the federal estate tax which a few years ago exempted under $1 million of an estate from the tax, but now exempts over $12 million per person (over $25 million per couple). That exemption makes a mockery of the idea that all Americans start or live their lives on a level playing field where merit counts more than inheritance. The U.S. could and should go back from that tax giveaway to the richest. There are many more possible tax increases.

Of course, there are strengths and weaknesses entailed in raising every tax, positive and negative consequences. But the exact same is true of raising the debt ceiling and thereby increasing the U.S. national debt. Likewise cutting spending has its pluses and minuses in terms of pain and gain. There is no logical or reasonable basis for excluding tax increases from the national debate and discussion about raising the debt ceiling and thereby the national debt.

It is rather the shared political commitments of both major parties that require and motivate the exclusion. There is no reason for U.S. citizens to accept, tolerate, endorse, or otherwise validate the debt ceiling deception perpetrated against us.

Nor is the debt ceiling deception alone. The previous national debate over responding to inflation by having the Federal Reserve raise interest rates provides another quite parallel example. That debate proceeded by debating the pros and cons of interest rate increases as if no other anti-inflationary policy existed or was even worth mentioning. Once again elementary economics teaches that wage-price freezes and rationing have been used against inflations in the past—including in the United States—as alternatives to raising interest rates or alongside them. U.S. President Nixon in 1971 used wage-price freezes. U.S. President Roosevelt used rationing during World War II. But the government, Federal Reserve, major media, and major academic leaders carried on their recent policy debates as if those other anti-inflationary tools did not exist or were not worth including in the debate.

Wage-price freezes and rationing have their strengths and weaknesses—just as tax increases do—but once again the same applies to raising interest rates. No justification exists for proceeding as if alternative options are not there. The U.S. national debate over fighting inflation was deceptive in the same way that the debate over the debt ceiling is.

Nor is the deception any less if it is covered by a claim of “realism.” Those who grasp elementary economics enough to know that tax increases could “solve” the debt ceiling issue become complicit in the deception by invoking “realism.” Since the two major parties are jointly subservient to corporations and the rich, they rule out tax increases on them. It thus becomes “realistic” to exclude that option from the debt ceiling debate. What is best for corporations and the rich thus gets equated to what is “realistic.” It is worth remembering that throughout history ruling classes have discovered, to their shock and surprise, that the ruled can and often do quickly alter what is “realistic.”

The debt ceiling deceptions favor corporations over individuals and the richest individuals over the rest of us. In our thinking and speaking too, the nation’s class structure and class struggles exhibit their influential power. The mainstream debt ceiling debate deceives by lying by omission rather than commission.

 This article was produced by Economy for All, a project of the Independent Media Institute.

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