Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It [Paperback]

Richard Wolff (Author)

Book Description

Publication Date: October 12, 2009

"With unerring coherence and unequaled breadth of knowledge, Rick Wolff offers a rich and much needed corrective to the views of mainstream economists and pundits. It would be difficult to come away from this... with anything but an acute appreciation of what is needed to get us out of this mess."
--Stanley Aronowitz, Distinguished Professor of Sociology and Urban Education, City University of New York

Capitalism Hits the Fan chronicles one economist's growing alarm and insights as he watched, from 2005 onwards, the economic crisis build, burst, and then dominate world events. The argument here differs sharply from most other explanations offered by politicians, media commentators, and other academics. Step by step, Professor Wolff shows that deep economic structures--the relationship of wages to profits, of workers to boards of directors, and of debts to income--account for the crisis. The great change in the US economy since the 1970s, as employers stopped the historic rise in US workers' real wages, set in motion the events that eventually broke the world economy. The crisis resulted from the post-1970s profit explosion, the debt-driven finance-industry expansion, and the sequential stock market and real estate booms and busts. Bailout interventions by the Federal Reserve and the US Treasury have thrown too little money too late at a problem that requires more than money to solve.

As this book shows, we must now ask basic questions about capitalism as a system that has now convulsed the world economy into two great depressions in 75 years (and countless lesser crises, recession, and cycles in between). The book's essays engage the long-overdue public discussion about basic structural changes and systemic alternatives needed not only to fix today's broken economy but to prevent future crises.

Editorial Reviews

About the Author

Richard Wolff has been a professor of economics at the University of Massachusetts, Amherst since 1981. He has been a visiting professor in the Graduate Program in International Affairs, at the New School in New York since 2007. Wolff's major recent interests and publications include studies of US economic history to ascertain the basic structural causes of the current economic crisis and the examination of how alternative economic theories (neoclassical, Keynesian, and Marxian) understand and respond to the crisis in very different ways. His past work involves application of advanced class analysis to contemporary global capitalism. He has written, co-authored, and co-edited many books and dozens of scholarly and popular journal articles. His recent analyses of current economic events appear regularly in the webzine of the Monthly Review.

Product Details

• Paperback: 262 pages
• Publisher: Olive Branch Pr (October 12, 2009)
• Language: English
• ISBN-10: 156656784X
• ISBN-13: 978-1566567848
• Product Dimensions: 8.9 x 5.9 x 0.7 inches
• Shipping Weight: 1 pounds
• Average Customer Review: 4.1 out of 5 stars  See all reviews (27 customer reviews)
• Amazon Best Sellers Rank: #187,405 in Books (See Top 100 in Books)

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135 of 139 people found the following review helpful

5.0 out of 5 stars The Truth. November 3, 2009

By S. J. Boatwright

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The current global financial crisis is not due to new problems nor was it unexpected. As "Capitalism Hits the Fan" illustrates it's simply the most recent downturn of the disaster prone free-market system. As far back as 2005 University of Massachusetts economist Richard Wolff, was sensing this coming downfall of the markets. Instead of taking the liberal approach (blaming government deregulation and a handful of corrupt corporations) or the conservative approach (blaming over-regulation) he targets what mainstream politicians don't dare to target: capitalism itself.

Capitalism has seen two major downfalls in the past 75 years and has been heavily peppered with slightly less painful contractions in that same time period. Many students of economics would simply brush this off as the inevitable consequences of the business cycle that accompanies the capitalist system. Such an explanation might suffice if it wasn't for the all out attack on workers that can't be attributed to the cycle. Dr. Wolff explains what many right and left-wing economist have been screaming for years but, without truly considering the consequences. Americans are working longer hours (the most in the industrialized world) more productively (with a 75%+ increase of productivity in the past 30 years) for ever falling wages.

The most noted effect of such a trend is the pendulum swing between FDR style "New Deal" policies and Regan-Bush style financial deregulation. When one style of capitalism fails, the voters flood to the other style in hopes of rejuvenated prosperity. However, as Wolff explains, regardless of where the pendulum swings both styles of capitalism are met with disastrous consequences for American citizens. Wolff also demonstrates how social democratic policies leave the wealthy with the incentive and the tools to dismantle social programs and sidestep government regulations thus enthroning "laissez-faire" once again.

The author then gives us a history of American industry in terms of wages. For 150 years wages rose with productivity. In the late 70's that trend came to a halt as worker's real-wages flat lined (as union membership declined and free-trade kicked into hyper speed). Industry then substituted lost wages with a wide range of loans to compensate. The loans were not taken due to a lack of "personal accountability" as many claim, but out of a desire to sustain pre-70's consumption. Wolff uses statistics to show the skyrocketing in the cost of living (like college expenses) in this time period, thus necessitating borrowed capital. Capital that of course must be paid with interest, effectively costing Americans twice: once for lost wages and again for interest payments. The results have been mass wealth redistribution from the bottom to the top. Wolff offers all the statistics to show the steady loss of ground for the working and middles classes. Comparing data from 1967 and 2001 brings startling facts to light."According to the US Census Bureau.....the share of total income flowing to the bottom 60% of households fell from 32 to 27 percent. ....the top 5 percent rose from under 18% to over 22%" Pg 11. The soaking of the rich resulted in speculation and bubbles the likes of which we've never seen. So begins the global economic meltdown (Of course I'm over-simplifying for the sake of the review).

Wolff's primary solution is worker self-management(Others include red-green alliances and coordination among coops). Workers would become their own board of directors. Not the private capitalist or state technocrats as in the Soviet or state capitalist models. Since the workers would probably not cut their own wages by the trillions, export their own jobs overseas, or invest trillions in risky financial investments, this option has always seemed the best to me.

If you're a diligent reader you will finish the book in about a week; It's a very fast read. The book is a collection of two or three page essays covering a wide array of topics but with great coherence. The only downfall is redundancy. Since the book is a collection of essays written since 2005, many of the same phrases (the word "oscillation" is used in virtually every essay) and arguments are repeated. Nonetheless this work is the most vital to truly comprehending the current economic downfall. I highly recommend it!

38 of 40 people found the following review helpful

5.0 out of 5 stars An Important Perspective February 6, 2010

By Steve Siegelbaum

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In this collection of startlingly prescient short essays from 2005 to 2009, Richard D, Wolff presents an analysis of the current economic disaster all too rarely encountered. In each of the book's three chronologically arranged sections - roots, economics, and politics of the economic crisis - he amply demonstrates how, through the decades, capitalism has oscillated from stability to meltdown to recovery and back. Increasingly, Wolff points out, it has been the workers who have borne the great burden of corrective or "recovery." For this, he levels strong criticism at both the right (Republicans) and the "mainstream" left (Democrats, Krugman, Stiglitz, et. al.). Using clearly reasoned arguments and detailed evidence, he concludes that unless capitalism undergoes profoundly radical structural change, we are doomed to endlessly repeat the cycle that produces these crises.
At times, Wolff, a professor of economics at the University of Massachusetts, Amherst, evinces a sour grapes attitude about what he sees as the difficulty of his like-minded colleagues to land plum academic positions. This, he believes, is a major reason the economic debate gets mired in oscillation mode. One look at Obama's staff of economic advisors strongly suggest he has a point.
The only quibble I have with this significant book is that there is a certain repetitiveness to the essays. However, given the import and freshness of its ideas, perhaps repetition is a good thing here.

32 of 35 people found the following review helpful

4.0 out of 5 stars The Prescience is Impressive August 10, 2010

By J. Edgar Mihelic

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Professor Richard Wolff is a Marxian Economist working in academia. These two aspects of his being allow for an objective analysis of the current and former economic situations. He sits outside of the necessity of justifying or cheer-leading capitalism in any of its orthodox forms. He can thus see both neo-classical and Keynesian economics objectively. It is a very powerful stance for analysis or criticism but not necessarily the best aspect for prescribing change for the system itself. He has no bias to try to save capitalism for itself, but wants to find a new structure `post-capitalism'. I admire this stance .

In this collection, essays from the run-up and the immediate fall-out of the most recent capitalistic are anthologized. The strength of this organizing principal is that you can see over time the development and concerns that grow and allow you to place it in time. For example, the Professor is able to give the structure and shape of the bursting of the bubble and its fall out as early as October 15, 2005, two years and eleven months before the biggest crisis point in the living memory of Capitalism. As an outsider Wolff is not looking at the economy as a way to leverage profit, so such a call is easy to make. The predictive power of the model is impressive. The only more impressive call would have to put a time-line on the bursting. If he could do that, he could have made money on the run-up and selling everything short. In all honesty, the prescience is impressive. Many were aware of the bubble, if only retroactively. (I know now: when people who know nothing of a subject think they will be millionaires by leveraging whatever prevailing trend, it is time to sell.)

The biggest weakness here is structural and hard to avoid. By having an anthology of essays that are made to stand alone and effective when they do, some of the underlying reasoning behind the author's positions are overstated. Real wages have been stagnant for 35 years; Americans have funded their increased consumption during that time with borrowing. I know this now. I know it in spades. Each three page essay is a structured argument, and at points I wished there was more depth in the evidence which is not available for the formal structure.

The other criticism is on the prescriptive end. In many places Wolff argues for true worker control of the companies. He has a particular animus against corporate boards and feels they should be replaced by the workers themselves. Capitalism, in its private or state structures, has not ever accomplished this. We can see in Germany where in the larger corporations the workers have a seat at the table, but Wolff wants the whole table for the workers. While I am not unsympathetic to such a reorganization, the pathway to this end seems unclear and left out of the argument. Again, it seems that it is much easier to find the flaws in the status quo than to posit the status no. To Wolff's credit he does admit that this new organizing principle would have its own contradictions. I appreciate such honesty.