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Prof. Richard Wolff: We have a "failed economic system"—To fix it, we must tax the wealthy

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This headline captures just one of the many excellent points made by New School professor Richard Wolff in this interview.

The questioner (Sam Seder of the Majority Report) asks just eight questions, and the answers are so cogent and clear that you feel like you've walked through a ton of material and barely exerted yourself. It's quite a performance by both of them.

There's a rundown of questions and a few answers after the clip, in case you want to jump around.

The interview starts with Greece — an explanation of what's happening now after the "orderly" partial "default" (actually, debt forgiveness). But the parallels between Europe and the U.S. are obvious and well-explored throughout the interview.

Wolff ends with a terrific discussion of Franklin Roosevelt, why he succeeded, and what we need to do today. Enjoy:

Sam's questions (paraphrased):

1. [0:30] What is the recent Greek deal, and what are its implications for the Greek people?

2. [4:55] How did Greece find itself in this situation?

3. [9:03] What's the distinction between private debt and public debt? In Greece, it's public debt, right?

4. [13:30] Isn't charging [sufficient] interest the way that bankers offset the risk of some loans defaulting? Why do bankers also have to be bailed out?

5. [18:38] With income disparity [between the rich and the rest in the U.S.; between rich nations and the rest in Europe] comes political disparity, right? What does that look like?

6. [19:30] What options were available to Greece, and what options are available in the U.S.?

7. [23:32] In the U.S., what would be the best way of doing what you suggest — a bailout of the folks at the bottom, rather than the top? Wouldn't increasing the deficit by borrowing at near-zero rates be a good idea?

Note: The answer might surprise you. See below.

8. [28:20] As a political calculation, are we anywhere close to to being able to make changes? [Unlike during the Depression] we're now living with the New Deal. We're still in a roll-back phase.

I'd like to expand Wolff's answer to the seventh question, about deficits. It's fascinating and contains two stories about Roosevelt I wasn't aware of.

Here's Wolff, paraphrased, at 24:20 in the clip:

[To your borrowing question], I'd say no. I'd take that page from FDR as well. He didn't borrow. Roosevelt went to the business community and to the rich and [basically] said:
Look you have to help me. You have to give me the money to take care of the mass of the people. If you don't, the CIO and the communists will come down the road and offer you a much worse deal than I'm offering you.

If you give me the money. I'll go to the unions and give them a massive bailout, and in return they'll agree not to interfere with your business. You'll remain the shareholders and boards of directors and all the rest.
So basically he split the business community. Half of them became the sworn enemy of the New Deal. The other half agreed with him, the equivalent of people like Buffett today.

Between the support from the mass of the Dems below, and half of the wealthy at the top, you got the kind of support for FDR to enable the New Deal. He became a virtual saint to the American people.
In that same answer, Wolff tells this telling story about how Roosevelt financed the New Deal (26:18 in the clip; again, paraphrased):
Deficits and debts are real problems. The way to deal with them, at least to move part of the way back [to lower levels], is to raise taxes on the wealthy and on corporations.

Illustration: In 1942-43, FDR sent Congress a proposal for a 100% top income tax. This would create a maximum salary or wage or income. Like a minimum wage for the poor, it's a maximum wage for the rich.

Congress went ballistic, led by republicans, of course. In the end, they compromised — on a 94% top tax bracket. [And that's how Roosevelt financed his programs.] In the 50s and 60s, the top marginal rate was 91%, endorsed by both parties. If we're going through the 5th year of a crisis, the same logic ought to move us in the same direction.
I think most of the country would cheer if that actually happened. I've been in favor for years of rolling back the Reagan top marginal rate to Nixon-era levels — all the way back to 70% or 75%.

If that were to occur, the looting of corporations by CEOs would stop in its tracks. No incentive to steal if you can't pocket the loot. (Sadly, if that were to occur, I would stop in my tracks as well, looking for the alternate universe I'd fallen into.)

But at least we agree on the solution. Prof. Wolff, in the rest of the answer to the last question, thinks we need the mass base of pressure from below that allowed Roosevelt to split the rich; he also thinks we're starting to see that.

Here's hoping; and here's hoping its the orderly version.


(To follow on Twitter or to send links: @Gaius_Publius)

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