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The root causes of today's economic crisis and why it's not going away

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Watch the video clips below as Professor Richard Wolff breaks down the root causes of today's economic crisis, showing how it was decades in the making, and how it reflects seismic failures within the structures of American-style capitalism itself. 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 changes will be necessary to avoid future catastrophes. Richly illustrated with motion graphics, this is a superb introduction designed to help ordinary citizens understand, and react to what is to become a lasting and continuing economic crisis.

Two introductory video clips at this first site. The first clip is especially vivid and to the point.

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The hour-long main feature:

This video is a real tour de force. In just 57 short minutes, U. Mass economics Professor Richard Wolff lays out in macro terms the contours of the present crisis of US capitalism. Amazingly, he does this in a clear, concise way, for the most part avoiding the use of jargon. Any relatively well informed person can easily understand the message. Throughout, actively moving graphs and charts aid the viewers' understanding of the message.

The presentation (filmed before a live audience) is broken down into 10 short subsections each with a single central theme. Brief pauses between sections allow one to digest what has been said and at the same time intellectually prepare for what follows. Some of the mini topics covered:

  • How We Got Here: American Exceptionalism;
  • Bust and No Boom in Sight;
  • Why Re-Regulation Won't Work.

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Wolff's central argument

During the long century between the end of the Civil War and the 1970s, US capitalism experienced a steady expansion fueled by the introduction of new technologies. The resultant rising levels of production and productivity allowed capitalists to raise wages consistently while maintaining profits. Although this growth did not occur without some blips -- notably the several mini crashes of the late 1890s and the Great Depression -- it was nonetheless prolonged. Built into this prolonged growth was the idea of American Exceptionalism: the notion that the USA is a blessedly unique nation where upward and onward for all would forever continue, and The American Dream (a house, a car or cars, and ever expanding consumption) would always be every American's birthright.

However, in the 1970s things began to change.

  • First, the introduction of computers led to rising productivity -- but without increased job creation or rising wages.
  • Second, a second great wave of massive immigration led to ever more competition for increasingly scarce jobs.
  • Third, outsourcing became available to capital as a way to drive down costs and put a ceiling on pay packets.
  • Fourth, foreign competition from low-wage areas of the world hurt both domestic and foreign sales.

As a result of these four developments, workers' real wages have leveled off from the 1970s and even declined as of late.

In order for companies to survive, capital accumulation must continue to expand. And while surging exports certainly help keep the wheels turning, the US home market and all the money being made from the associated bubble came to be vital to US capitalism's survival. The bankster ruling class hit upon a great new idea: Why not take this unprecedented amount of surplus value created by the workers and lend it back to them at fat interest rates? Thus would be produced profit upon the original profit, and no worker would be the wiser. And so it was that the great credit bubble of the past decade came into being, as unprecedented amounts of loan money and credit cards flowed to literally anyone with a job or a home -- and even many without either.

But all good things must come to an end and this is where today's new reality comes in: America's great credit expansion has finally, once and for all, reached its brick-wall limit. Hence today's crisis, which is not just another recession, in Wolff's opinion, but a stone wall up against which (as a watershed and game-changing event), what is essentially our very "operating system' has crashed.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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