0:00 The most successful investor in the United States over the last half a century is a man named Warren Buffett. He recently retired. He is an elderly gentleman now a billionaire etc. And he was always asked throughout his career one question. Why are you so successful? Why in his Berkshire Hathaway corporation did he assemble the right shares of stock at the right time to become a multi-billionaire blah blah blah he never hesitated to answer his answer yes the language of of economics that he's used to he said I always focus my investment as follows I look for a company and now his language that has a
0:47 dominant position in its market. Okay, that's a nice way of saying a monopolist, somebody who's in a position to jack the price of whatever it is they produce way above what it costs and to then parcel out that wonderful revenue to whoever made it possible. That's what he did. So he invested based on the hunger for monopoly in modern capitalism and he made a lot of money because he bet correctly that those companies in a position to dominate a market that is to charge more than the cost of reproducing whatever it is is where you want to be to collect the money in the way this capitalism runs. Wow. That's why he's
1:35 big in banking. He's big in insurance. He's big in all those things. Railroads, an effective monopoly on the where they run. Those are the things he's made his ton of his money on. It's an illustration of what Michael is trying to say. And a society that does that is siphoning wealth away from economic development to sustaining these special groups. And that's what Adam Smith and Ricardo hated about the feudal landlords. They siphoned away wealth. emerging out of feudalism that couldn't be used to develop the English or French economies because it was being spent in the frivolous consumption craziness of that period of French time. I just came back from France. If you travel along
2:21 the Lir River, which is not so far from Paris, you can see the extraordinary mansions and chateau that were built with this enormous surplus that was taken away from industrial production in order to produce one grand household after another along the Lir River as it runs from the middle of the country to the Atlantic Ocean. Extraordinary the insights you get from this. And then the the irony of China one more time by being excluded from the West by being told you're a communist country so you're the poorest country on earth. We're not going to help you and you're going to stay the poorest country on earth because you're not joining in the capitalist growth system. That's what
3:07 was literally told to them in the late 40s and early 50s. Being excluded was the best thing that ever happened to them. By being forced not to rely on the west, they were able to limit, not to by the way, only limit. They have their problems too, but they were able to limit the loss of all of that wealth from the job of economic development. They kept it there and that has made all the difference and nothing will change in that process. We will continue to see the GDP of China grow two to three times faster than the US which has been the case in every one of the last 30 years which is a stunning achievement which any serious economics profession would
3:53 make as its number one object. If Adam Smith's great book was the wealth of nations and to account for why the wealth of one nation was a hell of a lot more than the wealth of another that would be the issue today. Not understanding this leads you into the following conundrum. The denunciation in the west of China is precisely that the Chinese are doing for example with their credit system what Michael just described. They are not allowing it to function as though it were in some way equivalent to industrial capitalism. It's not going to be privately owned. It's not going to be driven by some narrow definition of whatever you call profit and maximizing and none of that. It's going to solve the social problem which for them has been not being the
4:40 poorest country on earth but becoming a a decent modern middle country which they have accomplished in one generation. Nobody has ever done that before. But the denunciation of them is a double irony. It misses what is their success and it guarantees the failure of the west because it can't do that. It has no way to mobilize its resources in a comparably focused way on economic growth and so it will lag behind leading to all the troubles. We read this morning in the press that the United States government has decided there are yet other kinds of equipment it will not allow American companies to sell to China. It's not going to stop the process. It misunderstands the
5:26 structural issue. It will be as big a failure as going to war in the Ukraine has proved to be or the war in Vietnam proved to be or the war in Iraq proved to be. You're not thinking clearly not because you aren't smart but because you took that labor theory of value which was developed again because Michael said it and so few people understand it. It was developed not by Karl Marx but by Adam Smith. I mean and there were other precursors beyond that but Adam Smith and David Ricardo Markx took it in a different direction for sure but he owed it to them which was a debt he acknowledged in those books that Michael referred to the theories of surplus value where he says over and over again what an important breakthrough it was when Smith and Ricardo got their hands
6:12 on that labor theory of value and what Michael is saying we have to read the history of economics differently because it's crucial to getting our ourselves straightened out in where we are today. My debt a little different from Michael. My debt is to an a French philosopher named Luis Altusair whose most important publication virtually unknown in the United States is a book in French called Leo Capita which translates into English reading capital and he meant by capital the book and he comes as a philosopher and says what is this book doing? What is the problem this book addresses? What is the project? And in his own language, which is a philosopher, he was a professor of philosophy. But his
6:57 language is different. But what he reaches is a conclusion charmingly parallel to what Michael opened us up today with that rendition. He says, "Look at what they're trying to do. This is what Oh, and then if you read this stuff in altus and then you go back and you say you have that RA moment, that's what this book is about. It's not about this or that detail. It's about a different way of understanding what's going on. And that, by the way, if you want to know why Marxist capital isn't taught in the United States, it's because it's a different way of understanding what's going on. And it's very important for this system not to have that publicly discussed, publicly explored, criticized. That's all fine.
7:45 Find shortcomings in it. There are plenty of them there. That's not this is not a loyalty game. This is a game of saying what kind of a society would enable the achievement of scientific breakthroughs which it then buries. What kind of a bizarre society must we be living in to do that? It's not something to be proud of. It's something to scratch your head and wonder why. If you want liberty, equality, fraternity, and democracy, you've got to get rid of capitalism. Otherwise, you're for doomed. You will fail as we have. Every time you read about Elon Musk, you're staring failure right in the face. The answer is always that the capitalists have cornered the surplus and are using
8:31 it to keep the surplus which is not surprising or shouldn't surprise anyone. And so one of the ways that this is done is by creating these special classes of people and that's where the beauty of the analogy with feudalism comes in. The landlord Markx was at his humorous best when he simply teaches us you know the working class has always understood why are we paying work landlords a rent they didn't create the land they had nothing to do with producing the land and you know if we stop paying them that wouldn't mean the land disappeared the land is there that's what we need we don't need the landlord and paying him simply removes a part of the value created by workers from being available
9:18 to develop their economy and instead supports extravagant lifestyle for people who are effectively parasites on the system and that monopouists are doing the same thing. They're getting a payment for what they sell beyond what it costs to produce. They shouldn't be getting that money. That money is then withdrawn by them for whatever it is they think of they would like to do, but it's no longer available to the workers and the industrial capitalists who presumably would use it otherwise. And the same is true of the bankers. The working class has often been confused between the industrial capitalist who takes the surplus from them and the moneyed capitalist who sits and watches the whole process and collects his
10:04 interest. But the rent, the monopoly price, and the interest are deductions of a surplus produced by the workers that could be used otherwise. And the revolt of classical economics was to show that. And the counterrevolution of neocclassical economics was to obliterate that understanding, to make everything a question of supply and demand. If there's a demand for it, well, then it must be valuable. The capitalist demands workers. See, they're valuable. The banker demands interest. It must be valuable. There we go. We have fudged away the surplus. We have fudged away everything the labor theory of value helped us to see. And the neocclassicals double the horror because they're proud of not paying attention to
10:52 the labor theory of value. For them, this is an achievement of greater theoretical precision. Whereas for us, it's the obvious effort of a system that is no longer dynamically moving society forward, but is now entrenching parasitical elements that will be a problem for our societies as long as we allow them to exist. This is a very important thing to have figured out that what the BRICS nations, what China are, what they're doing now is analogous to has lots of parallels with what the initial Western European break from feudalism was all about and that they are trying to achieve for themselves a
11:37 comparable breakthrough with the improvements in income and so on that went with it. and that the people who made the revolution back in the 18th and 19th century in Europe now occupy the obverse or the reverse position. They are the new feudal lords against whom they revolted. They have now become and the global south has taken over the historically progressive and dynamic moment. And notice I'm not talking about socialism yet. That's another issue. Socialism is the recognition that even what they're doing isn't going to get them what they hope it will. You know, Markx looked around in the middle of the 19th century and he said, "I love the slogan of the French Revolution,
12:24 liberty, equality, fraternity, and I love what the American Revolution added to that democracy. And I understand the leaders of the revolt against feudalism promised that alongside the end of lord and surf alongside replacing that with employer and employee would come as a fantastic social benefit liberty equality fraternity and democracy. But I have to tell you said Marx writing in the London of Charles Dickens that we don't have liberty equality fraternity and democracy. what capitalism promised it could not deliver. And that has been true ever since. And so Marx's project, if you allow me to say such a thing, was
13:09 to answer the question, why did capitalism fail to deliver on the liberty, equality, fraternity, and democracy? It promised. That's not to question the sincerity of the promise. It was sincere. Rob Spierre meant it. Thomas Jefferson in his way meant it. But they couldn't do it. They couldn't get it done. And Marx's answer, which makes him so important, is that capitalism itself is the barrier to realizing liberty, equality, and don't look elsewhere. Don't look outside. It's right inside. There's something that capitalism preserves that prevents it from overcoming the autocracy, the slavery, all the rest of it of previous history. And that is the
13:56 fact that there's something frighteningly similar between master and slave on the one hand, lord and surf on the next hand, and on that famous third hand, employer employee. You've kept that dichotomy. And in that retaining of that dichotomy, a minority at the top, a vast majority at the bottom, you have precluded liberty democracy. You've created a 100 years or 200 years of honest, good, well-meaning people trying to overcome inequality and all the rest of it unable to succeed because they haven't absorbed Marx's lesson that if you leave the capitalist structure the way it is, the way the capitalists think and function, they will make that
14:43 transition that we have been criticized. They will make the move from being an industrial capitalist focused on earning a profit by producing something to looking for the monopoly position in which you can make money while you're sleeping. It's much less arduous. You become instead of the living organism making the wealth, you become the parasite that sits and simply consumes the wealth and loses the interest in it. The ultimate guar here's the irony. the ultimate guarantee of what the early capitalist imagined. A capitalist driven by competition to make the most surplus and plow it back into the business to grow. That image is undercut by the
15:29 employer employee relationship. That was Marxist brilliant. What he called the relations of production in the end go from being a means to grow wealth to becoming a fetter holding back the growth of wealth. So what would be the guarantee that you wouldn't move from a appropriating a surplus to a parasite? The answer is get rid of the contradiction between the employer and the employee. Their interests are not the same. The employees understanding what Mark taught them. If they become their own employer, then they can be sure not to take it in that wasteful social direction. and having the workers become themselves the employer. That's socialism. That's why Markx not as some
16:17 mystical predictor of the future. Markx didn't believe predicting the future is something that people in the amusement park do. That's not a serious business. None of us knows what the future is. That's why we call it the future. When Markx talked like that, he was working out the logic of the system. The guarantor of socialism is that the internal contradictions of capitalism that he spent his life trying to figure out precluded not just the delivery of liberty, equality, and fraternity. It precluded the perpetuation of the capitalist system itself. And when he figured that out, he bequequefed to the rest of us a notion not only of how capitalism works, but how and why it will pass out of existence at which
17:05 point one of its products Marxism will disappear too. Who achieves such insight? You know that's what Aluser in France is what he marvels at. Look at this. This is an analysis which can account for the passing of the object of the analysis and then of the analysis too. It's extraordinary and it really underscores what Michael and I have a problem that he he said we face. We're trying to explain to our fellow economists what it is they are missing but being educated the way they have they can't hear us. So, we are yelling, we're speaking in a situation where there's just frustration all around. But then again, maybe we shouldn't complain because if I learn anything from my
17:51 fellow Americans every day in the street, we're all wondering what the hell is going on cuz none of the old rules and seem to be in place. Each day's headlines are more bizarre than the ones before. These are all signs. You'd have to be really blind or desperate not to see all that's going on. This is a generation of Americans who don't believe that their children are going to have a higher standard of living than they do. More and more of the money you and I pay in taxes in the United States is not going to give us a useful service. It's going to pay off whoever lent money to the government. The United States is in a declining position in the world economy. You could
18:38 pretend it wasn't there. You could deny it, but it's getting harder and harder as these tariffs and sanctions all show. When I was growing up in the United States, that was assumed to be somehow the magic benefit of being an American. Each generation would live. You will live better than your parents. They live better than your grandparents, etc., etc. It was just built in to what came to be called American exceptionalism. It was nothing exceptional at all. It was that profits were better here for all kinds of reasons and capital came here. And when profits became better somewhere else, capital left. We are hysterical as a nation with the problems we can't
19:24 solve and the magical scapegoats with which our leaders propose to distract us. Well, the United States at this point is stuck on its own on its own history. It it can't adjust. You know, it has developed a society which told itself and its people that profit the profit motive is the royal road to prosperity and success. let companies pursue the profit. And well, over the last 30 years, companies did that. They pursued the profit and they went to China or they went to India or they went to Brazil, which they're still doing. And so, Americans were stuck. What were they going to say? We don't believe in the profit motive. The results of the profit are not good for us. They would
20:10 have to rethink the entire pro- capitalist ideology that private pursuit of profit leads to the best outcome for everybody. Look, that's what's taught in the universities where I've been a professor all my life. That's what was taught to me and I went to all the elite universities here. That was the ideology. And the problem is that misunderstands that capitalism is in fact a profit-driven system. and it will therefore go where the profits dictate. If you're the place to which profit dictates investment, you're having a good time. You're having the second half of the 20th century in the United States. But if you're living in a country which isn't the profit attractor
20:58 because that's somewhere else, China, India, then you're going to be on the bad side of the profit motive. That's what's forcing itself into the consciousness of the United States. They're now seeing that free trade and profitdriven is what lost the jobs. You referred to it earlier correctly about the disappearing middle class. They're beginning to understand. Let's be economic historians together just for a moment. You know, here I live in the United States. Our the history of our country. We once had capitalism dynamic and growing in the area called New England, Maine, Rhode Island, Massachusetts, Connecticut, and so on. Then eventually it moved into what we call the Midatlantic states, New York,
21:46 Pennsylvania, and so on. Then it moved to the Midwest, Ohio, Indiana, Illinois. Then it moved to the south and the far west, California, and so on. And it left behind empty factories, depressed economic units. In recent decades, it's left the United States altogether. General Motors produces more cars in China than it does in the United States. Ditto for Ford and so on. Well, guess what, friends? Capitalism looking for profits goes where the profits are the highest. And over the last 30 years, what China has done, no great secret, it has said to the world's capitalists,
22:32 "Come here. We want you. We welcome you. We offer you an educated, disciplined labor force, much cheaper than what you pay your workers in Western Europe or North America or Japan. And because we are growing, we offer you the fastest growing market. And because we have a huge population, it's the world's biggest and fastest growing market. Well, I've been a professor at business schools and I can assure you, we teach the students who are the future business leaders that if you want your business to succeed, you go where the wages are low and the market is growing. That's what you do. And so capitalists have
23:18 left the United States, Western Europe, and Japan, and moved into China, India, Brazil. If you don't like that, if it depresses you about what that means, that all of America is now experiencing the decline that New England and Mid-Atlantic experienced half a century ago, then the problem for you is capitalism, not this or that detail. It's a system that goes to where the profits are and the profits are not here unless you create them artificially. Tariffs give you artificial profit opportunities by being able to jack up the prices. But that that's called an inflation has other very negative
24:05 consequences. The poor capitalists are stuck. What they do to solve a problem makes another problem worse. That's another sign of decline. Secretary of the Treasury Yellen went to China and invented an entirely new economics. Excess capacity. She said the Chinese produce huge factories. Of course they do. That's how they achieve their efficiency. It's called economies of scale. It's something we teach economics students in the first year. If you produce a lot of something, you can bring down the cost per unit of what you produce. So, you always build in excess capacity. Competitive enterprises do it
24:51 all the time. It's part of American economic history. She's just counting, Miss Yellen is, on people not understanding these basics. And so, finding this to be some sort of argument as if the Chinese have cheated. No, they didn't. They outdid you. Competition always has winners and losers. And I know that here in America, I'm born and raised here. We cannot imagine the United States losing ever anything. But we do. We lost the war in Vietnam. We lost the war in Afghanistan. But Americans need to believe that we're always winning. The tariffs are a sign that American dominance, which we got
25:37 used to after World War II, from the second half of the 20th century, was the dominance of the United States. And with the collapse of the Soviet Union in 1989, it left the United States. Political scientists like to call a uniolar moment. But that's over now. The United States isn't what it was. And the Chinese and their allies have become a powerful new competitor. And the United States is having a hard time adjusting, which I can understand. And the politicians don't know what to do. Their ideology was free market. That didn't work out. They're now switching to economic nationalism, protecting
26:24 everywhere, sanctioning, funding this company, funding that company. Billions have been given, for example, to Elon Musk. The production of electric vehicles in this country by Tesla is a government-funded project. Americans don't want to face that. But if they hadn't done that, then he would have done everything elsewhere or he wouldn't have done it at all. The government is crucial. Not just when we collapse like in 2008 and 9 and the government had to come in and bail out the banks or in 202021 when the government had to save us from the COVID pandemic. The government is continuously now being brought in cuz this capitalism cannot compete. The United States is at an earlier stage. The sanctions you see,
27:12 the tariffs you see, that's a switch to protectionism by a society that has no confidence in its own company's ability to compete. We used to. That's when the US was the champion of free trade around the world. That's because we could win in those situations. We were the most technologically dynamic. We were the fastest growing, but we're not anymore. And we haven't been for a generation now. And it's beginning to impact us day by day. And nobody should be fooled by leaders who continue to sanction and to tariff as if we were free to do that without consequences. Here's the most
27:58 important bottom line for Americans. If you raise the price of the tariff, if you raise the cost of imported goods, whether they are solar panels or semiconductor chips or electric vehicles or any of the other items, if you put a tariff on them, it means everything coming in from abroad costs much more, which allows the American competitors to charge more than they could have ever gotten away with if they had had to compete. We have a bizarre kind of capitalism in the United States. And by bizarre, I mean it puts our politicians in a very strange and awkward position. On the one hand, corporations want the
28:43 government to do lots of expensive things for them. They want them to maintain a global military to protect buying and selling around the world. uh which the United States does as much or more than any other country on earth. And it wants to protect its ability to get materials to get them for a good price. And having hundreds and hundreds of military bases around the world, which is very expensive, not to mention the wars, which are even more expensive, is part of the cost of servicing what corporations want. At the same time, those corporations resent and fight against paying taxes, which would be the way the
29:29 government gets the revenue to then do what the corporations want the government to do. All right, let's take a look then not at the corporations for a moment, but at the mass of working people. They too have things they want and need from the government to do. And like the corporations, the mass of people don't want to spend the taxes to pay for all of that. So we have corporations and working people, both of whom put demands on the government to do things which cost the government money. And yet at the same time, the corporations and the massive people don't want to pay taxes. Last point, the corporations have enormous wealth to get
30:15 the government to do what they want and the mass of people do not. That is, nobody has so far organized the mass of people to put together the amount of money that might someday enable them to influence the government. But right now and for most of the history of capitalism, the division of the income in a society between corporations and the people and between rich and the mass of people puts the overwhelming bulk of the wealth in the hands of corporations and the rich. And now what everybody knows who's honest, the corporations and the rich have been very successful in removing the burden of taxation off of
31:00 themselves and onto the mass of people. This has been going on for the last century. And now here comes the point. After a certain level, the mass of people revolt. They say we will not pay more taxes. They make it impossible for politicians to keep doing what they've been doing, which is shifting the burden. For example, we used to rely on the income tax, which is a progressive tax. The higher your income, the higher the percentage you have to pay. Then, when corporations were strong enough, they got that changed. Half of what the government raises now is money off of social security withholding from the weekly check of an American. That's not
31:47 a progressive tax. That does not go up in percentage as you get richer. In fact, if you earn more than $160,000 a year, which people in this country do, you don't pay on what's above 160,000. Only the average people pay. So look at how successful corporations and the rich have been in shifting the taxes, but they can't anymore. The mass of people won't allow it. They vote out anybody who raises their taxes. Okay, now the politicians are in a jam. They are demand the corporations and the people demand services, but they can't squeeze more taxes out of the masses. And the corporations and the rich have basically
32:33 bribed their way out of paying much in the way of taxes. So what is the government going to do? What do the politicians do? Answer, they borrow money. The way they keep spending on the corporations and on the people is not by taxing but by borrowing the money. And that's why the borrowing is getting bigger and bigger. And all the national debt is is the accumulation of annual deficits over the years. And they're going crazy now because the government desperate desperate to hold on to political power is spending money like there's no going out of style. wars,
33:18 military expending, everything is being spent without the ability to make the beneficiaries of that spending pay for it in taxes because it it it's impossible for the politicians to survive if they would dare do that. If you tax corporations and the rich, they will fund whoever runs against you in the next election. So, you're gone. And for the mass of people, they are so stressed right now that if you tax them an inch more, you really will have a popular revolt. It's a sign that American capitalism is in a very bad place. We are not the great economy our political leaders would like us to believe. Neither Republicans nor
34:04 Democrats. We are in very serious trouble. And one measure of that is that this political absurdity of our politicians having to borrow more and more because they don't have the courage to tax means that we are in the situation you describe. We are loaded up with debt in a way that we used to identify with countries that were in trouble economically around the world. Now, we don't hear that so much because it applies to us in terms of the ratio of the debt to the national uh income. And make no mistake, the debt matters. People who are seeing this explosion are trying to calm the American people. Well, it's not so important. Most of the
34:49 debt is a debt of the government, the Treasury, to the Federal Reserve, which is another part of the United States government. All of that is true, but it is not relevant. It's not relevant because in the end, the government has to raise the money to pay the interest on this enormous debt. And that means more and more of the money you and I pay in taxes is not going to give us a useful service. It's going to pay off whoever lent money to the government. And here's the last step. The fundamental injustice of the national debt is often overlooked. Who lends money to the United States government? The minute you understand this, you will see it's rich people and corporations
35:36 and to some extent foreign corporations and foreign governments. The mass of people are not in a position they don't have any extra money to lend to the government. So they don't the mass of people pay the taxes that are used to pay the interest to corporations and the rich who are in a position to lend to the government. You will understand that when the politicians borrow money, they are doing an enormous service to corporations and the rich because they're basically saying to them, "We will not tax you. Instead, you shall take the money that we could have taken from you in taxes and instead we will
36:21 borrow it from you and after a few few years we'll give it back to you and during that time we'll pay you interest on the money that we've borrowed from you. So for corporations this is a no-brainer. Of course, it's better to have the government borrow from you than to tax you as corporations and the rich. And that's why the mass of people, even if they don't understand the economics, understand they're being ripped off. And the deficit is a mechanism for ripping off the mass of people who pay the cost of it. Whereas the benefit goes to the corporations and the rich who are the only ones to be able to lend to the government. One last point, foreign
37:08 governments are also able to lend money to the United States government. And most of the people watching this program probably don't know that the two largest lenders to the United States government are Japan and the People's Republic of China, ranking one and two among foreign lenders. China has somewhere around $800 billion dollar lent to the United States government, which the United States government can and does use in part to fight a war in Ukraine, where China is helping the Russians. If that sounds like a strange arrangement, welcome to modern capitalism. This might strike you
37:54 as even stranger. with $800 billion dollar of US debt. The United States has to tax all of us, which it does, to raise the money, which it then sends to Beijing in interest on all the debt that the Chinese own of the United States government. Which means that part of the money China uses to build up its military is the money we American taxpayers deliver to them. It's the way capitalism has organized the world and it's not the least of the absurd contradictions that this system is living with and imposing on all of us. I must tell you the number of people that
38:39 I encounter as an American who are questioning capitalism. I've never seen that in my entire life. and the willingness of young people, particularly young people, to challenge and question what the government is doing. Well, you can see it on the campuses around Israel and Gaza. They're questioning everything. And that's because they're not being offered the jobs they were taught to expect. They are not being offered the economic future they were taught to expect. and they are asking the questions that intelligent human beings have always asked when things don't work the way they're supposed to. And so I've asked myself, where is this going? And the answer I've come up with is the following. These young people are not
39:24 going to be persuaded that voting for a Democrat versus a Republican or for that matter vice versa, that's not the solution. They just they understand the problems are deeper and that these people are fundamentally puppets of the way their system is laid
