Actually, “It’s the System, Stupid”

At the capitalist system’s core lies its central conflict. On one side, corporate boards of directors pursue ever more surplus extracted from productive workers. On the other side, workers seek ever more wages and benefits and better working conditions that reduce the surplus available to employers. Perpetual class conflict results between capitalists and workers over the size of that surplus. The conflict’s form varies from hidden to open and from mild to violent.

Boards of directors continually find ways to reduce wages. Yet they complain when consumers whose wages fall cannot then buy all the commodities that capitalists need to sell to them. Indeed, insufficient consumption often contributes to causing or worsening a recession. The contradiction here is one that many capitalists seem unable to see, let alone trace to the class structure of capitalist production and its resulting conflict.

Workers continually seek to improve their incomes, benefits, and job conditions. Yet they confront employers who respond by outsourcing jobs to cheaper or more subservient workers or by eliminating jobs through automation, even at the cost of jeopardizing commodity sales to workers, leading to or worsening recessions. The contradiction here — workers who achieve gains risk losing their jobs — underlies another of capitalism’s systemic conflicts. As discussed further below, were workers to become their own collective boards of directors, they would not likely reduce wages or outsource jobs. Workers appropriating their own surpluses would accompany automation with serious job retraining and transitional support to displaced workers — rarely done when capitalist boards of directors automate.

Conflict between corporate directors and productive workers helped to produce both the wage stagnation of the last 25 years and the resulting surplus bubble that swelled and then burst in 2008. Class conflict has always contributed to capitalism’s systemic instability. Figure 1 below, prepared by the Center on Budget and Policy Priorities, records the many post-1945 US recessions. Capitalism’s instability was a constant, even though national politics and culture changed repeatedly after 1945, as the Cold War flared and ebbed. Capitalism’s class structure kept hammering its rhythm of boom and bust cycles into our lives.

Figure 1

Figure 1

Each recession since 1948 cost millions of lost jobs that hurt the workers involved, their families, neighbors, and communities (including their employers). Large portions of productive capacity (machines, equipment, offices, stores) were idled: output worth billions that might have been produced never was because of recession. Had that output been produced and used to alleviate social problems (poverty, homelessness, inadequate childcare, deteriorated infrastructure, etc.), we would be living in a very different country. Recessions always cut revenues for local, state, and federal governments, forcing reductions in public education, health care, and so on. Recurring instability mocks as well as invalidates all that noise about “capitalist efficiency.”

It would be reasonable to identify, investigate, and publicly discuss every possible cause of such instability. The goals would be to offset, moderate, or eliminate its effects or, better yet, the instability itself. But a taboo blocks consideration of one such cause, namely capitalism’s class structure. For the last half-century, analyses and policies debated by most business, political, academic, and even labor leaders avoided connecting economic instability to capitalism’s class structure. Instead, many faulted politicians (blaming Democrats or Republicans), unions, or big business. Others focused on human weaknesses (“greed,” “irresponsible” borrowing, etc.). Still others blamed inadequate state “regulation” of private business. With most analyses blind to class structure as a cause, change in the class structure of production rarely figured in proposed solutions for capitalist instability.

The policies actually debated are all variations of (1) US state responses to the 1930s Great Depression and (2) Japanese state interventions in its long post-1990 recession. Proposed state actions in today’s global recession include “bailouts” of selected industries (especially finance); (re)regulations of enterprises and markets; central bank reductions in interest rates and expansions of money supplies; and federal tax cuts and “stimulus” spending. Such interventions sometimes helped the US through past recessions. They never solved the basic problem of recurring recessions.

Class struggles often provoke capitalism’s cyclical booms and busts. The more severe recessions bring state interventions and regulations to help capitalists survive capitalism’s convulsions. Once the immediate economic crisis is past, capitalists proceed to undo state interventions again. So long as capitalists appropriate surpluses, they always use them to evade, weaken, or destroy state interventions that constrain them. Meanwhile they try to keep public debate and policy away from systemic solutions to recurring recessions.

And so, capitalist cycles recur. Each economic cycle imposes huge painful social costs. In a parallel ideological cycle, most politicians, mass media, and academics swing ridiculously between hyped celebrations of deregulation and (re)regulation as “the solution to our economic problems.”

Capitalism’s instability is systemic. To address it without considering systemic change is to continue the history of failure to “solve” that instability. Capitalism’s core class conflict between workers and boards of directors was never fundamentally changed by state bailouts, (re)regulations, or monetary and fiscal policies. Capitalism’s class structure is likewise not systemically changed even if we replace boards of directors privately elected by shareholders with boards of state officials instead. State capitalism (USSR), too, not just private capitalism (USA), displayed instabilities driven by class conflicts between surplus producers and appropriators. Notwithstanding differences between the instabilities of state and private capitalism, both still yielded inefficiencies and wastes that each so assiduously documented in the other.

One possible systemic change eliminates capitalist class conflict by reorganizing enterprises to position productive workers as their own collective board of directors, thereby removing one key cause of capitalist instability. Such post-capitalist boards’ decisions (about technical change, capital accumulation, wages, and so forth) would differ markedly from capitalist boards’ decisions. Post-capitalist boards of directors would differ from capitalist boards in their relations to the state as well. A systemically post-capitalist economy would have its instability problems, but they too would differ from capitalism’s.

The point is not that this systemic change is the only one that could (or could alone) seriously address capitalism’s instability. The goal here is to expose the widespread — and politically self-defeating — refusal, even on the left, to acknowledge such systemic causes. The center and the right will forever debate and oscillate between non-systemic causes and policies (bailouts, regulations, stimuli, etc.). The left’s unique contribution could and should be to insist that systemic solutions — e.g., changed class structure of enterprises — be part of public discussion and public policy.

Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002) and (with Stephen Resnick) New Departures in Marxian Theory (Routledge, 2006). Be sure to check out the video of Rick Wolff's lecture "Capitalism Hits the Fan: A Marxian View." Read other articles by Rick, or visit Rick's website.

16 comments on this article so far ...

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  1. Don Hawkins said on January 5th, 2009 at 9:03am #

    The present system is not sustainable that’s just the way the cookie crumbles. In our case human’s the way civilization crumbles. Think of it as down the drain in slow motion. Down the drain in slow motion I forget who said that but explains a lot. Say the stuff people learn at Harvard Business School well much can be thrown out the window that is if human’s wish to survive. Next! Oh, and think of this as kind of a war.

  2. Ron Horn said on January 5th, 2009 at 11:51am #

    Very well put, Rick Wolff. I would only elaborate that American capitalists took the wealth created by working people, and since the 1980s discovered increasingly that they could make even more money by moving their factories abroad where labor was cheap, where pro-labor and environmental protection laws were weak, where it was easy to corrupt local officials, etc, etc. As a result we are left with a service economy where we serve each other coffee, take in each other’s laundry, etc., with little to offer the rest of the world (except military weapons). Its clear that these bastard’s only concern is their own wealth accumulation–the American society be damned! As the great Wall Street guru, Warren Buffet, put it, “There’s class warfare, all right, but it’s my class that’s winning.” I try really hard not to hate these people, and try to stay focused on the system. Because it is the latter that causes many weak people with sociopathic tendencies to succumb to the temptations of wealth and power.

    So, let us all go to our windows, lean out and shout, “it’s the economic system, stupid, and I’m not going to take it anymore!

  3. giorgio said on January 5th, 2009 at 12:04pm #

    Now here is a gem in commonsense:

    “One possible systemic change eliminates capitalist class conflict by reorganizing enterprises to position productive workers as their own collective board of directors, thereby removing one key cause of capitalist instability.”

    Professor Rick Wolff, why don’t you become Ron Paul’s economic (or one of) advisor?

  4. giorgio said on January 5th, 2009 at 12:11pm #

    AND join Ron Paul’s REVOLUTION for LIBERTY?

  5. Don Hawkins said on January 5th, 2009 at 12:17pm #

    Papua New Guinea declared a national disaster in early December after heavy sea swells forced tens of thousands of people – close to half the population of its northern Manus province – from their homes. Elsewhere in the Pacific, islands states are seeking to buy land in other countries for the permanent relocation of communities forced out by intrusion of the sea.

    “It’s another consequence of global warming,” says Baddour. “The problem is really there, it’s really there now.”

    “The problem is really there, it’s really there now.” A new system is needed a new way of thinking.

  6. joed said on January 5th, 2009 at 12:43pm #

    when grover norquist said he was going to shrink the govt and then drownd it he wasn’t joking. he killed the economy along with the govt.
    the plan worked much better than he though it would. the commonwealth of amerika is now in the hands of very very few people. the govt is nothing more than military, police and political thugs, and there is no going back. the bad guys won and you guys lost! you guys though taking would change things–no wonder you lost.

  7. joed said on January 5th, 2009 at 1:58pm #

    that should be; you guys THOUGHT TALKING would change things–no wonder you lost.

  8. Brian said on January 5th, 2009 at 6:08pm #


    And why would the professor want to become an advisor to a politician who espouses the very philosophy that got us into this mess?

  9. The Angry Peasant said on January 5th, 2009 at 8:05pm #

    Ron Paul,
    Yes, it’s the system, but there’s nothingwrongwith hating the evil bastards who keep it going, make it so much worse, and revel in it. In fact, hatred’s too good for them.

  10. giorgio said on January 6th, 2009 at 1:34am #

    Ron Paul, who advocates less gov interference, end this obscene Empire, shut down the Fed which is a private enterprise headed by the Rothschilds can’t be all that bad. In fact he’s one of the few congressmen with integrity and incorruptible by corporate interests.
    He’s dead against the Patriot Act, IDs and censorship of the internet, which by the way sounds as if it’s coming…so meantime enjoy the net while it’s still ‘free’ but not for long….

  11. The Angry Peasant said on January 6th, 2009 at 8:54pm #

    If we lose the internet; the last bastion of free speech and uncensored information in America an the world…I will personally storm the White House myself!

  12. lichen said on January 6th, 2009 at 9:35pm #

    ron paul, an ignorant peice of trash who supports mass privitizations of schools, national parks, libraries, medical care, and everything else; who calls for eliminating the minimum wage, who wants to repeal all gun control laws, is against abortion, gay rights, and believes that the founding fathers had a nation in mind centered around the church as the primary social institution; ron paul, a scumbag who would create mass poverty and an overtly violent, minority-oppressing, corporatist society.

  13. The Angry Peasant said on January 6th, 2009 at 9:46pm #


    What do you mean, he “would create?” He wouldn’t have to; we already ARE a poverty-ridden, overtly violent, minority-oppressing, corporatist society!

  14. lichen said on January 6th, 2009 at 9:58pm #

    Yes, we are, but he pledges, if given the power, to up the ante and make it all so much worse, to wipe out the last particles won by the labor movement over the past century and blast us back into fuedalism; he claims to be anti-war, but clearly fights for the rich to win the US class war completely.

  15. The Angry Peasant said on January 6th, 2009 at 10:44pm #

    I don’t know…I’ve listened to Ron Paul enough…Yes, he’s conservative (in the actual sense of the word, not the warped moniker monsters like Nixon and Cheney adopted). But he is against furthering the imperialist U.S. agenda. He’s an isolationist. He wants to live by the constitution. He wants good diplomatic relations with the rest of the world. He wants to abolish the Federal Reserve, the privatized bank that rules over us all. Listen to his dedication to this cause.This is definitely no racist elitist we’re talking about here. Go to YouTube and listen to interviews with him. Watch him at the Republican debates, which FOX later censored because he was speaking the truth too much. I mean, the guy is vehemently against all kinds of things we agree on. Frankly, I don’t care if he believes in God or is against abortion. His head and heart are definitely in the right place.

  16. mallensr1 said on February 21st, 2009 at 11:39am #

    Ron Paul is not an ignorant peice of trash,and we would all be better off if he were the Pres. And the person that said he is trash is a moron or working for the new world order.