The Road to Economic Growth
with John McWhorter and Richard Wolff
How should a society’s resources be distributed? And what do employers owe the employees who make those play a part in generating those resources? In this excerpt from my recent conversation with John McWhorter and Richard Wolff, we debate these two interrelated questions. Richard argues that, all other issues aside, the Soviet Union and China both achieved levels of economic growth not seen anywhere else in the world over the last century. He also argues that workers should be regarded as stakeholders in the businesses that employ them, the same as a business owner or investor. If a worker reorganizes her life in order to work for a company, Richard suggest, she’s owed a say in that company’s fate, and thus her own.
It may be the case that, historically, the Soviet Union and China have economically outperformed the US. I'm not an expert on the subject, though I have my doubts. But it seems to me that the downsides of a planned economy outweigh the benefits. We know of the mass murder, repression, and resource scarcity that attended the Soviet project. We also know that, even today, China’s economic success has brought with it significant political repression, military aggression, and human rights abuses.
Can we really be so confident in separating out these nations’ economic gains from the authoritarianism and terror wrought by the likes of Stalin and Mao? And even if we wanted to implement central planning in the US, would we be able to reorganize our system of taxation, contract law, and property rights to the extent necessary without causing massive social upheaval and instability? There are inefficiencies and injustices that come along with the marriage of democracy and capitalism in the US, no doubt. But we have the tools to fix or at least attenuate many of those problems, at least theoretically.
I’m not convinced by Richard’s case for centralization and the inherent right of workers to determine the course of a business, but he’s an outstanding guest. It important that, while we’re on the opposite sides of this debate, we’re able to come together and talk. I’m curious to know what all of you think. Let me know in the comments.
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GLENN LOURY: I just want to say one more thing before I ask you to address the second part of my concern, which was about property. And the other thing I wanna say is, what about history? A lot of people would say, look at the history of the twentieth century. Where large-scale planning has been implemented under the rubric of socialism in developing countries left and right, we have seen stagnation and we have seen worse. Where relatively free market forces have been allowed to hold sway, as in China and Korea and Singapore, we have seen growth and we have seen development. The tragedy of Africa is in part a political-ideological tragedy, so this argument would go. You know how this argument would be developed. So what about that? Isn't the historical record not so friendly to the socialist ambition?
RICHARD WOLFF: No, I think the historical record has been rewritten in order to be unfriendly, but that in fact you can't sustain that. I mean, here's the basic reality in the twentieth century: the most spectacular achievement of economic growth, not of other things, but of economic growth in the normal measurement, GDP, annual growth per year, blah, blah, all of that. The number one achievement of the twentieth century was the Soviet Union. And the number one achievement of the twenty-first century is the People's Republic of China.
Now, you ought to wonder a little bit about what the empirical record tells you if that sentence I just uttered is correct. And I assure you that it is. If you look at what the Soviet Union was in 1917 when it begins and what it was in 1989 when it ends, and ditto for China, 1949 of the Revolution to today, these are growth experiences we have never seen before, especially if you count the contradictory events, the wars and the other problems they had to surmount in both cases along the way. Their record of achievement of economic growth is the envy of the—no capitalist country has done it. And they've certainly not done it in the compressed amount of time that Russia and China achieved it. I mean, I have criticisms of those societies. That's not the point. But on the grounds ...
Okay, I'm not qualified to rebut you, but I got my doubts. I just wanna go on the record.
RICHARD WOLFF: Let me give you a suggestion. Twenty years ago, I published a book with my colleague, Steve Resnick published by Routledge Publishers in England called Class Theory and History: Capitalism and Communism in the USSR. I spent ten years of my life studying exactly what happened in the Soviet Union, why it grew the way it did, and why it fell apart the way it did. And, you know, I really do know this material. As economic growth goes, the Chinese, I mean, that's our world. Our world is being transformed today by what that country was able to do. It dwarfs the Soviet Union. The achievement of China is the elephant in the room, if I could say so. Anyway, I still owe you an answer. Glenn, I owe you an answer.
Okay, you do, but I want to let John back into the conversation.
JOHN MCWHORTER: Very, very quick question. I don't know anything about economics. I know about this much. But based on what you're saying ... So let's talk about, say, the Soviet Union, the former Soviet Union and China. We all know there's been a great deal of misery in those places, despite the growth that you're talking about.
RICHARD WOLFF: Yes.
JOHN MCWHORTER: This is a genuine question. Couldn't a Martian anthropologist look at this thing called the United States of America—not Youngstown, Ohio, but the United States of America—and see maybe not growth along the lines of what happened to Russia throughout the twentieth century or China ten minutes ago, but looking at how our economy grows and is more efficient, et cetera, and think, well, that's unfortunate about the bakers in Youngstown. That was a local issue. That was a tragedy. But in general terms, even with lack of planning, we grew. That's what I imagine a Martian economist might see. Am I incorrect?
RICHARD WOLFF: No, you are correct. We grew. This economy here in the United States, for example, if you take the last half-century, the last 50 years, post-World War II to the present, this economy grew. By the way, over the last 30 years, which is the period that I study and that I know, just so you know, the average growth of GDP in the US over the last 30 years, about two, two-and-a-half percent per year. Over the exact same period of time, the average rate of growth of the Chinese GDP was six to nine percent per year, roughly three times sustained for an entire generation. We've never seen such a thing. So yes, we grew.
But here's the other side of the growth here. And the Chinese have their problems. I don't wanna be boxed in. I'm not celebrating everything in China as wonderful. That's childish. That's not my view. I have a lot of criticisms of Russia, China, and all of that. But I want to be clear on what they did, what they didn't do, et cetera, et cetera. The Chinese achievement comes in contrast to what happened here. The average real wage in China, I'll use that as a symbol number. You know, that's the wage of the money they get adjusted for the prices they have to pay: the real wage. The Chinese real wage over the last 25 years has quadrupled. The real wage of the American worker over the last 30 years has gone absolutely nowhere. The real wage of the American worker today is roughly what it was in the late 1970s. So what you have seen is ...
We're at different stages of development, right?
RICHARD WOLFF: I bet!
I mean, the US at the late-nineteenth and early-twentieth century was also extraordinary amongst industrializing countries in terms of growth rates. The China of today is more like the US of 1890 or 1910, something like that.
RICHARD WOLFF: Right. And the United States at that time of growth, even though it didn't achieve the rates of growth of the Chinese, achieved good rates of growth. And that was a tremendous challenge for the dominant economy of the world at that time, which was the British Empire. And we saw what happened. One empire collapsed—that's Britain—which has now become what it once was: a small, wet, cold offshore island from the continent of Europe. And the Chinese are doing to this country what we did to the British, only the difference is the British have a century of denying it. The Americans are only getting into it now to deny what's happening to them by talking about China as if it weren't happening again. But you are quite right. The parallels are striking.
Now, what about my second question, which is, I started the company. It belongs to me. A guy that works for me does not own my company.
Here's the problem. You put investment, you put some money, some time, some energy into setting up that business and all of that. But so do all of your workers. For example, they moved from X to Y. They took their children out of this school and put 'em into that school. They made all kinds of life decisions with enormous consequences for other people as part of your business. That's what gives them entitlement.
I pay them.
Yes. You pay them. And then—wait a minute ...
The guy that sells me raw materials also had to do a lot of prep work in order to get me my coal or to get me my steel ingots or whatever. He doesn't own my business for that. We had a contract. The worker delivered eight hours a day of labor power, and I delivered a hundred thousand dollars or a thousand dollars or five dollars. We had a contract. They didn't own my property because they were on the other side of that contract from me.
There's something special about labor, I'm guessing, in the Marxian tradition. There's something that is normatively significant about surrendering my blood, sweat, and tears as a worker that gives me a claim more so than anybody who just sold me a widget to help me do my business.
RICHARD WOLFF: Well, I mean, you can go that route. A lot of Marxists like to go that route. I'm not one of them. It seems to me, I like the language of modern capitalism about stakeholders. A business has a lot of people that have a stake in it. The particular qualities of their stake vary. Somebody brings the money. And we don't ask the question in capitalism, “Where did you get the money from?” Did you steal it? Did you inherit it? Did you swindle John over there for it? We pretend that that doesn't matter. I'm okay with that, as long as we don't lie about what we're doing.
So you bring money, however you acquired it. But the other person brings eight hours a day. You give them some money and they give you eight hours a day. But you want to be recognized. “Well, I conceived of the business, I worry about the business.” But they take risks and they made commitments and they've drawn other people in and we all have a stake. Why are you the only one who's in a position to say, “Business is over. I'm leaving.” Whoa! You're not the only one who's invested into this. The whole community is dependent on this. I'm not gonna even go into all the ways you as the business owner have asked for and gotten the road to be repaired, the taxes to be—you know, all of it.
“You didn't build [that],” as President Obama famously put it.
RICHARD WOLFF: He was exactly right. He was exactly right.