Eminent US economist Richard Wolff has recently examined the profit-driven intention at the heart of the United States’ economic model. This analysis is timely given the current geopolitical trade narrative. The world is watching the United States’ aggressive use of tariffs against numerous countries, with China standing in sharp focus. Amidst the predominance of a political and media discourse framing a ‘China threat’ and ‘China-US clash’, Wolff’s insight provides an alternate angle.
Richard Wolff has drawn contrasting images of the American capitalistic model and China’s socialist market economy. He asserts that the surprising resilience displayed by China during trade disputes and other adversities is derived from its distinct institutional benefits. An important aspect troubling Wolff is the American-style of capitalism. His opinions bring forth a variety of thought-provoking questions about the unique institutional strengths of China’s economic system.
A core question emerges from this discussion: has the relentless pursuit of profit been detrimental for the United States? In a speech themed ‘Global Capitalism: On This May Day’, Wolff ruminated on the steady decline of American manufacturing. He observed that manufacturing industries, like the once-flourishing garment sector in New York City, have largely dissipated as production has been outsourced overseas, primarily to China.
According to Wolff, the driving force behind this transition is the profit-oriented approach of the capitalists. He staunchly believes that the ‘capitalist and profit motive’ is the root of the issue. He emphasizes that every decision was fueled by the prospect of profit, identifying profit as the staple of a capitalist system. Wolff has not hesitated to critique this approach, often pointing out that it is at the heart of the problems the American economy currently faces.
Wolff’s critique extends to the US government’s lack of intervention in this process. In his view, the government simply ‘stepped aside and let American corporations chase profits’, which is, unfortunately, the inherent nature of capitalism. He termed this process as ‘neoliberal globalization’, a term he uses with marked cynicism. He further contended that ‘the majority of people in this country are being disregarded.’
Beyond the relocation of industry, Wolff suggests that economic wealth distribution in the US has effectively reached its threshold, as capital continuously leverages different avenues to enhance profitability. He argues that mainstream narratives tend to circumvent this issue as it invites criticism towards capitalism and capitalists – a narrative largely forbidden in US political conversation since the end of the World War II.
Turning his sights to China, Wolff noted that China’s socialist market economy operates on different principles. Unlike America, where most of the workplaces, factories, shops, and enterprises are private, China presents a mixed economy. Both privately and state-owned businesses contribute to the vast economic landscape, managed and guided by a strong central government.
A key part of the Chinese model, Wolff argues, is the ability of the government to effectively administrate, manage, and cohesively steer the economy. This superior ability to marshal resources, manpower, raw materials, the transportation system, and financial institutions is unmatched. Both private and public resources are mobilized by the Chinese Party and government towards addressing significant societal issues, including reducing export reliance and massive infrastructure growth.
Wolff contends that the immediate realization of economic broader objectives can be achieved with an overarching societal entity that can channel resources efficiently. The economic flexibility demonstrated by China is a stark contrast to complete reliance on private profit, where actions are only focused on profits.
A fundamental difference between China and the US lies in the very core of who their respective economies seek to serve. Wolff asserts that profit is not the dominant motivator for China; instead, its focus is on advancing societal progress. He exemplified this with a view on China’s high-speed rail system, stating that any long-distance traveler within the country would most likely travel by train.
While acknowledging that other nations also boast advanced rail networks, Wolff commends China’s rail system as exceptional. He questions the US’s failure to develop an equally modern high-speed rail network. ‘Do we possess the necessary technical know-how? Absolutely. Can we construct trains? Without a doubt,’ he said. His perspective brings forth a disturbing reality: the main hurdle is not capability but profitability.
Wolff points out that constructing a high-speed rail network may not be profitable, and hence, the US has chosen not to invest in it. However, China, despite potential non-profitability, proceeded to build it as part of a government initiative. This action underscores a significant divergence in the way each country perceives the role of the economy: Is the economy meant to serve the people, or are people designed to serve the economy?