Thom Hartmann: Hello, I'm Thom Hartmann in Washington DC and welcome to The Big Picture.

In 1992 when Bill Clinton first ran for president, his campaign famously had a large sign in their headquarters that said "it's the economy stupid!". Arguably all the navel-gazing being done by political commentators trying to figure out why Trump is about to walk into the White House can boil down to that same statement.

As Thomas Piketty and others pointed out recently in an article for The Washington Center for Equitable Growth, "From 1980 to 2014, ... the average pre-tax income of the bottom 50 percent of individual income earners stagnated at about $16,000 per adult after adjusting for inflation. In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent."

That much-promised and much-hyped income growth promised by both Reaganomics and Clintonomics failed to materialize for more than half the country. So, it's still the economy, stupid! Given the importance of this, let's do a deep dive into our economy with one of our nation's most brilliant and thoughtful economists: Dr. Richard Wolff, Professor of Economics Emeritus at the University of Massachusetts Amherst, Visiting Professor at the The New School in New York City, founder of Democracy At Work and author of the new book "Capitalism's Crisis Deepens: Essays on the Global Economic Meltdown". Dr. Richard Wolff, welcome back.

Richard Wolff: Thank you, Thom, glad to be here.

Thom Hartmann: It is always great to have you, sir. This year, we arguably saw the rejection of neoliberalism in the United Kingdom with Brexit and here in the US with Trump although in both situations there are obviously other factors at play as well. But broadly, is the neoliberal era over? And if so, what comes next?

Richard Wolff: Well, I think it's over in the sense that the glib suggestion that letting the private sector, the big corporations, do their thing with minimal government intervention, which is what neoliberalism basically means, that that is some kind of quick and easy way for prosperity for everybody.

Nobody in their right mind still believes that. Well, maybe some, and maybe some in high places because it feathers their nest. It makes them wealthy. But as a general idea, no, I think it's bankrupt. And I think the sign with Mr. Trump is clear that one of his most effective kind of theaters was intervening and saying he's going to tell the companies what to do, which means that the government is taking a step through him to control things, to not leave it to the market, to not leave it to the corporations themselves, because they're not trustworthy and the outcomes are unacceptable.

So in that sense Trump is destroying neoliberalism with his emphasis on his own interventionary power.

Thom Hartmann: Well, and his interventionary power has the power of the government behind it. I mean, arguably -I don't know if this is ironic or just bizarre - the Republican Party, the so-called party of small government, the party of "we don't pick winners and losers", the party of no intervention, the party of your definition of neoliberalism, basically - let the so-called free market do whatever it wants - has just elected as president a man who ran on a campaign platform that was essentially "I'm going to make the government bigger and we're going to use that government to beat up these companies that have been sticking it to you the working people".

Richard Wolff: And it was very clever because as you said in your announcement, the mass of people know that Reaganomics and Clintonomics has been a disaster for them, that their share of the wealth of this country that they work hard to produce has been shrinking, that their prospects are poor and the prospects of their children poorer still. They're looking around. It is a very sad picture and they're simply not willing to continue with the establishment's hurrah for a neoliberal globalization that just doesn't deliver the goods to the mass of people. And since the only person saying that left after Bernie Sanders was pushed out was Mr. Trump, he cashed in. It was sort of the irony of ironies that he cashed in with a party opposed to what he was doing. And I think it's a sign of the confused state of American politics that that could even happen.

Thom Hartmann: Yeah. Donald Trump has embraced a much more nationalist style of economics, as exemplified by his attempts to make deals with Softbank and Carrier and his repeated reviving this old 'America first' meme. Where is this nationalist strain of right-wing economics coming from? Is it something new or is it a continuation of what we saw erupt in I think a very consequential way in 1992 with Ross Perot?

Richard Wolff: I think it's a sign, to be frank, of a system in very serious trouble that can't go on in the way that it has become used to. After much of the last 50 years plays itself out, I think turning to a character like Trump who violates all the norms and rules is a sign of decay - not of progress - a sign of desperation that the private capitalist system simply isn't going to be tolerated anymore. And there's a kind of a lurching to the right because an option to go to the left really was removed earlier on.

So you have a kind of "let's try this" mentality. I think that's behind why the stock market is suddenly doing well as investors imagine maybe he can pull it off, maybe the normal politics and economics isn't adequate and we'll try this admittedly bizarre character. Maybe he can pull it off. But I would warn everyone that the problems are intractable. A theatrical trip to Indiana to save 800 jobs when 1300 ended up going to Mexico may be good political photo op but it doesn't change the underlying processes. And if Mr. Trump isn't very lucky and very careful he will end up being even more hated than his predecessors were because he made such grandiose promises that when they bomb, when they don't come true, the anger of the public, that he is basking in their approval now, could turn on him.

Thom Hartmann: Do you think there's a possibility that he could also enjoy the fate that Herbert Hoover did?

Richard Wolff: Yes, that he could become looked upon as the disaster unfolds. You know, capitalism as a system has economic downturns every four to seven years, wherever it has lasted. Well, our last formal downturn was 2009-2010. Well, do the math. Four to seven years is the average. We're due for one. There are already signs. For example, today's news and news recently that airline orders are shrinking, automobiles are peaking in terms of the market.

If these downturn factors produce one in this country, we're going to see in 2017 and even 2018, we're going to see enormous questions raised when the pompous promises of an immediate quick-fix turn out not to be available and - what's worse - actually be the beginning of a downturn. These are things that Mr. Trump cannot prevent, that are not even altogether his fault, they're about the system he is in. But he's playing a very dangerous game and my fear is when it doesn't work real well, what is a person like that with the people he's assembled around him, what is he going to do politically, civil liberty-wise and so on? There, I think the vulnerability of our system at this point will become very much clearer in all of our minds and in a scary way.

Thom Hartmann: Well, Aristotle pointed out, he actually used the phrase "middle class" and he said there's three classes: the poor, the rich, and the middle class, and that if a government, if a country no longer had the middle class as the major class, that that government would devolve into either tyranny, oligarchy or anarchy. Is that the sort of thing that you're predicting, and do you agree with Aristotle's analysis, for that matter?

Richard Wolff: I do agree with Aristotle's analysis in the sense that the middle has always been the kind of rock upon which an economy can sustain itself in terms of popular support. If you destroy the middle which we've basically done in this country in the last 40 years, the stability of the system becomes very questionable. It gets to be wobbly. It can go either to the left in a kind of revolutionary movement against capitalism, or it can become very authoritarian in an attempt to hold onto capitalism when the mass base for it is not there.

I mean, the hard reality is that the vast majority of Americans eligible to vote did not vote for Donald Trump. They either chose not to vote at all or they voted for the others running for that office. He does not have a mandate. He has a very wobbly coalition with a Republican Party that for 40 years has advocated the very neoliberalism that he mocks. How this is going to be worked out - especially if there's an economic downturn - is anybody's guess, but it's a time of political trouble because to keep himself going in a negative economic situation he will have to resort to those authoritarian measures that Aristotle feared. And I think we're going to face exactly that in this country.

Thom Hartmann: What you'll recall that the the worst stock market collapse since 1929 first happened in the nineteen eighties I think was '86 under Reagan or '83?

Richard Wolff: '87.

Thom Hartmann: '87, thank you ,sir. And, you know, Reagan had basically kind of gotten himself out of that and pretty much everything else by cutting taxes massively and then ramping up defense spending, tripling our national debt, which stimulated the economy. Then he pointed at the tax cuts and said that's what stimulated the economy when in fact it was probably the spending. Do you think that Trump could pull a Reagan and pull the same thing off and just do this three-card Monte thing with us?

Richard Wolff: Look, you never know in advance and 20-20 hindsight isn't really useful, so let me point this out: because it worked once doesn't mean it will work again. It's possible he will try it again. It's possible it might work in the sense that it will give some sort of reprieve to the United States from the long-term decline of the middle class, the long-term decline of the United States relative to the rest of the world, and so on.

But that is a long, long shot; a low odds kind of gamble. For a president who is a minority elected president to take a long shot like that, that is either ignorance or desperation and my guess is here a little bit of both, that he hopes somehow this magical flim-flam will all work out for him. He's not dealing with the underlying inequality. He's really doing nothing to prevent that from continuing. One of the strongest ways you got a middle class in the 40 years from the 1930s to the 1970s was to give strength to workers, unions, and all of that. He's decimated all of that on top of what has already happened. It's not a good prospect for him to succeed.

Thom Hartmann: Yeah. More with Richard Wolff right after this break.

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Thom Hartmann: Welcome back to The Big Picture. I'm speaking with economist Richard Wolff, Professor of Economics Emeritus at the University of Massachusetts Amherst, Visiting Professor at the The New School in New York City, founder of Democracy At Work and author of the new book "Capitalism's Crisis Deepens: Essays on the Global Economic Meltdown".

: Dr. Wolff, there's a lot of talk here in the US about Rex Tillerson and his ties to Russia. Shouldn't the bigger story, particularly given that we're seeing really dramatic weather effects right now as a consequence of the melting of the Arctic ice, is bringing all these basically petro-billionaires and petro-millionaires into his cabinet and as advisors and whatnot, isn't that really a much bigger problem?

Richard Wolff: Absolutely. Look, he has surrounded himself with more billionaires than anybody else. He has surrounded himself with folks from Goldman Sachs, having attacked them during the race. This is either a hustler president or somebody so lost in the public relations game that he is just distracting everybody from what it is he may do if even he knows it. But yes, Exxon is in trouble for having hidden climate science for decades that was inimical to its profits. The people around him have nothing to do with rebuilding a middle-class, have never engaged in any such activity, have been following the big bucks wherever they could find them, and these are people who are the last ones you would expect to have any idea about - let alone a plan for - to rebuild an economy like this.

The nationalist gaming - we're going to make America great again - it's lots of words and hand waving but there's no practical way given what we know about how economies work to make any of that happen. And the mere fiat statements of Mr. Trump are not going to undo what the history of these people he's gathered around him tells us about how they think and what they're likely to do.

Thom Hartmann: Dr. Wolff, Trump looks like he's going to take a harsher tone or a harsher line toward China, at least so far with his tweet-storm. Setting aside possible violations of the Logan Act which forbids US citizens who are not government officials from negotiating foreign policy, you know, he recently said China should keep that drone. And frankly, setting aside the kind of general craziness of it. If he really seriously picks a fight with China or moves the United States into protectionist mode in a fairly rapid fashion, could that be destructive to the United States or constructive long-term?

Richard Wolff: At this point it would have to be counted as destructive. Here's the reason: we now depend on the Chinese imports for the quality of our lives: for our clothing, for our appliances, for a vast array of commodities that go into determining how working people in America live. You close that off from China and you're going to make the cost of living of the American people go through the roof.

Are you prepared to deal with the political fallout of doing that, especially at a time when wages are not about to go up to enable people to buy the more expensive stuff, if you close out the Chinese? I don't think so.

If you remember that half of what comes from China comes from subsidiaries of American corporations who have poured hundreds of billions of dollars into those investments in China to produce there and bring back here. Those companies' bottom lines are going to fall through the basement and they're not going to be happy. They're going to turn against the government that undoes their investments like that. To build a capacity here in the United States to offset all that, that will take many years and that's very risky. Who knows when the policy will be changed?

None of these things that he flashingly talks about are manageable. And here's the last one that will frighten the audience, but you have to understand... the Chinese became the second economy in the world after the United States and in some ways is already equal to the United States. It did that over the last 30 years by building its industrial structure around one basic reality: exports.

The Chinese people didn't have enough money to sustain an economy growing like that. The way the Chinese were able to do it was to produce for the rest of the world. If you close off the biggest market in the world - the United States - to the Chinese, you are threatening their entire economic foundation. That is a kind of economic aggression that in the past has led to war - military war - because you're leaving people with no choice.

However that plays in the United States for people who don't see how to connect the dots, this is a very, very dangerous way to think about solving America's problems.

Thom Hartmann: And yet, with a 600 billion dollar a year trade deficit, isn't it incumbent upon us as a nation to, I mean, basically we didn't have trade deficits from George Washington until I think probably around the early 1990s. I'm sure you would know better than me. Isn't an incumbent upon us to do something to reduce that trade deficit? I'm not talking about necessarily declaring all-out trade war with China or Mexico, but somehow changing our trade policies? And wouldn't that also open up a lot of opportunity for American entrepreneurs to build factories to fill in the blanks of what's no longer being imported?

Richard Wolff: Right, but unfortunately, to do that you've got to take into account the interdependent world that the United States has at least as much responsibility for creating in the last 40 years than anyone else does.

Thom Hartmann: Right.

Richard Wolff: You can't just say, "well, we're not doing that anymore, we're changing direction". The rest of the world has adjusted to all of this and they're not going to just walk away or lay down to be convenient to the United States solving that problem. You have to put people to work? Do it. But you gotta do it in some relationship to the needs of the rest of the world, otherwise we're going to blow up this planet of ours, not even waiting for the climate change and the physical problems, but we're gonna blow ourselves up in an absurd effort to solve the problems of one nation by disregarding what it does to the others.

That's a kind of neoliberal way of thinking about solving the American problems. That's a luxury we don't have anymore unless we play a kind of crazy nationalist game in which what happens in the rest of the world doesn't concern us anymore. And that will come back to bite us in a very soft part of our anatomy.

Thom Hartmann: So how do we get back to trade surpluses, or at least to a balance of trade? Or is that not all that important or desirable?

Richard Wolff: Well, it depends on how we deal with the rest of the world. If we cultivate a peaceful world that we can rely on the supply of goods coming from abroad, that can be made more efficiently over there than they are here, then maybe we could over time make an adjustment that meets our needs. Maybe we need to put people to work not on the basis of profit, which is how it's done now, but on the basis of the social needs we have to have people have meaningful work lives in a society that welcomes that and supports it.

We would have to ask questions about a system that has gotten us into this dead end of bad choices. That's why I'm a critic of capitalism because it's the system that keeps plunging us into these choices that are scary which way we go. At a certain point instead of just asking which of these bad directions is the less scary, let's ask ourselves, what about a system that only employs people if its profitable to do so? Maybe we should employ people because that's what people want and need, and we as a society can do that if we don't make ourselves hostage to the profit of a few as the only way to move forward.

Thom Hartmann: Is what you're discussing essentially what FDR did with the CCC and WPA? You know, basically there's things that need to be done, the government has money, we will be employer of last resort.

Richard Wolff: Absolutely. He took those steps at that time because the anger of the mass of people about the depression made them move generally in the left direction rather than the right direction. What FDR didn't do was realize that in order to make that solution he moved towards permanent, you can't leave the power - the decision-making power - of this economy in the same old hands of private enterprise. He didn't take that last step to say that's not an acceptable way of doing things. So as soon as old Roosevelt died at the end of World War Two, the very people who he superseded by having the government step in rolled back the New Deal he had pushed through, got rid of it.

His mistake was to leave them in a position of owning the profits and being able to use them for that roll back. If he hadn't done that we might not be in the fix we're in now. That's the key lesson. He took the steps but was afraid to go far enough to make them unrollbackable, if I can use that bad English.

Thom Hartmann: Yeah. I know it's actually a great phrase. There's lots of discussion right now about automation and its role in deindustrialization. What do you make of that conversation? Has it played as big a role in job losses mainstream economists think, or is this just a distraction from a conversation we should be having about, for example, trade or perhaps even a guaranteed minimum income?

Richard Wolff: Look, there's no question in my mind that automation is a serious real phenomenon. Capitalists look for ways to save on their payroll expenses, either to pay workers less - that's why they go abroad - or to have less workers to pay in the first place by replacing them with machines which is what automation means.

What we have to understand is the motivation of a capitalist enterprise to automate is to get rid of workers - to replace them with machines, because machines are cheaper over the long run than paying workers. So when they use a new technology, when they install it, they fire workers. They don't have to worry about what happens to those workers. It's not a cost to these corporations. They're just looking at the profits. The fact that the unemployed worker then has stresses at home, that it causes lifelong difficulties for his or her children, that it has social costs that far exceed whatever the private profit gain of the installer, we don't worry about that because we live in a world that pretends it doesn't have to worry about that.

So here's an alternative: suppose when a new technology comes in that makes us need twenty percent less workers, instead of firing them to make profits for the company, we reduce everyone's work week who works in this industry by twenty percent. Solves the problem. Takes care of the need to do what technology promised to make life better for all of us. To do that you have to make a different calculus from a profit-driven calculus. When capitalists use technology it's for profit. For the mass of people, what technology could and should do is make life easier and that requires system change or we don't get that.

Thom Hartmann: Amen. Professor Richard Wolff, it's always a pleasure to have you, sir. Thank you.

Richard Wolff: Thank you, Thom.

Thom Hartmann: And that's the way it is tonight. And don't forget, democracy is not a spectator sport, get out there, get active, tag you're it!

Transcribed by Sue Nethercott.