Richard D. Wolff & Michael Hudson: US Next President Faces IMPOSSIBLE ODDS: Middle East & Ukraine
Dialogue Works • 1:19:25 •
NIMA ALKHORSHID: Today is Thursday, October 31st, and we’re having Michael Hudson and Richard Wolff with us to talk about the legacy of the Biden administration for the next president of the United States. And let’s start with Richard. How do you find right now [the] two important conflicts, one in Ukraine and the other one in the Middle East? We know that the next president of the United States should confront these two difficulties. And on the other hand, we’re going to talk about tariffs as well. But when it comes to these two conflicts, what’s your take on that?
RICHARD WOLFF: Well, I think like a number of what I would think of as the most important issues facing this country, the two candidates have little or nothing to say. So, as far as I can tell, there is a slight difference in the sense that there is speculation that Mr. Trump is not so eager to be persistent about Ukraine, and rather more eager to be persistent about Israel and bashing China.
On the other hand, the Democrats seem to think that their success lies in doing what the Republicans do, just not so quickly, not so harshly, but otherwise to take their cue. Therefore, I don’t think it’s going to make all that much difference on these two issues. What exactly happens when you add the social forces that are behind all of this, they will be more important in shaping what the president, whoever it is, does, than anything they say, in general, and anything they say during a campaign, in particular, when, kind of, they say whatever their polls suggest, will get them more votes.
So this is like so much about our elections. This is a theater. I like to call it the theater of democracy, because it’s a substitute for the real thing, which they do not want. Let me put this another way. In my view, what we are experiencing, what we are living through, the three of us plus everybody else on this planet, is the decline of the American Empire. And it takes a variety of forms, foreign and domestic, but I think in the end, the Ukraine War is a kind of gesture, a kind of shadow boxing, in which the United States is trying to convince itself, its allies and as much of the world as possible that it’s the global dominant power that it used to be.
And unfortunately, it is demonstrating exactly the opposite, although they don’t want to face it yet. They can’t allow it to be discussed. And so the two candidates say nothing like that; do not admit it, do not deal with it, do not suggest ways that the United States can rationally deal with the decline of its own empire. They are engaged in a combination of denial and desperate pretense.
And basically, I think that’s largely what’s going on in Israel as well. Israel is trying to hold on to an impossible situation, and the only country that gives it any significant support is the United States, because it has a vague notion that Israel will be its local leader in that part of the world, the Middle East, and is hoping to hold on to the fantasy that that’s actually possible. And it isn’t, in my judgment. I think that’s hopeless. But the desperation is causing a lot of people to die, and having the effect of mobilizing the alliances of Russia and China, of both of them and India, and of BRICS as a challenge to the West. It is accelerating what it was designed to stop. And they don’t see that either, so it’s full-speed ahead doing all of these things.
Now, I could be wrong, of course, but if you ask how I see all of this, that’s the framework within which I see it. You have two political parties who agree on all of the most important things: that Capitalism is the greatest thing since sliced bread; that there is no alternative that needs to be discussed; there is no option; and that the maintenance of Capitalism equals the celebration of Freedom and Democracy; and that everything the United States does in the world, it does to expand the realm of Freedom and Democracy against the evil alternatives that beset this Project.
They used to be called Socialism and Communism, and now they’re called Authoritarianism, but it’s the same game. It’s even got the same players that barely changed their uniforms, so we can all recognize who you mean. And the hypocrisy of it all is right on display, as it always was, and it’s overwhelmed by propaganda, and the two political parties do their part by being utterly silent on all of it.
NIMA ALKHORSHID: Michael.
MICHAEL HUDSON: Well, I think Richard and I have been making this point through all of your shows, and I think that a lot of the American voters are in agreement. Certainly they’re in agreement that both presidential candidates are just front men for the deep state, or whatever you want to call it, Wall Street, and their financial backers. And the result of people finally catching on is that what’s coming up next Tuesday is a typical American election: Who are you going to vote against? The question is always the same: Who’s worst? And all that the Harris lady can say is, well, I’m not Trump. And Trump can say, well, I’m not Harris. And the Trump haters are going to vote Democratic, and voters who are disgusted with Biden and Harris are going to vote for Trump. But voters against Biden – two big wars – are going to try to vote for Jill Stein. And I’m sure when it’s all over, they’re going to find the margin of Trump’s victory over Harris (certainly in the swing states) is going to be less than the large, the Jill Stein/third party vote. And the Democrats are going to say, “Oh, we would have won if it wouldn’t have been a third party.” That’s the one thing we can never have in the United States. We have to make it even harder for there to be any real choice of a third party in the United States. There must be no alternative.
And the issue is all going to be personified – that Richard just described as the underlying forces. I think the Democrats are going to lose because Harris has come out as the war party candidate. And I guess you could say the election is going to be which war party, which war do you think is more important?
Harris is defending Ukraine, Trump is defending Israel, but basically the Democrats are the war party. And I think that’s what’s going to defeat her in Michigan, in Minnesota, and other key states, her war party stance. Yesterday in the magazine, The National Interest, General Hodges, (one of the big generals in the U.S.) and another national security general, gave a plea to American voters: You must vote for Kamala Harris, because otherwise Russia is going to march right through to recapture East Germany on its way to the Atlantic. We must stop Russia. This election is over… Wanna stop Russia, or not?
Whereas for Trump, he’s saying this election is over… You want to stop Chinese economic domination of the U.S. economy, or not?
In other words, pick your enemy. It’s the enemy that is defining the candidate because neither candidate has anything positive to offer the people. So all you can do is play on everybody’s resentment against the economy, and try to channel that resentment toward the opposite party. So it’s a purely negative kind of election. There’s no longer an election over what kind of parties you do want.
And I think as Jill Stein said on your show a few months ago, Nima, that she agrees with what Harris is saying, and what the left wing of the Democratic Party, such as AOC, is saying. A vote for Jill Stein, against the war, is a vote for Donald Trump.
And we’re okay with that because I don’t think there can really be any progress beyond the dilemma that Richard is talking about, as long as the Democrats are really in power to sort of pretend to be the alternative to the Republicans.
And I think that if this election ends the way I expect it to, and the Democrats will lose not only the Presidency, but the Congress and the Senate as well, that will mean that it’s not possible for them to win an election again without somehow moving away from their right-wing basis.
There have been some polls that the newspapers don’t talk about, and that is that Bernie Sanders was the most popular politician within the Democratic Party. Suppose that there would have been presidential primaries, like every other party has had for the last hundred years. Suppose people had earlier said, you know, Biden is really senile, we can’t let him run again. We’ve got to let the voters choose who an alternative will be. Harris could not have won a single state, just like in 2016. Bernie Sanders would have won. The Democrats said, we know that’s going to happen. We would rather lose with Harris than win with Bernie. Just as in 2016, they would rather lose with Hillary than win with Bernie. So that shows the rottenness of the choice that’s put before the American people. Because the election is not going to be about the problems of American militarism and the empire and the domination of Wall Street that Richard and I’ve been talking about on your show for the last few months.
NIMA ALKHORSHID: Do you want to add something, Richard?
RICHARD WOLFF: Yes, I want to throw an idea out for you and for Michael to play with. And I’ll be blunt, so I won’t be able to develop the nuances of this. A very short time ago the head of Apple, Mr. Cook, went on a trip to China. He’s made many trips to China but more than one this year, but he recently made one. And it was crystal clear by the very warm reception he got, and by his own very enthusiastic, positive commentary on China, that – and here comes the jump – that there are sections of America’s most important, biggest businesses that do not want a war with China. They do not want this conflict. They have become the giant successes they have been because of what China enabled them to do. They know it. They don’t want to lose that. There is nothing to substitute for what they get out of China which, to be blunt, is cheap labor and the biggest expanding market on earth. To give those up is to risk their entire business operation.
Okay, now at some point – especially were Mr. Trump to win – these people are going to possibly begin to think like Michael just spoke. They’re going to say, These two parties are a disaster. They are involving us in one dead-end war, or conflict, after another. And while it may be good for the Military Industrial Complex, we are after all a bigger section of this economy than they are: we, the high tech industries; we, all the rest of the economy, other than the Military Industrial Complex.
At which point an immense conflict breaks out in the ranks of capitalists: Those who want to cut a deal with China and the BRICS work out how we live and let live with one another on this planet; who don’t want war and who don’t want nuclear war and who don’t want Jake Sullivan-type people playing around that problem – versus the Military Industrial Complex and those who are won over by them.
It will be a split, bitter conflict over which way American foreign policy goes. It will be decided in Congress. And so each of those two wings will begin to appeal to the public for mass support to their two different programs: go the way we are, sabre-rattling down the road, or go in the alternative direction: work out a deal with Russia, China, the Arab world, and so on – at the expense of the West, including Israel, Western Europe, and so on, no question.
Do we do that, or do we – and pardon my humor – have a capitalist – peace movement alliance which actually wins? Why? Because the peace movement can be the most popular base, and that wing of the capitalists will fund the creation of that base into a voting majority. If I’m right, that’s the next step of American political life which will burst on the scene because of the crazy things that are going to happen next in Ukraine and in the Middle East. No matter who wins, that will force the thing I’ve just described – which will either happen, or it won’t. But it is a possible scenario that has come into my mind, as I watch the lunacy.
And just one last thing. I know you mentioned we might discuss it. But if Mr. Trump has to carry through the notion of putting tariffs on everything (which is what he said he is going to do), with the uptick in inflation… (I don’t know if you saw it in today’s data, the inflation is back) but that’s nothing compared to what would happen if you actually did that tariff-stupidity.
And I also begin to think that the United States is beginning to recognize what somebody ought to call the Hegelian Moment of American Politics. And here it is: The culmination of the Cold War and the years since, that aimed to isolate Socialism, isolate Russia, isolate China, is reaching its peak, which takes the form of the isolation of the United States.
MICHAEL HUDSON: Yeah, if you isolate everybody else, and you end up fighting them altogether, and you’re isolated – that’s exactly right. So this is a new kind of isolationism. In the past the isolationists were always against the war. Today, you’re saying…
RICHARD WOLFF: the opposite…
MICHAEL HUDSON: …the isolationists have led the war.
RICHARD WOLFF: Yeah, because the war is a self-delusional gesture. It’s the person who is losing the battle who, well, I’ll give you an example from the Ukrainian war. The Ukrainians are losing, and they take their best troops and invade an unimportant corner of Russia. I mean, that’s pure symbolic gesture. That can’t work, and it is now coming to its pathetic end, as anybody who paid attention would have presumed it would. That’s an act of desperation, as would be sending missiles into the heart of Russia – which Mr Zelensky wants to do. He’s desperate, which I understand – that he’s desperate. And these are the behaviors of a desperate character, but they’re not to be taken seriously on their face value. He calls it a Victory Plan. That’s hysterical! A what?! You have no plans at all, let alone… your plan is how to get out of that country in time, when the troops arrive. That’s the only plan left for you.
NIMA ALKHORSHID: Michael, do you want to add something?
MICHAEL HUDSON: Yeah, why on earth would Zelensky have invaded the Khursk area. The answer is, it’s all about the narrative. He didn’t invade to win the war. He invaded because he thought that that would convince – somehow – the egotistical, narcissistic American cold warriors that this enables a narrative to be said: Ukraine has fought back. Russia invaded us. We’re going to invade it. There’d better be a peace, and if there is a peace, there’ll have to be a ceasefire and Russia cannot continue to mop up, and continue the plan that Putin has announced of de-nazifying Ukraine and protecting itself against NATO.
So it’s the fight over the narrative and nobody… on this show, Richard and I naturally are saying, what is in the capitalist interest? What is in America’s interest? What is in foreign countries’ interest? And there are people who are not interested in America’s interest. They’re interested in their own interests. And to distract people’s attention from the American national interest – if there is an American election – they have to have a different narrative, a narrative in which they’re protecting the weak Democratic Ukrainians against the Authoritarian Russian invaders who are not going to stop at Ukraine, but are just going to continue to march West over the rest of Europe.
Somehow there’s a belief of the American cold warriors that they can create a narrative that will convince people to somehow find the fight between Good and Evil – as seen depicted by the CIA and the American military – more important and certainly confuse people [about] what the real world’s fight between Good and Evil, between Civilization and Barbarism, is. And I think the ideas that Richard and I have said on your show is that the new force of Civilization that is taking place – in isolation from the West – is the global majority in the BRICS. And Barbarism is the attack on the BRICS – the U.S.-NATO attacks – trying to preserve this defunct American power that is only predatory, not productive; only extractive, not productive, not leaving living standards; only polarizing, not democratizing. So I think that this is the military wars that are going on: wars between two narratives, and what is good and what is evil, what is black and what is white.
NIMA ALKHORSHID: Richard and Michael, when it comes to these two conflicts in the Middle East and in Ukraine, we want to see what’s the difference between the Democratic Party and Republican Party. Donald Trump, in his recent interviews, he was just talking, I’m going to put an end to the conflict in Ukraine in 24 hours, as he put it out. And in the Middle East, he said, I’m not interested in a direct conflict, in a direct war with Iran. J.D. Vance, in his latest interview, he mentioned the same thing, that Israelis are trying to drag us into a war with Iran, but we are not interested in going to war with Iran.
This is one side of the story. On the other hand, Donald Trump is talking about Mike Pompeo, Nikki Haley, Tom Cotton, these people are going to be in his administration, if he wins. Here is what Mike Pompeo said on Fox News, specifically about the conflict in Ukraine. He says, Donald Trump doesn’t know what he’s talking about.
[NEWS CLIP BEGINS]
MIKE POMPEO: I don’t know what he’s talking about. I do know that we were able to deter Vladimir Putin from doing precisely what he did, invade Europe. He’s killed innocent Ukrainian civilians. That didn’t happen on our watch. Putin takes a fifth of Ukraine under President Obama – not an inch while I was Secretary of State – and then goes at it again, as soon as we leave. So I’m convinced we could have convinced Vladimir Putin not to have done this. Putting it back in the box is going to require real American seriousness, real American leadership, the preparedness to help the Ukrainians do the things that they need to do…
[NEWS CLIP ENDS]
NIMA ALKHORSHID: Yeah, put him back in the box. It seems that they can do whatever they just desire to do. Richard, jump in, please.
RICHARD WOLFF: Well, you know, this has deep roots in the United States. Very deep roots. Going back to our start as a colony, the Puritans, this way of thinking: that the world is to be captured by a great struggle between Good and Evil. This obliterates all the complicated relationships that make things happen. It reduces it. And they know that. They know that. But we don’t, we don’t tell our people what the issues are. We don’t explain. We have no history of it. We barely do it in the university with the tiny minority of people that even bother to go to the university, and the tiny minority of them who actually read and listen to what goes on. I spent my life in the university. I did the best I could, but I’m not crazy. I know what my students did and didn’t do.
And I learned what holds them back from learning. I’ll give you an example. There’s this need to demonize the enemy. Everything is about Mr. Putin. I got news for you. Like any other leader, he is very much shaped by the situation he’s in. He’s not some free actor, somebody like a devil, in the notion of God versus the Devil, somebody who has no constraints. Obviously, God, if he is all-powerful, should have gotten rid of the Devil. But he couldn’t. I guess something happened that made the Devil survive the God. And we know the stories. We can learn them when we’re little. And so we have these great actors who are acting out their intrinsic social role, but there’s no analysis of why they do what they do. So, everybody is free to define the devilishness.
So, for Mr. Pompeo – he’s not original in this, by the way, he’s not original in anything else either – he has picked up the story that Mr. Putin wants to march to the ocean. That’s right! Instead of Ukraine, he’d like to have a rebellion of the French and the British and the Germans and the Italians and the Scandinavians, altogether! He can try to, he can barely control Ukraine. What a joke that he could control the others, who are better armed, better equipped than the Ukrainians ever were! I mean, this is so silly that it works, and it works because it touches the good and the bad, the good and the bad. And when people reason like that, it never stops. That’s why Mr. Pompeo can then seamlessly go from the Bad Putin and the Good Us, to the Bad Us and the Good Us: the Bad Democrats and the Good Republicans. (We’re God. The Democrats are Junior Devil. That’s why they made a deal with the Senior Devil and…) This is childish! This is reading the comic book instead of reading the book about which the comic book was written. This is a childish substitute for real politics.
That’s why clowns like Pompeo… and Nikki Haley?? I mean, please, help us! There’s nothing there. Nothing. There’s a thing, you’re in the air… which way is the political wind blowing among the mass media… and takes her cue. And I don’t mean to pick on her. She’s no worse, or no better, than Mr. Pompeo. This is a game inside the United States: You paint your enemy as the Devil, for MAGA supporters…I don’t know… Kamala Harris, or the others, they’re devils. They talk like that! They’re at least honest enough. They talk like that.
And for the Democrats, you hear that Mr. Trump and all of his people are immense dangers to Democracy. Look at the language. That’s why you don’t hear much about this or that program. What’s the point? You can’t have an anti-capitalist program because then the media will destroy you in ten minutes. So you fasten on other issues where you’re allowed to say something, like abortion, or gun control, or immigration. And you pick that, and then what do you do? You picture your enemy as a devil. So the people who don’t agree with you on immigration are evil people abetting the invasion of the… that’s the way they talk!
But listen. As with any therapy, what we’re doing is we’re trying to understand what’s behind the language. There’s no point in dismissing the language. The language is our clue. The clue here is that you allowed yourself – and you had the luxury in the United States, by the very distance from Europe in the beginning, by the importance of the Atlantic and Pacific Ocean separating you – to cultivate a notion that you really are in God’s Chosen Country. That’s part of why there’s a vibration with Israel. They too think they’re God’s Chosen People and they’re in the Chosen Country, and the Chosen Book – the Bible – said it was their real estate, not all other people’s real [estate]… What is going on here?
And so you’ve had this way of thinking, and now the chickens are coming home to roost because this way of thinking – We are the Exception, you know, American Exceptionalism, God created us – our politicians have to be talking to God all the time. Politicians in European countries don’t do that. If they stood up and said, I’m talking to God, there’d be a paddy wagon come to pick them up and take them to the sanatorium! Nobody wants to hear this and these are countries that have the same Christian religions that you have here. But you can’t do it here because everything is infused, and now that the dénouement – the chickens coming home to roost – you’re killing yourself, you’re destroying yourself, by turning that language onto one another.
And now we are a country split, in which each side thinks it’s God versus the Devil. And they’re going to destroy each other. The Soviet Union didn’t disappear because another country overwhelmed it. The Soviet Union imploded. That should worry people as the politics of America becomes unlivable. Are we headed down that way? That’s a conversation we ought to have, but of course, we won’t. Each side will see the Devil in the other – not in the relationships – because if you understood that this is a language game, you’d have to ask the question, why are we playing the game? But the people that we’re talking about (Harris, Trump and all the others), they are so into that game, they can’t see it as a game.
The great philosopher Ludwig Wittgenstein understood, and wrote reams of material, about the games: “Language is a game.” And that metaphor is really helpful because you can then, maybe, take a step back and ask yourself, why are these language games so powerful? Or, to use Michael’s language, why is this narrative the one that’s embraced by people? That’s the first step to getting out of this hole, is to understand that you’re in a hole. Just like going to Alcoholics Anonymous, they require you to say, “I’m an alcoholic.” You have to begin recognizing where you are if you’re ever going to get out of there.
MICHAEL HUDSON: What does it mean to be a devil? It really means the Other. You mentioned the roots in American settlement itself. The Other, at that time, were the Native Americans. What did you do? You wanted to put them on reservations. So, I think the strategists – the neo-cons and the militarists at the top of the planning pyramid in the United States – may not take themselves as good and evil. That’s just to tell the religious sector of the voters. What they think of as the Other: the people who do not submit to us; the people who want to maintain their own autonomy. Just as you wanted to put the Native Americans on reservations, America’s policy is, in words that you almost said literally, put Russia back on the reservation. Isolate it. Put China on a reservation. When you put everybody on a reservation, you have a situation pretty much like when you put many of the Native Americans on reservations.
All of a sudden, they found that oil was under these reservations. All of a sudden, you found that they were very rich. What do you do with that? Well, all of a sudden, you want to grab them. I think the Koch brothers made almost (I’m told) all of their money stealing oil from the Native American reservations. They were about to be exposed by the government when President Clinton had the affair with his assistant, and her dress. So the deal was: Okay, we won’t impeach Clinton, get rid of him, if you don’t move against the Koch brothers. That was a turning point, certainly, in American politics.
Well, America has isolated almost all of the global majority. As we said earlier, we put it on a reservation; they find that they have oil; that enables them to be independent. They’ve also found that they’re immune from many of the Western laws, from the rules-based order, and can make their own international law and order. And I guess for the American reservations, we can have gambling casinos and clean up with the frustration of the Americans. I think the higher planners, who are really behind making this aggressive policy that you talked about, think the only thing that we can do is prevent [it]. This is a war against anyone who is trying to maintain independence from the American Unipolar World Order. Of course, that means everybody’s the enemy. Well, they’re not going to say this is their strategy to the American voters. They’re just going to say, this is good versus evil; us versus the foreigners.
And all of a sudden, what has catalyzed the recognition of (certainly) the global majority is exactly what’s happening in Israel; the fact that they say, God gave us this land and we must exterminate everybody, all the enemies: they’re all Amalek. And it’s a war for the Destiny of Civilization. And all of a sudden, the rest of the countries of the world saying, well, when the Americans are coming in and have the National Endowment for Democracy-sponsored regime change, and color revolutions, they’re going to try to get one of us to die “to the last Ukrainian,” to die to the last Georgian. (If they could have been able to overthrow the Georgian government – yet again – they would like Georgia to fight to the last Georgian against Russia. Who, which of the BRICS, can they pick on next to fight to the last of their citizenry against? America cannot fight militarily. It has to somehow convince one of its designated opponents to fight among themselves. This is the kind of crazy [lockstep] in diplomacy that we’re in.
RICHARD WOLFF: Yeah, let’s add, just to take Michael’s point another step, to make sure people get it. The whole world is watching what Israel is doing in Gaza. Okay? Now, what Americans have to understand is what’s going through the minds of all of those people around the world. The United States is funding and arming what the Israelis are doing, in order to hold on to its influence – through Israel – in that part of the world. Everyone is wondering, will there be another country, a neighbor of mine, another Latin country, another Middle Eastern country, another Asian or South Asian country, another African country, that will be chosen by the United States to play that role over there? Will they be armed, and are we dealing here with the risk of this happening to us?
And they’re terrified by it. And they’re worried that the United States is, in its empire decline, going to reach out. If the BRICS keeps picking up more and more Muslim countries – it’s got most of them – if it’s going to pick up the remaining Muslim countries – and the United States is identified everywhere as the enemy of the Muslim countries – will the United States pick one of them, make that its ally, and have that be “the Israel” of another place?
And that is becoming part of the mentality of the United States, which is looking for those countries; was very upset when Niger, a small country in the middle of Africa, basically said, You have to leave, Americans… and brought in the Russians. Okay, this is for them a terrible sign of where things can go.
Like the election in Georgia, or a hundred other elections, or movements, or problems… And those countries are worried now, not only that this might happen, but the Israelis are showing them how far the United States is willing to go to protect its “friend” in the area. Whoa. That’s a little different from Ukraine. That’s another issue. Similar, but this is going into an area with a bunch of different countries, making one your bosom buddy and then enabling it to become dominant. Wow. Wow. And are there people in many countries who would like to play that role for the United States? You bet! Is that already happening? I would guess so.
And what that does to everybody else is to begin to do the worst nightmare of the United States, which is that the world decides that there is one Number One rogue country, and it’s the US. Not North Korea. They’re not endangered by North Korea. They’re endangered by the United States. And at that point, where are they going to go as there’s a burgeoning conflict between the United States, or the G7, on the one hand, and the BRICS?
You’re watching in slow motion the decline of an empire. When the Roman Empire collapsed, for a hundred years, the conversation in Rome was about “the Barbarians,” the language, I believe, Michael used a few minutes ago. You viewed the people moving in on the empire, the Frankish people (in what we call France now), the Gaulish people (another part of France), and so on. They weren’t barbarian, but they were for the Romans, because they were the manifestation of the decline of an empire that couldn’t stop the decline. We all read those books about the end of Rome. They are wonderful insights into what’s happening here.
NIMA ALKHORSHID: Yeah. You two mentioned that the situation in Middle East is far more complicated. Here is what the foreign minister of Saudi Arabia recently said about the conflict in Gaza, in the West Bank, and Israel.
[ALEKHBARIYA NEWS CLIP BEGINS]
FAISAL BIN FARHAN AL SAUD: The normalization with the kingdom of Saudi Arabia is not just a risk, it’s off the table until we have a resolution to Palestinian statehood. But I would say more than that, I would say that it’s not just the issue of normalization with the kingdom that is at risk. I would say that the security of the region as a whole is at risk, if we do not address the rights of the Palestinians, if we do not find their way to a pathway that leads us to a Palestinian state, because that’s the only way we can ensure that we can focus on the future, that we can focus on co-operation, that we can focus on integration.
So I would hope that the leadership of Israel sees that it is not just the right thing to do, it is not just the moral thing to do, it’s not just the just thing to do to give the Palestinians their rights and their state, it is also in the security and strategic interest of Israel to do so. And that’s, I think, up to them to decide.
[ALEKHBARIYA NEWS CLIP ENDS]
NIMA ALKHORSHID: Do you see any sort of understanding in terms of, because when we talk about Saudi Arabia in the Middle East, we know how close they are to the United States right now. How do you find the way that he’s talking about the conflict in the Middle East, Michael? Do you think that it’s possible?
MICHAEL HUDSON: Ten years, or maybe thirty years, or 75 years too late. There is no way there can be a Palestinian state alongside Israel anymore. The way that Israel has structured the whole region is a prison camp. How can a state have its own authority, the power?
The only way you can have a Palestinian state is for Netanyahu to kill all the Palestinians, except maybe 200, and it will put these 200 on a reservation and call that the Palestinian state. There is no way in which Palestinians and Israelis can live because the Israelis say the Palestinians are not human beings. We have to make Israel for the human beings only. We can’t have non-human beings – or the barbarians – anywhere around us. This is a fight for the death for them. Certainly Pompeo says, “Yes, we’re all for that because when the fight is for the death, Jesus will come and he will take all his true followers up to heaven.” Pompeo is this religious nut, on top of all of his craziness. So I don’t think there’s any hope for a Palestinian state anymore. The question is, what are you going to do with the Israeli Zionists who live in Israel? How are you going to get them out of Palestine? They cannot live in Palestine if there is to be a Palestinian state, or if there are going to be any living Palestinians left. Where are you going to put the Zionists? Where can they go in the world?
RICHARD WOLFF: Yeah, the way I read his statement is the way I read what Saudi Arabia does in the world. And for me, it is a wonderful case. They are hedging their bets. First of all, Saudi Arabia is in the BRICS. So, we know that the United States is not encouraging anyone to become a member of the BRICS; it is encouraging everybody not to do so. Okay. I’m sure… I don’t know, but I’m sure that they encourage the Saudis not to do that.
Well, that didn’t work. The Saudis went ahead and did it. Every country’s leadership is now assessing what has to change in their foreign policy to take into account that the global economy is now split between a larger and a smaller group of nations. And I mean larger and smaller in terms of total wealth, or total output (GDP, or whatever you want to use). All right? The BRICS is now the larger of the two. It wasn’t before. The two lines crossed in 2020 and the gap between them is getting wider, each passing day. And that means if you’re a company, where you source your inputs has to be re-thought because you’re going to criss-cross this new global situation. If not directly, then indirectly, which can be just as devastating. You have to re-consider where your exports are going to go. You’re going to have to re-consider your credit situation. You’re going to have to consider who to insure with, what banks to use, how to split your accounts, so that you’re not maybe too much in one or the… Everybody is shifting, and in that shifting, the West loses what it had before and the BRICS gain relative to – more or less, and maybe some exceptions. And the Saudis are busy doing that. And there’s a dance here. And the dance is, don’t make the adjustment too quick because the United States might then do to you what is happening to Palestine, or Lebanon, or Syria, or Libya (or fill in the blank). So you can’t go too quick, but you better not not go either because that’s very dangerous, and becoming more dangerous with every step.
Yesterday, the United States announced more sanctions, a whole new bunch of sanctions, on companies and countries that are allowing other companies to function there because those companies also sometimes do business with Russia. Okay. Most of the countries on earth are doing business with Russia, and more of them will be in the years ahead. They’re facing sanctions. The United States ironically keeps forcing decisions that are going to go against them. So there’s a dynamic here that feeds on itself, and that cannot help the United States.
That’s why the word “rogue” nation, because the rest of the world is slowly coming to an awareness that out of its own desperation at being a declining empire, which is always hard for the empire that’s in decline… (It was terribly difficult for the British. It was terribly difficult for the Dutch before them. The French didn’t go quietly; you know, they’re still trying to hold on to bits of their empire. So it’s very hard.) But what the world is observing is that the American empire – partly because it was a global empire, more than anybody else, even the British, had achieved (the United States has those 700 bases around the world), it really was a global empire. Because that makes it that much harder, the United States, busy with its defensive gestures, is actually making the problem worse.
If I could pick a dangerous metaphor: If you’ve ever taught swimming, one of the lessons you teach a swimmer is if you’re having trouble swimming, don’t flail your arms around because it’ll make it worse for you; it’ll make it harder for someone to save you. Don’t do that. Someone ought to tell the United States, that’s what you’re doing. You’re going to go down faster, further because of your refusal to deal with what your situation actually is, and the desperate ways you’re holding on.
MICHAEL HUDSON: You mentioned the Roman Empire before, as it declined. There are a number of differences. Many of the Romans kept leaving the empire to join the barbarians because they thought the barbarians were more civilized. I can imagine American engineers, German engineers, others emigrating to Russia, China, the BRICS countries, where they want to do that. That’s one similarity. But also many of the Germans began to become the Roman empires. There were fights among rival Roman empires and they would hire the Germans as their troops, and the Germans ended up as the Popes.
The equivalent there would be if America expanded to China and Asia and the BRICS, if there was some kind of reciprocal investment here, that somehow the BRICS would invest in the United States, which is what the United States is trying to get Taiwan and other countries to do. I don’t see that happening because there’s so much of a hatred against the barbarians here that really didn’t exist in Rome. By about the fourth century, you had Roman philosophers saying, well, the barbarians have many qualities that are more civilized than are in our own country: They have a more balanced economy. They have mutual aid. They don’t have the kind of financial oligarchy. The Romans began to idealize an original society where people were equal and mutually supportive. Today we’d call that Communism. They began to try to develop that and that became, in a way, Christianity. But as that developed, the center of the Roman Empire moved northwards. It moved northward to Milan; then it moved up into the Germanic tribes. Finally, it moved to the new Rome – Constantinople. The whole center changed. I don’t know where the American Empire could somehow move its center to, certainly not Europe because part of the real fight against BRICS began with the fight of America against Europe – against Germany, and against any potential European industrial rival. Those parallels to Rome can’t exist: America has sort of boxed itself in. It can’t immigrate to, at least as a government, to foreign countries. If America were like Rome developing Christianity, it would develop Socialism.
As you put it at the beginning of the show, if politicians represented actual voters, of course, it would be good for the economy. Then this would become an ideal that would lead to a universal world. It will, I think you said earlier, there’s going to be a real crisis first. What you’re describing as a positive potential outcome will be triggered by the absolute disaster that’s going to be caused either by the Warmonger Harris, or by Trump and his tariff disasters and his economic libertarian disasters for the United States. It will somehow lead, you’d think, the large corporations to say, we’re boxed in here. We can’t go to the British countries because of the sanctions that have been spurred by this nationalist fervor against the Other. There’s nothing we can do except to create a new society. This, I guess, would be America’s version of Christianity. And, of course, that was poisoned soon enough, by the fifth century, by St. Augustine and Cyril of Alexandria (that completely destroyed the Christian feeling that came out of Rome), but that revulsion against inequality spread throughout the Near East. It spread to Persia. It spread to other Near Eastern countries. It was absorbed by Islam, that came up. So we’re going to see some kind of a transplantation of what was America into other parts of the world, but it’s almost impossible to see how this will occur right now, except beginning with a trickle of emigration of people who cannot live in today’s version of Rome, abroad.
But then it will lead, you’d think, to some powerful groups acting in their own self-interest, and at least the American power elite – not quite like the Roman Landlord Creditor class, trying to indebt the whole other country and impoverish it and lead to feudalism. And that’s really the question: Is the American economic model going to lead to neo-feudalism, or is it going to lead to something better that would actually be, in principle, the same kind of rules of civilization that the BRICS countries are trying to create?
RICHARD WOLFF: I think the very nature of this conversation is telling you: we are more evidence of a declining empire. We are beginning to grow up around for either historical models, or theoretical extensions of things we see now, to begin to imagine where this can all go. And that’s already a sign that people are looking.
There’s an enormous revulsion here in the United States against the level of inequality that we have. One of the reasons neither presidential candidate goes near there is because it is so dangerous. The tiny minority at the top are prepared and willing to spend a lot of money to keep that conversation bottled up, not public, not pervasive. They are very interested in not having that conversation go because they are so isolated at the top of the pyramid, with all that wealth. I mean, if you have $200 billion and most people, you know, living paycheck to paycheck, you’ve got a problem. You need to keep the lid on the ideologies of your people. You need to control the politics. Otherwise, the sheer numbers will overwhelm you. And I suspect we’re going to see all kinds of movements against the inequality, questioning the system in all kinds of ways, including a resuscitation of the old Marxian and socialist… That’s going to come back, as it has in the past. You know, the comment that that’s all behind us is silly. That deserves the same answer that the Mark Twain gave when he read his own obituary in the Hartford Courant. He wrote the letter to the editor saying, the rumors of my death have been greatly exaggerated. You know, the same is true for all of these other ideas. You know, the worker co-op is not a new idea. It’s been around for thousands of years, but it is already having a renaissance in part because there is a concrete example, visible all over the place, of people who are getting together in an enterprise to produce a good or a service and not organizing it in the capitalist way – with an owner operator at the top and a mass of dependent servants (excuse me, employees) below. That’s being a problem now. And there are alternatives being groped around to see whether they might fit. But I think everything starts with understanding that we’re doing that.
If you ask that question, then you don’t have a war in the Ukraine. You don’t. You work things out. You take into account the security needs Russia says it has, the security needs Ukraine says they have, and work something out. That could have, and should have, been done. It had been done for years before. It could continue. We can work that out. And the same is true in the Middle East. I understand what Michael is saying. And I think the Israelis have made horrible mistakes in now creating a population: Whatever its animosity was before, can you imagine with me what the feelings of the Palestinian people must now be after a year of that kind of bombardment? I mean, it is beyond. So I understand why Michael can’t possibly imagine how these two people could live together, given what has happened now. And remember, every time the Israelis had a war with the Palestinians, they explained and justified the violence they used on the grounds that they had to do something that would prevent worse violence. Well, it didn’t work. We have that worse violence, much worse violence. And to say now it has to be done to prevent worse violence? You can’t do that anymore. You’ve run out of that one. That one’s dead. So you’ve got to come up with something else. The Israelis will have to face that one way or another.
And there are enormous divisions inside Israel. So it’s not as though there’s all unanimity about what they’re doing. It’s a very particular government. I understand the people have supported their government doing that, and there is no way around that. But there are also big splits and differences that also should be kept in mind in terms of what the future may bring.
But to go back to the way you opened today’s show, Nima, look at how many of the issues we’ve brought up, you, Michael, and me. And even if you don’t agree with all of them, of course not… but these are the issues that could have been, and should have been, raised as this country at this moment in its history chooses its leadership. What do you say about a country that can’t talk about, that we have one president who says I’ll end that war in a week? That’s not serious. That’s childish junk. What is that? That doesn’t solve anything. You’re not going to deal with, you know, even if you thought you could do it, the whole of European politics has been turned on its head by this war in Ukraine! The leadership, the center-right leadership of Europe, is committed to fighting in Ukraine. It will be looking totally ridiculous if Mr. Trump ends this war. And what’s going to happen then? The Left is already preparing to make this point in France, and they’re already the biggest party there. And, I’m talking, a Left that is old, well-organized, knows how to function, theoretically sophisticated, present throughout the society; and I could go on talking about the German, or the Italian, or even the British.
So you’re not in a position. You may think you are, “Mr. Trump-I’ll-end-the-war.” You can’t do that. It’s not available to you. The implications of this war will play themselves out. And you’ll be even less able than you might have been to shape it because you don’t even talk about it. You don’t even allow your society to engage in a discussion that might come up with some new ideas, that might come up with an idea, a plan for how to do it. We’re just three people. I really believe in democracy with a small d. I want more people involved in these conversations. And then we’ll get better answers, if we do that.
MICHAEL HUDSON: You’ve made a very funny comment, Richard. Suppose, indeed, that Donald Trump could make an agreement to say, well, the whole Ukraine war has been a mistake. Look, we’ve lost. Russia has absolutely wiped out most of the Ukrainians, not only population, but also society, and so let’s arrange some kind of peace. It was all a mistake.
Well, where does this leave Germany and the rest of Europe? This mistake for them is not reversible. A few weeks ago, Volkswagen said, we’re no longer really a viable company in the way that we’ve operated in the past. For the first time we’re going to cut back employment, we’re going to cut back sales. We’re not able to compete in electric cars with China, so unless we put huge tariffs on China, which will reverberate throughout the German economy, you know, we’re going under. The German industrialists, the small medium-sized firms, the “Mittelstand” German firms, they’re going out of business. And once the firm is out of business, it can’t be remade. If Volkswagen goes out of business, it can’t be remade. Putin has said that if any missile made by the German Rheinmetall firm ends up in Russia, Russia will not hesitate to bomb the Rheinmetall factory. So there are all of these.
America has created irreversibilities for Europe, while maintaining its own freedom of action. For instance, the grabbing of the Russian 300 billion foreign exchange, that was Europe grabbing it. Hardly any was in the United States, for the first time. Europe has cut its ties with all of these countries. We’ve talked about just America versus these countries, but Europe has been collateral damage in all of this. And I think you’re right. You’d think the hope would be the French Left, and Sarah Wagenknecht’s left-wing party that split off from Die Linke in Germany. But so far, it’s the nationalistic parties, not exactly the pro-Labor parties, that have been grabbing power in Europe. Any party that calls itself “socialist” is usually the far Right, whether it’s the British Labor Party, or Macron’s Party in France, or the other. So we’ve created a mess that looks almost inextricable.
How can you extricate yourself? I can’t figure out. And it is not foreseeable right now. It’s a quandary. A problem has a solution, but a quandary doesn’t have a solution. What is going to happen?
RICHARD WOLFF: I know we’re running out of time, but I would add that it isn’t surprising. I mean, since the Second World War, we’ve had this Cold War, or the legacy of the Cold War, that has systematically demonized the Left: The Communists are the great danger, the Socialists are fellow travelers of the Communists and therefore more or less equally dangerous, and on. So when the great consensus of the center Right – center Left begins to dissolve, when you don’t have yet another American election with a Democrat like George Bush and a Republican like Bill Clinton, but you have something odd, weird and different like Trump, it’s going to be from the right.
The people who are going to break this mold, this consensus that is now so stale, the people who have the idea, this is unbearable, are going to come from the right because that’s what we have, as a society, cultivated all this time. We expunged the Left, the Left were impossible. So the first breakthrough will be on the right. I think that’s not surprising. The Left will now have to understand that the time has come when you’re going to have to do on the left something like what the extreme Right has done on their side. And the middle, the middle, as the great British [Irish] Yeats said, doesn’t exist anymore. The middle is vanishing. The middle class we all know has been eviscerated. Now the middle perspective of politics is also on the way out. What you have is a vast mass, eighty or more percent of the people who feel cheated, who feel hurt. I could add to the story that Michael told about Volkswagen, the detail (which is no detail) that the largest union in Germany is striking Volkswagen. And that’s a bitter strike that’s going to (and I urge you to take a look at the Boeing workers who used to be very docile, who have been on strike and who have now rejected, by overwhelming majority, two of the contracts offered to them). Boeing is a member of that Military Industrial Complex big, big time. They can’t manage their problems.
By the way, the Chinese are producing lots of military aircraft. That too is going to become a serious problem for the United States. I think the Left, ironically, agreed to Kamala Harris. And here I’m talking about Bernie. They agreed because they saw what was happening on the right as a great threat. And they’re right, it is. But the answer to it should have been Bernie, not Kamala Harris. They should have understood that they need dramatic, powerful images of change. When Mr. Trump gets up and says to the suffering American working class, I’m going to protect you from the immigrants, and from the Chinese, that’s a ‘good,’ big image. In terms of economics, it’s silly. It’s a joke. It’s not serious. It’s fake. Well, who cares? What we need is Bernie to stand up and say, we don’t need billionaires. In ten minutes, we can pick 2,000 billionaires and announce to them there’s a wealth tax. Anyone over $10 billion, that’s it. You don’t have it anymore. It’s over. Comparable things like that would have given the people a chance to say, wait a minute. I am willing to desert the conventional parties. Like recent polls show, Americans are interested in third party, but Bernie would have then given them something on the left, comparable to “I’ll protect you from the immigrants:” I’ll protect you by taking the money from the billionaires, which they’re all jealous about anyway. I can do that and I can make a new deal. Here’s what it’ll look like. Everybody will have a job, as a right. That’s the drama that would have overwhelmed Mr. Trump.
Instead, she did the usual, left-of-center: I’ll do this. I’ll help working people there. Those are genuine, but they’re small, they’re old. They’re precisely the kinds of things that Democrats have always done, which is why they’ve never changed the basic trajectory of inequality in this society. But they didn’t understand it. They were hesitant. If Kamala Harris loses, it may be a very important time to make that point.
MICHAEL HUDSON: Well, this is the problem that I mentioned at the very beginning, when I said the Democratic Party’s role is to prevent the Left and to co-opt the Left. Two days ago, Bernie gave a whole attack on the American working class, an attack on the pacifists, saying you must support Kamala Harris. AOC, his popular follower, gave an attack on the working class, an attack on American Labor, an attack on the pacifists. You must support AOC. You must support the war in Ukraine. The function of the Democratic Party is quicksand that just absorbs these people, pretending to be weirdly alternative to the right wing. They will take the people who would like to be on the left like Bernie was when he joined the Trotskyists in 1962, and just sort of absorbed them and made a deal. They told Bernie, we will put you on some committees. You can do all the talking you want. You simply cannot act. We want you to talk. The more you talk, people will think that somehow the Democratic Party has a potential. By absorbing you, we were crushing the potential. People are now disgusted with you, Bernie. They’re disgusted with AOC. They’re disgusted with you supporting the war. They’re disgusted with you supporting Wall Street and supporting the Democratic Party through Harris and her right-wing, not center-left, party with a left-wing rhetoric, to prevent any Left from developing in the United States. So, in a way, the function of the Democratic Party is to sterilize the Left.
I think with the message that Jill Stein was given – she’s not only anti-war, she’s against the pretense that there is a two-party state, that there is an alternative, and that the Democratic Party is different from the Republicans in any way except for its trickster rhetoric.
NIMA ALKHORSHID: Just to share with you, here is an article in Gallup that shows 63% of Americans are in favor of a third party in the United States, and that shows everything. But it’s not there, for the time being. Thank you so much, Richard and Michael, for being with us today. Great pleasure as always.
RICHARD WOLFF: Thank you very much, and I’m very glad to be part of this. I learn, and I appreciate it very much.
MICHAEL HUDSON: I think we’re redefining the quandary in a way that nobody else is really talking about.
RICHARD WOLFF: That’s our job.
NIMA ALKHORSHID: Thank you so much. Bye bye.
Image by GreenCardShow from Pixabay
NIMA ALKHORSHID: Today is October 9th and we’re having Michael Hudson and Richard Wolff talk about what’s going on in the Middle East. Richard and Michael, let me show you an article that shows the spending of the United States on the conflict in the Middle East helping Israel. It’s almost $22.76 billion. And in this graph, you’re witnessing that in 2024, if you look at this graph, it’s $17.9 billion. And directly to Israel and the rest would be the conflicts that the United States went to the Red Sea to help Israel and other operations in that region. And here is what Matt Miller said to the press when he was asked about this helping, this aid that goes to Israel.
SAID ARIKAT: Taxpayers paid for almost $23 billion in the last year alone – that’s almost $3000 for each and every Israeli. So we have absolutely no leverage, no pressure – you cannot tell them do this or not do this?
MATT MILLER: So, we made very clear to the government of Israel what we believe are the best outcomes along a number of different vectors in the region. But as you’ve heard me say before, they are ultimately a sovereign country and have to make their own decisions.
SAID ARIKAT: Yes, but I understand a sovereign country that received from American taxpayers $22 billion dollars.
MATT MILLER: Well first of all, that number is not correct, it conflates a number of different things. It’s not correct. I don’t have the exact number, but I know the number you are referring to.
MATT LEE: So what does the U.S. government think that it has given Israel since October 7th?
MATT MILLER: So we give them $3.3 billion a year and there was additional money that was appropriated in the supplemental. The reason it’s hard to answer that question definitively is…
MATT LEE: Like you don’t want to. That’s why it’s hard to answer.
MATT MILLER: No, there are different ways of looking at it.
MATT LEE: I know there are. I’ve been through all of this.
MATT MILLER: There’s money that is appropriated, there is money that is allocated and then not actually delivered for years to come.
MATT LEE: Look, there are private educational organizations that have come up with estimates. This building, at least, which is in charge of arms transfers – at least, many of them – hasn’t seen fit to come up with an update since July of last year.
MATT MILLER: Yeah, I just don’t have the update, I’m just telling you that number, you can look at that number and see how it conflates a number of things, including direct U.S. military spending to combat the Houthis attacking international shipping, which is included in that number, which is obviously not either.
MATT LEE: It can’t be that difficult to separate what has been given to them post- October 7th in terms of things that were not approved before then under the MOU. Stuff that went to them specifically for the Gaza operation, and now Lebanon.
MATT MILLER: So it depends how you look at it – is it the amount that’s been allocated to them, is it the amount that’s been delivered to them, is it the amount that is gonna be delivered …
MATT LEE: I’ll take any of them now.
MATT MILLER: No, but that’s the point is when you ask the question it’s a difficult one – I don’t have the numbers here at my fingertips, obviously. I’m just pointing out that the number that Said referred to …
MATT LEE: Someone’s got to have the number some place?
SAID ARIKAT: The numbers were Brown University’s numbers, not mine. But, you know, it doesn’t matter what the actual figure is, we give them a lot of money, we give them a great deal of leverage, you know, we give them obviously a great deal of political coverage in the U.N. and many other places and so on. And to suggest that this huge and lengthy partnership really does not exact any kind of leverage with the Israelis – don’t you question that?
MATT MILLER: That’s not what I said. The thing that I said is that we’re a sovereign country with our interests, they’re a sovereign country with their interests.
NIMA ALKHORSHID: Yeah. Richard, he’s saying that he doesn’t answer the question. He says that Israel is a sovereign country. What’s your answer to that question?
RICHARD WOLFF: Iraq was a sovereign country when the United States invaded it. Afghanistan was a sovereign country when the United States invaded it. Vietnam was a sovereign country when the United States invaded it. It didn’t give a damn whether that was a sovereign country or not. It didn’t respect its sovereignty for one second.
It just – as part of the war in Ukraine – seized $300 billion worth of Russian gold. Its sovereignty meant absolutely nothing. Come on. The answer to talk about sovereignty is a transparent fakery, as is all the mumbo jumbo about how to estimate the numbers. The question was about leverage, if you provide a lot of money.
The question was clear and it had nothing to do with quarrels about estimating the amount of money. This is a government that wants the freedom to do in the Middle East what it has always done, namely operate a colonial regime without telling the people of the United States anything other than fairy tales about respect for different religions, and the importance of Jerusalem, and other nonsense that future spokespersons at the State Department will no doubt repeat in the same mumbo jumbo style of Mr. Miller that we just saw.
NIMA ALKHORSHID: Michael?
MICHAEL HUDSON: Well, if Israel were a sovereign country, it would no longer be an American ally because the whole war that the United States is fighting, not only in the Near East, but also in Ukraine, is a war against sovereignty. That’s what this whole world war between the U.S. and NATO countries against the global majority – China, Russia and other BRICS countries – it’s a war to make a unipolar U.S. control to prevent the whole rest of the world being sovereign.
So the whole issue of sovereignty is silly – and obviously if you look at where the armaments of Israel are coming from – quite apart from money. These are American bombs being dropped on Gaza and on Lebanon. These are American ships that are supporting it. It is American money that’s also supporting it. And that doesn’t even account for the Israel bonds by non-governmental authorities. So the whole idea of sovereignty is irrelevant. You can look at this war against sovereignty, and especially against sovereignty – as Richard just mentioned – of Iraq and Libya, to use Israel as an American satellite to prevent the Near East from becoming sovereign, in control, not only of its own oil, but in control of the export money that it makes from this oil.
RICHARD WOLFF: Also, just an additional word. The United Nations allows Palestine to have a seat – I don’t remember exactly what the status is – but they have a seat to participate in at least some degree, and at least a large part of the world would assign “sovereignty” to the Palestinians based on all of the historic notions of what sovereignty entails. Clearly the United States does not respect the sovereignty of the Palestinians. So, once again, this use of the notion of sovereignty is extraordinarily selective. My goodness!
I mean, for me, the most impressive thing about the little clip you showed us was the fact that we live in a society where a collection of, what I assume to be, perfectly reasonable intelligent journalists sit there and ask such questions and don’t quarrel about the absurd refusal to answer. And they don’t quarrel about the absurd invocation of sovereignty. But they allow the conversation to absorb many minutes of quarreling about the details of the statistics.
Both Michael and I are economists. We work with statistics all the time. If you do, you know that they are loosely constructed numbers that have a million qualifications about them. And that if you don’t know the details of how they are gathered and how they are assembled and how they are edited, you really can do virtually anything with them.
You know, there’s an old statement among statisticians: “The statistics don’t lie, but the statisticians surely do.” Because they pick and choose which ones to gather, which ones to assimilate, which ones to edit.
This is childish manipulation, and the thing that most impresses me is that the journalists, they are complicit with this mumbo jumbo theatric. And they oughtn’t to be. They ought to have a bit more of a spine, a bit more of that part of the journalistic tradition which says, “ask the hard questions that these politicians are trained to evade and avoid.”
MICHAEL HUDSON: Well, Richard’s talking about the sovereignty of journalism. And I think we talked before about what John Kerry said at the World Economic Forum. He said, “Our first amendment stands as a major block to our ability to be able to hammer disinformation out of existence.”
Sovereignty for journalism is what WikiLeaks did, which is why its leader was imprisoned for so many years. We don’t have sovereignty of the Press anymore than nations have sovereignty, and you could look at the whole part of the American Cold War attempt to prevent other nations from having political sovereignty as the attempt to make sure that the U.S. has unique unipolar sole sovereignty over the narrative. Is the Middle East War, the Israeli War, all about the captives that were made October 7th, a year ago? I think there are now a few dozen. Or is it about the tens of thousands and hundreds of thousands of Palestinians? Not a word about the Palestinians captive in Israeli jails.
Again, the narrative is all from a very strange perspective. It’s like the famous Hiroshige painting, a big tree in the foreground and the city far away in the background, the little tree in the foreground has priority over everything else. That’s the news that we get from the Near East, Ukraine and the rest of the world. Not sovereignty.
NIMA ALKHORSHID: Richard, can I ask a question? The main question right now in terms of what’s going on in the Middle East is the way that Netanyahu is behaving right now. And when you look at his behavior, what is Israel’s endgame under Netanyahu? How can we define that?
RICHARD WOLFF: Well, I must say with all regret and sadness, I will tell you what I have concluded watching all of this over the last, particularly this last, year. And I conclude by referring to a saying that has been raised by Israeli leaders, at least as far back as David Ben-Gurion.
And that is to say that the whole story can be summed up by saying that “the Jewish people, a people without land, were finally given a land without people.”
That’s a quote, I didn’t make that up. That’s a quotation repeated many times: From the Jordan to the Mediterranean, from the river to the sea, a people without land – i.e. Jewish people – were given a land without people. Notice the little move there, the move at the end to suggest that people were given something that no other people already had, even though everybody who’s taken five minutes to look at the history of that part of the world knows that it has been densely populated for thousands of years by a whole host of people.
So the reality was, it wasn’t empty. It’s a little bit like what I discovered when I was just beginning as a college teacher and I had occasion to talk about the early period of the American economy, when we were still a colony.
And I discovered that a significant percentage of my students understood the Europeans who came here to have discovered a land without people, which they then proceeded to inhabit, moving from the East Coast across, until they finally reached the Pacific Ocean in the West.
When I reminded them, well, it wasn’t empty, then yes, they remembered from their western movies that there were these “savages” who were around somewhere, but who became quickly disposed of.
Well, if you know the history, it took centuries before you could herd those native people that you didn’t kill into the reservations they still occupy in significant numbers across the United States. Okay, the Israeli story seems to me to be summarized and carried forward by Mr. Netanyahu as exactly what I said. They want to establish that the area we now call Israel, Gaza, and the West Bank are a land that had no people and is therefore now to be settled by a growing Jewish population. And the job of the Palestinians is to choose one of the following three options: leave or die.
Those are the options, and the Israelis become the agents of leaving or dying, and they’re trying both. And they’ll rely on either one of them to solve the problem, to fulfill the idea that it is a land without people that can now be settled by the people who don’t have enough land.
By the way, this notion of “land hunger” is a replication of what the Nazis called Lebensraum: room to live. The Nazis moved east in Europe to get it; the Israelis move west to get it. But that’s what this has become, and it will take a radical change of the mentality of the Israelis to change it.
Last point: when you’re an aggressor, and you’re also a settler-colonialism, which is what this is, nothing is more common than justify what you are doing on the grounds that you must do it, because the savages – that’s the people that are already there – are intent on doing that to you. And it doesn’t matter whether they are or not, you must tell that story because it justifies what you are doing. And I’ll illustrate it with a story, and excuse me if I told you this story before, but near where the University of Massachusetts is located is a town called Deerfield, Massachusetts. And it has an old part, which is the colonial houses that were built there back in the 17th and 18th century. And they have redone these houses to look in the way that they did in Colonial America. So it’s become a tourist attraction. It’s known as “Old Deerfield.”
And if you go there, as I have done, and you walk through the old village, and you look at the reconstructed housing, you will notice in front of each of them a plaque. And if you read the plaque, which tourists do, it says things like, here was the Jones family or the Smith family, and they came in 1702 and blah, blah, blah, and then on the night of the 14th of April, the savages attacked them. And I remember the first time I saw this. I said to myself, without thinking much, “what a remarkable thing – the Europeans come from thousands of miles away, they take the land, they take the coast, they fish the water, they attack the local people, they push them off the land. And they refer to them as the savages. What an amazing move! It’s the Europeans who were savage, who had the guns to be savage with. But you need to call them savages because what you are doing is so savage, it has to be justified as self-defense against savages. And so you call the other what you are. In psychology, this is so common, it’s called projection. And every psychological practitioner knows about it and tries to treat it.
But in our political discussion of Israel and the Palestinians, we all pretend we know nothing about any of that.
MICHAEL HUDSON: What Richard has just explained is what really was meant by a land without a people. What are people? They are humans. And the Israeli leadership, again and again, has said that the Palestinians are not human: they are sub-humans.That is exactly what the Ukrainians are saying about the Slavic people. The Slavic people are not humans; the Islamic populations are not human. In both cases, they are called sub-human and a different species. And this kind of thinking goes way back to the United States at the late 19th century. The U.S. leaders thought of America as creating a new civilization. And that new civilization, somehow in the 1930s they began to absorb Nazism. And it was as if the new countries with their ethnicity were evolutionary, biological, new species. And the Americans were a new species.
The Israelis are claiming to be a new species, exterminating the sub-humans, so that there won’t be inter-marriage, like there was between the Cro-Magnons and the Neanderthals 40,000 years ago. That treatment is exactly what was the feeling in the United States that I experienced in the 1960s. The Catholic Church sent me to New Mexico to discuss how to raise up the Indian tribes. There was an official from the Bureau of Indian Affairs who began talking about the “Indian problem.” And I jumped up and said to the Bureau of Indian Affairs, “the Indian problem is the problem that they are Indians.” And that’s how the Israelis and the Ukrainians think about everybody who’s not them. When we’re talking about a political group of settlers – or in America, of Empire builders – claiming to be a new species, cleaning out the biology of these inferior races. This is Nazism. And that’s really what the fight is all about.
That’s why we’re now in a civilizational fight between the NATO-U.S.-West and its allies of like-thinking people who treat their adversaries as sub-humans. Or, as Biden says, it’s Democracy against Autocracy. The Autocracy are considered to be sub-humans, a different civilization, and all this somehow has genetically become a new species. And what the rest of civilization – the global majority – is trying to say, is “No, we’re all humans.” Americans have said, like I said, “No, you’re not humans.” That’s basically the position in this Cold War II.
RICHARD WOLFF: You see it also in this very sad tendency: I cringe when I watch a video clip of the President of the United States, in this case, Mr. Biden, referring to the leader of the People’s Republic of China as a thug. What are you doing? What kind of childish behavior is this? Mr. Putin doesn’t refer to Mr. Biden as a thug. He doesn’t do that. One doesn’t do. You don’t see too many leaders, even in private – let alone in a public interview – doing such things. What is this demonization of the – here we go – it’s “they’re all savages?”
So if you disagree with the United States, if your idea of a European security architecture, which is what they’re actually trying to figure out, how are we going to be secure each in our national boundary without threatening one another? That’s what they mean by a “security architecture.”
How are we going to work that out? Russia has to feel secure. Ukraine has to feel secure. They have to be able to function. Okay, that’s a problem. We will have disagreements. We won’t see it the same way. We’ll have to make some compromise. But, suddenly: ‘No, no, no, no, no, no, no, no, no. We are the good and the noble and the vanilla, and they are the terrible evil empire.’ What is this? This is not just a quibble about words. Behind these words lies what Michael was just talking about. This notion that, really, this is a war of good against evil and in the name of the good, you can do what?
Palestinians who know something about the Christian Bible like to remind us about all the times in the Old Testament especially, when there are all these discussions about God telling people to slay this group and kill all of them and murder the children and … whoa. There you have already the beginnings of a justification.
Yes, yes, I know the Bible is full of other contradictory sentiments about loving your neighbor and turning the other cheek and all the rest of it. But if you cherry pick, you can become the exponent of “I’m good, they’re evil, I am called to get rid of them” – literally. There’s a quote from an Israeli defense force person in the press recently explaining to a reporter how good he feels when he’s asked about bombing mosques and hospitals. He looks at the guy and he says, “But we’re winning, we’re winning.” Wow. He’s winning. He’s not asking what he’s winning – he’s just winning.
And that’s the struggle of good and evil when you think like that. In the name of that stuff, we have 5,000 years of slaughter and we’ll have more if we don’t outgrow it.
NIMA ALKHORSHID: Michael, here comes the question that how we can -with the situation that you’re having in Ukraine together with what’s going on right now in the Middle East and in my opinion, if Donald Trump wins, we’re going to have a big fight between the United States and China.
How can we make peace affordable for each and every player in this political arena or national political arena? Michael.
MICHAEL HUDSON: The only way to solve the problem in Ukraine is by war. You can’t have peace without war.
Some people say that war doesn’t settle problems, but sometimes the only way of settling a problem such as the U.S. and NATO and Ukraine trying to attack Russia is by war. And that’s why you mentioned the costs of this war before, at the beginning.
I think that the whole idea of what’s happening in the Ukraine is the American planners said, “Look at what really broke the Soviet Union’s power – it was the war in Afghanistan. It drained Russia. They had to spend all of their economic surplus on the military and send their population to fight in Afghanistan. Finally, this created such austerity and poverty and impoverishment that the leaders of the Soviet Union themselves decided it didn’t work.” They somehow expect that if the war in Ukraine is supposed to go on as long as it can, not to be settled, but just to continue to drain Russia until its economic surplus is spent on fighting the war and the population says, I guess, what the Russians were saying in the 1980s: “We want to have blue jeans like the Americans have. We want a consumer society and we can’t because it’s a military society.”
So the American idea in Ukraine is to spend as much as it takes from our side to keep the war going as long as possible and outspend Russia until the discontent in Russia reaches a degree where you can bring in a new Russian Yeltsin [unclear]. Well, Putin is also strategizing and said, well, he is not in any hurry to just march in and end the war quickly in Ukraine by marching to the deeper and beyond. He’s willing to go slow because there’s something that he says that is beyond the short-term cost of the military budget.
And that is the longer the war in Ukraine takes, the more it’s breaking up Europe. You’ve seen the last three German elections where the anti-war parties beat the Christian Democrats and the social Democrats. You’ve seen last week’s election in Austria. Again, the anti-war party won and as we noted before, the anti-war parties today are on the right, not the left. But we’re seeing the idea of the real costs both from the American vantage point and the global majority’s (the BRICS) vantage point- the cost is going to be how is all of this going to end up? What is the structure of the world economy to be? And the fight in Israel and Ukraine is just a sideline, a particular chapter, venue, in this much broader war. And the real way of looking at the cost is, “Who is going to support what countries?” Will the cost of the Ukraine war essentially, as Putin believes, end up dividing Europe, breaking up the European Union and paving the way for – in 30 years, I think Putin said – for there to finally be a restoration of the German and the European linkage with Russia and the global majority by which time in his hope, the whole world will be under a unipolar rule of law. That’s how to think of the costs that we’re undertaking now and what the war is all about.
RICHARD WOLFF: Yeah, let me come at this from a slightly different perspective that might be of interest to folks. Capitalism as a system has built into its structure an imperative to grow. Every capitalist understands that unless they can expand their business and thereby get their hands on bigger profits, they run the risk of being competed out of existence by somebody who can and will do that. And so they all have to grow. And we know that this has become internalized by the political leaders of all capitalist countries.
I’ll use the example that they teach in elementary school: If an economy is like a pie, and different people and different groups have different pieces, if you grow the pie, everybody’s piece can get bigger and we will all be happy.
If you don’t grow the pie, then a growth in some requires a diminution in the others and then we will be at each other’s throats. Very old idea, been around for centuries.
And in capitalism, that idea, together with the way capitalism works, means that countries with employers and employees and enterprises that produce and compete in markets have a drive to grow. That’s why it’s a national emergency if the statistics show the GDP isn’t growing fast enough. Oh my god, alarm, alarm.
Okay, now let’s stop and take a step back. For ecological reasons and climate change reasons, we now know we’ve got to stop growing – it’s threatening our survival. The people of the world have already figured it out because the birth rate of our planet is now zero. We’re not growing anymore. The United States, Asia. Only in Africa is there a net positive birth rate, and it’s shrinking there too. Okay, now we have a problem that a long-repressed part of the world, the global south, wants to have its standard of living be where it should have been two centuries ago. They’re not waiting anymore. So they are demanding a bigger piece of the pie. This, of course, threatens the United States because it can’t grow the way it wants to because it now has a serious competitor. China and the BRICS is already a richer entity than the United States and the G7. Okay, here’s then a solution. We question – don’t everybody yell – we question capitalism. Why don’t we change to a system that doesn’t have a built-in imperative to grow, because it’s killing us? It’s killing us ecologically, but it’s also killing us because the genuine and deserved demand of the global south for a place in the sun to raise their families, have an education, be decently cared for, medically and so on, is not going to be stopped – with or without a world war. All right, so let’s accommodate: Give them a bigger piece and rearrange – in the way that socialists have always advocated – to a much less unequal distribution of the resources of the world. That way we can stop growing, thereby meet our ecological danger and do away with the competition that threatens a war between a rising standard of living in the global south and a resharing that the rest of us here in the global north will have to undergo. But we do so because it saves our planet, and it saves us from war, and that’s worth it.
That’s a plan, but it requires the taboo be broken. Employer-employee is not the only way to organize the production and distribution of goods and services. It’s the capitalist way. It was what we got when we got rid of the lords and serfs, and masters and slaves – we replaced it with employers and employees. But we can do better than that and we are at a point where we have to. And so the issue of a socialism beyond capitalism comes right back on the agenda. It never really left, it just needs a little goosing from those of us who see it to make it become, again, what we’re all talking about and struggling to figure out how to achieve.
MICHAEL HUDSON: What Richard described is occurring on a number of planes. He talks about the drive of capitalism is to grow. Well, that’s certainly the dynamic of industrial capitalism, but somehow that hasn’t been the drive of the United States recently. Richard, how do you grow by out competing your rivals? You cut costs, you make things cheaper, or less expensively, and better. But the United States has been losing its race. It’s true. Last month the US GDP is going to grow and next month it’s going to really grow because the hurricanes hit South Carolina and now they’re going to hit Florida. That’s going to be a big jump in GDP. It’s not going to increase America’s dominance or competitiveness.
The American idea of growing today – I think certainly the neo-con idea, the Democratic and Republican idea – isn’t the kind of growth Richard is talking about capitalism. It’s a purely exploitative growth: America can only grow by arranging the international economic order in a way that siphons off the real growth in other countries – China, Russia, the global south – and taking their economic surplus and transferring it to itself.
This is not a growth of part of the production sector of the economy. It’s a growth of the circulation sector of the economy. Marx drew those two distinctions – production, circulation, which is part of the distribution. The American growth has been parasitic. The NATO-U.S. unity is like a parasite on the body of the global majority and they call that growth for the United States in Europe, but it’s parasitism. All of that, as Richard just said, we’re facing the overhead of global warming. How do you prevent it? Well, China has taken the lead according to yesterday’s Wall Street Journal in cutting way back carbon emissions, way back coal, and by taking the lead and creating solar power and atomic power. The U.S. position is to oppose the importation of Chinese solar panels because that’s not their philosophy. The oil lobbyists are now backing both political parties in the United States to make sure that any agreements – like the Paris Agreement that America signed – will not be followed in practice.
You have the United States and Europe pushing the growth and pollution. You have the green party in Germany saying that coal is the fuel of the future. It’s coal and cutting down the forests. It’s not oil, it’s not gas, it’s not power. It’s simply that. And you achieve this global fix-up by war.
Somehow the anti-war party is supposed to be a key precondition catalyst for all of this environmental change. You’re having this bizarre conflation of ideas in the U.S.- NATO, as opposed to the rest of the world, just as Richard has pointed out.
NIMA ALKHORSHID: Richard, do you want to add something?
RICHARD WOLFF: No, no.
NIMA ALKHORSHID: Right now, Michael, in your opinion, when it comes to the Biden administration, it seems that they’re trying to put some sort of pressure on Netanyahu. But in your opinion, why are they not successful? Why are they not successful in their attempts to put pressure on Netanyahu?
Last time we talked here, you said that the United States is running the show. Richard, I want you to comment on this as well. I had some sort of division between the analysts like you and Richard and other analysts. Some of you are believing that the United States is running the show in the Middle East and the other ones are thinking that the Israeli lobby in the United States is running the show. Who’s running the show with these endless wars?
MICHAEL HUDSON: I think we talked last week about this very topic. Netanyahu is doing just what the United States wants. The dream of Netanyahu is the same dream of the US neo-cons: war with Iran. Because if you can conquer Iran, then you just close up everything between Israel and Iran. You take up Syria, Iraq; you move down into Kuwait and Saudi Arabia. You take over the whole Near East.
Obviously, Netanyahu is doing what the United States wants, because the United States is giving it the bombs every week to drop, giving it the money every month so that it can continue.
So what we’re seeing is a good cop-bad cop pretending. The United States doesn’t want to be blamed by the whole-world abhorrence for what is happening in Israel. So it pretends to say, “That’s not us; we want to be the good guys; we told him to be gentle when he dropped his bombs and not kill anybody.” But he’s killing people. And we keep giving him bombs and telling him to be gentle with it. Well, what can we do? We don’t have control – he’s a “sovereign country” as you played at the beginning. So all of this is just a charade.
RICHARD WOLFF: Yeah, I would argue very similarly. I don’t see this great struggle between the two as anything more than poorly staged theater that is not. Yeah, maybe for some people around the world, it’ll be convenient to believe that they can hold on. But I would look at it in a long-term strategic way, as follows: For many, many years now – for basically the post World War two period – this has worked very well, this alliance between the United States and Israel, for them. It has allowed Israel to go from a poor, largely agricultural backwater to an important modern economic power; to grow its population far beyond what it could have internally by itself. And it has allowed the United States to have – right in the middle of the Middle East – its own special agent dependent on it, loyal to it. I don’t want to go over all of the murky ways that Israel played strange intermediation roles when it came to the survival of apartheid in South Africa; when it came to the funding of the Iran Contras Central America. The hands of Israeli operatives are present in many of those – they were a loyal service. They operate a very good intelligence system in the Middle East, as the killings of Nasrallah and others have shown us. They’re probably better than what the United States could do, so that’s a service they can provide, that the United States either couldn’t or doesn’t want to be caught doing. So it’s all the Israelis who get the bad rep.
But here’s perhaps the most important: The Israeli economy is dead, it’s finished. It will take a long, long time to recover from what it is doing. An enormous portion of its adult manpower is busy in the military. They’re not working at their factories or their offices, or anywhere else.
Large numbers of people have left the country – that’s not reported on, but I know it to be the case – etc, etc. That Israel is going to be dependent on help from the United States economically, enormously, in the years ahead. So the United States has a proven, reliable agent who will need them in the future, and is therefore not in a position to deny the United States anything that it suggests it wants. I don’t see the United States having no leverage, as that journalist did.
The United States has plenty of leverage, and the reason it’s not using the leverage is there’s no reason to. Or let me put it differently: Where they’re using the leverage, we don’t know about it. Because they don’t want us to, and the Israelis dare not reveal the leverage if the Americans don’t want it, for all the reasons I’ve just given.
If there were no Israel, the United States would look for an alternative agent in the Middle East. And whoever you might imagine could play that role, they’ve decided that such an agent, if there is one, would be less reliable, less pliable, that you would operate less leverage than the one you have.
Does the AIPAC and the other domestic supporters of Israel inside the United States have influence? Sure they do. Professor Mearsheimer and his colleagues have demonstrated that for many years with countless studies. But I don’t think that would be enough, anywhere near enough, to explain what’s going on.
This is an alliance which has served the interests of those who run Israel and those who run the United States. And that’s why they preserve it. It’s not to have nothing to do with leverage. They have leverage. That’s why they preserve it. And the only thing holding back the Israelis, when they disagree with the United States, is the fact that they know that that leverage is there. They’re not going to take that chance. The biggest problem for the Israelis is the very large portion of Jews in the United States who do not support Netanyahu, who do not support the policies now.
And the way they handle that is to focus their foreign policy, not on the Jews in the United States, who are in the main, unreachable by that. But instead to go after the fundamentalist Christians, to build up the idea that Jesus is coming back, and that in order for him to come back, Jerusalem, the Holy Land, has to be in the hands of the Jews. The Bible says that somewhere. They fasten on that. And so that’s where the Israeli government has its film festivals and its exchanges and its tourism. I mean, that’s all dead. They’ve not earned any money on tourism for the last year, and none is likely to have happened. But those are Christians that are going over there hosted by the Jews in a very careful campaign, so that they get the support they need for Mr. Biden to do what he wants to do.
This is an agreed plan by both of them to maximize the freedom they have to do what they are doing. And the people who want to drive a wedge between the two of them, unless you have something very powerful, that’s not going to happen. There’s too much that pulls them together. You’re certainly not going to shame them by saying that “Mr. Biden doesn’t want you to invade…” and you invade it anyway. As Michael correctly says, this is a theater. This is a theater – that is how they manage the deal that they have.
It is like a good cop-bad cop deal, or any kind of deal where the two sides include in their deal the pretense they both contribute to, that that deal isn’t going on.
MICHAEL HUDSON: I agree with what Richard said.
NIMA ALKHORSHID: Yeah, recently we had finally – just to finalize this session – recently we had Emmanuel Macron finally saying something against war. And he said that we have to control the arms and aid going to Israel in order to put some sort of pressure on Netanyahu. And after that Netanyahu responded to him, “Shame on you” and “How you can say that,” and all of that.
How do you see the situation in the European Union changing toward Israel, or we are still having the same old policy toward Israel and its attitude?
RICHARD WOLFF: Well, let me speak a little bit to Emmanuel Macron and I’ll quote the American filmmaker Michael Moore who last night when asked about the election made the following sentence: “Donald Trump is toast.” That was Michael Moore’s statement. He did correctly predict that Trump would win in 2016, so people should be careful before they dismiss what Michael Moore has to say. I make no prediction so I’m not doing that. Mr. Macaroon, as my French family refers to him, as President Macaroon. He is, in other words, a cookie.
He is toast – there is no question – he is political toast. He was never a serious politician. He proved that before he became president and just in case anyone missed it, he proved it again while he was president. He had the distinction of being a sitting president when earlier this year the national elections in France, divided among the three major parties, and his party – the party of the sitting president – came in third out of three. That’s his achievement. Goodbye, Mr. Macron. But he is desperate. Everything he does is guided by the last minute desperation of someone who has no base. He is hated by the old conservatives. He is hated by the socialist party of which he was once both a member and a minister. The man was minister of education, if I’m remembering correctly, in the last socialist government.
He’s hated by all of them because he is such a flip-flopper, finger-in-the-wind to see which way the politics wind is blowing. So now he has his last desperate effort. He’s going to appeal largely to the people on the political right – who are against Israel’s position for a whole host of reasons – and the people that are on the left – who are against Israel’s position for a whole host of different reasons – and try somehow to attract them. But they already hate him. They do not trust him. There is no reason. I would like to remind you that less than a year ago Mr. Macron was the leading European politician advocating for European troops to land in Ukraine and fight alongside the Ukrainians against the Russians, prompting Mr. Putin to make one of his statements, that “if other leaders in the West were thinking along these lines, he wanted to make it crystal clear that this would be an attack on Russia which Russia would respond to with any and all means at its disposal.” You’d have to be dead not to understand what he was saying. Now, this man wants to stop killing people in the Middle East. It’s not serious, and to the chagrin, not just of Mr. Macron, but of all French people, no one is taking him seriously.
And in that he was helped, because Mr. Netanyahu not only chastised him for saying these things, but went on to say – and I didn’t make this up, I’m virtually quoting Mr. Netanyahu – that “on the side of Israel is civilization, and on the other side is barbarism.” Well that’s our conversation a few minutes ago. There we have it again: “Savages and the good people.” And Mr. Macron – in the mind of Mr. Netanyahu – just crossed over the bridge from the good guys to the bad guys, and next we’ll be hearing him referred to as “a thug.”
NIMA ALKHORSHID: Michael.
MICHAEL HUDSON: What can I add to that? Richard’s described the situation perfectly. All I can do is paraphrase and that’s not much of a discussion.
NIMA ALKHORSHID: Thank you so much for being with us today, both of you, and hope we can keep these talks and great pleasure as always talking with both of you. See you soon. Thank you.
RICHARD WOLFF: Thank you. Same here.
NIMA ALKHORSHID: Bye bye.
Image by hosny salah from Pixabay
Youtube - How the U.S. Took Over the World: The End of International Law
NIMA ALKHORSHID: Today is Thursday, October 17th, and we’re having Richard Wolff and Michael Hudson with us to talk about U.S. foreign policy. And the title of this video today, Richard and Michael, is over the world, the end of international law. We know whenever they’re talking about the foreign policy of the United States, they’re talking about the rules-based international order. And Michael, let’s start with you. Why have they decided to put an end to international law?
MICHAEL HUDSON: Well, you’re right. That the build-up of this whole U.S.-sponsored aggression from Ukraine to Israel has caused a breakdown of international law. And just as important, what does international law mean when there’s no means of enforcement if there’s laws against genocide, laws against ongoing attacks on civilians? What can anyone do about it? There seems to be a global war, and all of the tactics now are different from all the wars that we’ve seen before, and we’ll get into that.
The basic political issues today in this new Cold War, very much like Europe’s Thirty Years’ War (from 1618 to 1648). That Thirty Years’ War ended with the Peace of Westphalia, and that led to the creation of international law that has ruled the world all the way from 1648 until the creation of the United Nations. Until just a few years ago, when the United States replaced it and said, ‘We are no longer following international law. We are following our own law. We call it the rules-based order, and it’s our rules, and our rules of order are the reverse of everything that international law has said before.’
It’s a radical change, and hardly anybody’s talked about this, because what do you do about the fact that you have the United States, Ukraine, Israel, NATO, all of a sudden reversing the principles that were considered to be the very basis of civilization for almost four centuries now? It’s very radical.
The United States has a unipolar drive for control over countries. The whole basis of international law after the Thirty Years’ War was to prevent future wars by saying no country can interfere with the political affairs of other countries. Every country has its own autonomy, and that’s what, essentially, the war was fought over. The Catholic countries were attacking the Protestant countries, and it was the largest and most devastating war that Europe had until World War I. But at the end they got together, and at the Peace of Westphalia they said, ‘How do we prevent this from happening again?
We’re going to recognize all nations are sovereign, and no country, as I said, permitted to interfere with other countries to bring about regime change.’ There was to be religious and political freedom, and the world was to be multipolar. They didn’t use that word, but that meant there wouldn’t be any single group dominating them, and they were referring specifically to the Catholic Church and the Habsburg monarchy. The Hapsburgs controlled Spain, that had all of the silver coming in from the New World, and was the big military power – as was France – and they were allied against Germany, Sweden, and the northern European Protestant countries.
A multipolar world was the whole basis of international law, and that was supposed to be the basis of the United Nations. And violation of these principles was viewed as if it was an attack on civilization itself. Emmanuel Kant and other German philosophers wrote about how this was finally a universal law, and you needed this universal law of individual freedom for persons, but also for nations.
Well, all this is now being rejected by the United States and its allies, and the proxy state of Israel in the Near East. The world is being separated into blocks between the East and West. In the conflict today, really, is whether the [?] nations, the BRICS – Russia, China, Iran, and the allies that they’ve been putting together – are going to be able to design their own destiny, or whether they’re going to have to be subject to whatever the United States does.
And you’ve seen in the last few days in Ukraine, the non-president Zelensky has just said, ‘We’re going to raise the money to buy arms and to bribe all of our officials to be loyal by selling off Ukraine’s titanium mines, to sell off the natural resources. So even if Russia takes over, the international law that America supports is going to say, wait a minute, we’ve already privatized all these resources.
Yes, you can take them over, Russia, but you won’t have any control over the land, or your ability to tax them, because we’ve privatized it all.’ That’s the kind of transformation of the way the world has organized that nobody could have expected before. So there’s a kind of ideological inquisition that’s taking place throughout the world by the United States that rejects the most basic principles of national sovereignty.
And what’s so remarkable in this is we’re seeing an economically shrinking and deindustrializing – the United States and Europe – trying to prevent the global majority from aiming at its own economic and political independence. The rest of the world has 85% of the world’s population, and it’s trying to recover from over a century of colonialism, and the financial neo-colonialism that the United States put in place after 1945.
The U.S.-centered rules of international trade and investment that sort of forced other countries to supply raw materials instead of industrializing and feeding their own population and their own economies and raising their own living standards. So you have this U.S.-NATO “Golden Billion” waging this new Cold War against most of the Western world, without an army, really, to enforce it.
Its policy makers have followed an entirely different track than was done before. They deem other countries and adversaries to be a different civilization altogether. And I’ll get to that shortly. It’s trying to dominate the world, but it no longer has the military dominance that it had in 1945. It’s lost its former ability to dominate the world monetary system, and by economic means. Its aim of retaining its former unipolar policy has been replaced by a whole different strategy, by escalating it all. We’re dealing with the end of civilization, and the end of civilization is supposed to be the United States taking control of the whole world, by imposing a neo-liberal privatization ethic, Thatcherizing and Reaganizing the whole world.
RICHARD WOLFF: Let me come at it. I appreciate very much Michael’s historical framework. I think it’s very helpful to keep that in mind. It avoids all kinds of mistakes. Let me add some comments to the story he’s told. In my view, what is going on is a desperate effort of a declining situation – a declining regime, if you like, a declining historical phase, that doesn’t want to give up, which I understand. They don’t usually go quietly, these empires, when they go down. I think the theory that you’re breaking all the customary rules that were in place – either explicitly or implicitly – for several centuries, is the right way to look at this. It’ll help us understand things that we might not see connected, but that are.
Number one, a level of horror in Gaza. I want to be clear. What was denied by people who could not face what was done to Jews in Europe in the Holocaust. We have the phenomena of people who have to deny it. That’s a way of recognizing how horrible that thing was that you can’t stand it. So you literally erase it.
It’s not the appropriate response – one should recognize it – but it helps you underscore just how horrible it was that people have to do that. It underscores in Gaza that the Israelis don’t want you to call this a genocide because if you do, then the victims of one Holocaust are busily perpetrating another one. This is horrible.
And you can’t have the United States quite deal with it, for a number of reasons. Number one, because Israel is the same settler colonialism that the United States is. We are a country of Europeans who come over to the Western hemisphere and ethnically cleanse the indigenous population out of existence, with the exception of the horrible condition the few remaining ones live out in the so-called reservations scattered across the United States, making their living from gambling, casinos, and so on. It’s this remarkable obliteration.
The United States, Canada, Australia, New Zealand, South Africa: These are horrible examples of settler colonialism, but they were accomplished at a time when that was historically possible. Israel has the unfortunate historical fact that it isn’t possible anymore and trying to do it now is self-destructive – although it might take them a while.
But let me show you some other ways to connect. The international rules were that countries could keep their reserves, the backing for their currency in foreign banks. Russia kept a good part of its dollar and gold holdings in foreign banks. Those were seized early on in this war. That’s a violation.
To this day, there are legal ramifications percolating in Europe, even in England, questioning. For example, they couldn’t, they decided, because they’re torn too, about obliterating existing law. So they didn’t take that money. They froze it, which is already not legal. But when it came to giving the money to Ukraine, they have decided just to give the interest earned by those stolen funds. This is a playing-with-giving-up the rule, the idea, of the sacrosanct private property of Russia. And then you take the interest from it. That’s stealing too. These are lawyerly games. What’s important here is, as Michael says, leaving it.
Then there’s the war in Ukraine itself. Okay. Ukraine says it needs to have security. Russia says it needs to have security. Ukraine is behaving badly towards its Russian minorities. The Russians want to protect their minority. Okay. This has to be worked out. This is not the first time you’ve had this kind of a conflict. There’s nothing unique about that conflict.
You know, there were Germans living in the Sudetenland in Czechoslovakia. There were other examples. This could have been worked out as those others were, but it wasn’t. And that’s what’s interesting. The decision was made not to. Now, yes, it’s the United States flexing its muscle. But I see it a little bit less grandiosely, as – Michael put it – reshaping the world. It is that, but it comes out of a defensive posture. It comes out of desperation. It comes out of, ‘We are losing in the world and we will not tolerate losing again. You will not stop us from doing what we want to do in Ukraine. You will not stop us from having Israel as our secure outpost. You cannot attack it. We don’t care what your issue is. You are Palestinians, you were there, that’s not interesting for us.
For us, we need a reliable agent in the Middle East. Israel has been that, and we will protect it. And we have now controlled Ukraine. We rearranged their politics a few years earlier to make that the case. It’s ours. It’s part of our expansion of NATO.’ And the horror is that the Russians should resist. The Russians should say – and this has nothing to do with whether the Russians are right or wrong in any of this – ‘This is an empire,’ say, in the words of Lyndon Johnson, “So far and no further” (in good Texas English). So, I see the taking of the reserves from Russia, I see the misunderstanding of what’s going on, in terms of Russia’s allies, the power that the BRICS have. Forget, yes, that it takes time to replace the dollar.
The BRICS have made some moves in that direction, but they still have a long way to go. No question. No question. But the reality is the BRICS have made real moves. And one of the most important was supporting Russia against the United States and Europe in the Ukraine. That’s the reality. It’s not about right or wrong or anything else. This is about how you try to handle and understand what’s going on.
The United States is desperate. And, by the way, I want people to see it internally. If it were just external I wouldn’t be saying these things. But it’s internal too. The reason we have a character like Trump in a position to be president, there it is. That’s a symptom. People are so angry with what is happening to their lives here that they want something different and they don’t care who he has abused, or what he has said, or how many times he’s gone bankrupt. These are details.
He says he’s going to change everything and go back to when it was better. That is understood by people whose reality has decreased. When production leaves the United States, as it has. Manufacturing, in huge portion, has left the United States and moved overseas. It took the best jobs, it took the strongest unions, and decimated them by moving. UAW is a shadow of what it once was.
The same is true of the steelworkers, and all the rest of them. That’s a reality. That means jobs are not what they once were. That means the standard of living isn’t what it was, and the security of your job isn’t what it was. And what was done by the relocation of jobs to profit from overseas expansion will now be continued with another technological wave. This time not the computers and robots. This time artificial intelligence, which will be used for profit-making purposes at the expense of the quality and the quantity of jobs. People are correct. The empire that concentrated production and income growth here, is now not here anymore. It left. And the people understand that they are left behind. There is no mystery.
My last point. The media have been obsessing for several years now, with the Democrats, over the problem: The economy is doing well: Why do the mass of people answer every public poll with the statement, the economy is a disaster? The economy is a disaster. I’m in a disaster.
This is not because they are stupid. It’s not because they aren’t educated. None of those things. It’s a different experience. People question me: The stock market is doing well? Well, 85 to 90 percent of stocks are owned by 10 percent of the people. They’re doing well. But the other 90 percent are spectators about a process of prosperity from which they are excluded, and they identify with the shrinking American empire abroad.
For them, they’re losing their status as an American worker and they’re losing their status as an American. In short, they’re losing and they don’t want to continue to lose. No one addresses any of that. The Republicans say, ‘Let’s go backward.’ Okay, that’s a fantasy. That’s not a very good long-term proposal. That won’t go very far. He lost a good bit of the benefit of that the first time when he didn’t do shit (if you pardon my Spanish) to take us back to anything. He’s not going to do it in the second term either.
What you have is a declining situation and the spectacle of a politics that doesn’t either understand, or have any handle whatsoever on any of it. So you’re watching a dysfunctional system run by a dysfunctional government. I want to remind everyone of, what a great tactician once said are, the preconditions for revolution. They are two. Number one, that the people in charge don’t know how to govern anymore. Number two, that the mass of people feel that the people at the top can’t govern anymore. If you have those two conditions met, you’re going to have a revolution. We are getting real close in this country.
MICHAEL HUDSON: Well, Richard, you begin by discussing what’s unique in the situation we’re in today. You use the word “desperation.” What you’ve been describing is desperation right along. That indeed is what makes it unique. The United States and the West no longer can mount a war of military occupation. That’s another part of the by-product of what you’ve been describing economically. Ukraine showed that the United States can’t win a war and that NATO needs proxy armies because their own population would resist if there were a draft. So the U.S. and NATO forces have only one policy to use: They can only bomb and shoot missiles. The basic political fact remains that they are too weak to win on the battlefield, according to the rules of war that formerly guided international law, and that made genocide illegal.
I want to focus on the effect of all of what you’ve described on what it means for international law and the global fracture that we’re seeing today. I think the U.S. and NATO fight to control the world – from the Atlantic to the Pacific, and from the United States and England all the way to the China Sea – can only be won in a dirty way – in violation of international law – by focusing on killing civilians, bombing hospitals, schools, and other basic institutions. That’s what makes this war unique.
U.S. naval fighting concentrates on civilian, instead of military, targets. You’ve seen Ukraine, focusing on the Russian-speaking civilian population, hoping that the civilians will say, ‘Please don’t bomb us anymore. We want our own Boris Yeltsin, or some Pinochet or Zelensky, to take over. We’ll do anything for peace.’ But that’s not what they did. They rallied around Russia and say, ‘You know what, you killing us is wrong and we’re not going to submit to you, because if you’re killing us now, what are you going to do if there were peace?’ So this is genocide in Ukraine, just as it’s genocide in Palestine.
The other countries are seeing that it’s a moral evil and it’s an attack on the very principle of civilization and common humanity. So what is the U.S. and NATO to do?
They’re relying on Ukraine and Israel Nazis to uproot or destroy any population that resists its economic or financial and political control, or are simply in their way. It’s a war of extermination – not a military war against armies – but a war of extermination of people, in order to create a neo-colonialism. That’s what the U.S. and NATO are doing. They are trying to create a neo-colonialism to make one world. Not a group of different civilizations. One civilization, that is the U.S. neo-liberal civilization. And other countries in their way are not really an alternative civilization. There’s no plurality of civilizations where each country or region can make its choice. There’s only supposed to be one.
Now this is evil, but it’s historically a characteristic of religious wars and wars of hatred – ethnic, national and even racial hatred – in the case of Europe’s colonialism and America’s war in Asia. Soldiers, and even the domestic civilian population, are propagandized to view the enemy as being sub-human and therefore it can be treated in utterly different ways than the rules of war. That’s the character of Israel’s war against Islamic countries, and against any population that stands in the way of Israel expanding from the sea to the ocean.
That is, all the land, and oil, and natural resources, extending from the Mediterranean Sea to the Indian Ocean. That’s the aim. The broad West Asian area is to be turned into a land without a people. That’s what Netanyahu means. A land without a people, just as what Israel’s settlers did to the Palestinians who lived there for millennia. The occupants are held to be non-people, to be treated as the biblical Amalek whom the Lord directed his religionists to exterminate, along with all their cattle, trees and productive resources capable of sustaining life.
So when Israel goes into Gaza or the West Bank or now into Lebanon, they’re not fighting another army. They’re destroying the hospitals. They’re tearing up the olive trees that take 30 to 50 years to develop. They’re tearing up the infrastructure. They’re making it impossible to continue to live there. That’s what makes this unique, and even more destructive than the earlier wars, which at least left the civilization and the basic infrastructure in place. But it’s destructive because of what you said: Desperation of the West, and the U.S. and Europe, is the only kind of war they can fight.
RICHARD WOLFF: Let me tell you a story, even if I’ve done it once before, that I hope we’ll bring it home to an American audience. I once took some European visitors to a town in Massachusetts called Old Deerfield. It is a part of a little town called Deerfield located on the Deerfield River in Western Massachusetts. The town of Old Deerfield is a recreated community that has recreated all the houses in it to look like they did in colonial days, before the United States emerged as an independent country. If you visit this place and you start looking at these interesting old reconstituted houses, and you go inside and you see the colonial furniture and all that, you will be confronted with little plaques on the outside of each house that give you a little thumbnail description of life when this house was occupied by living family, etc.
I went and I looked at it, like my guests, and we all immediately reacted because of what it says on the plaques. To my knowledge, that’s what it says right now, as we’re speaking. It describes the family of John Jones and his wife and the children, and then on this difficult day back in 1691, the savages attacked. And then periodically it’s all about the savages who were then eventually beaten back. And the Europeans looked at each other, and I looked at them and they at me. The Europeans arrived here, killed these people, took their land, and called them savages; shot them like animals because the indigenous people didn’t have guns and gunpowder, and all the rest of that, whereas the Europeans did. So, it was quite easy to shoot them, and to deal with them as animals. They were savage.
When they resisted their land and their animals being taken from them, then they became more savage, and absolutely subject to extermination, which was considered a 100% acceptable social solution. The final solution to the Native American ‘problem,’ you might call it.
But you know, again, this is not about Europeans or Native Americans. It’s about settler colonialism that has a ‘problem.’ That’s why it has to imagine that the land is empty because otherwise it would be confronted with, ‘What are you doing if the land is full?’ Well, you are creating a Them versus Us. If you read the literature of those who support Netanyahu, that’s what they say every day. It’s them or us.
That’s what the colonial people in Old Deerfield felt. It was them or us, and they would celebrate the attack of the savages because it confirmed how savage they were. It didn’t confirm that settler colonialism might be questioned. That never occurred to them. I mean, it’s a study in what can happen to human beings when they trap themselves, or are trapped, in a dead end that they don’t want to confront. Well then, they rethink it, so it isn’t a dead end, it isn’t a problem. It is now [as] understandable as getting rid of these pesky animals that stand in the way of the noble Christian civilization we are constructing.
And in Israel simply substitute Jewish, or Zionist, or whatever word you want. But we do have to understand that this isn’t new. Michael is right. It is a particular historical conjuncture. That’s what’s fading. My fear is if we give it too much uniqueness, you’ll miss the fact that it is a rerun.
Look, the world looks back on those years 1933 to 1945. Twelve years, a long time. Twelve years. Mr. Hitler came to power in January of 1933 and he was finished in World War II. So from ’33 to ’45 – twelve years – he, the Nazis ruled, and the whole world has ever since looked back in horror at what they did, and what they were. For those twelve years it was scary, and people shook their heads and didn’t want to believe it, and turned away from it. But eventually – and it took 75 years for right-wing fascistic types to put their heads up above the sand – and we see them now again. But again, it took a long time.
The Israeli behavior will take a long time, and we will look back on it the way we look back on what the Nazis did in their part of Europe with the same horror, except we will have learned, maybe, something from this time more than we learned the first time.
MICHAEL HUDSON: Well, I think, Richard, what you’re describing is there is something unique today, and that is that there’s a whole ideology to support something that supports what the settlers did in America – and you’re quite right to draw that parallel – and what settler states are doing elsewhere, and what the United States and NATO are trying to expand other countries. It’s much more than a clash of civilizations, like between the English settlers and the domestic indigenous population here.
It’s an attack on the very principle of what people traditionally have considered to be civilization, and I think America’s policy makers have come to realize that their plan for world dictatorship that they celebrated in 1992 as the “End of History” by Francis Fukuyama, has been a failure. That their idea of civilization, as everyone will funnel Ronald Reagan and Margaret Thatcher and will privatize the economy – and now that the Soviet Union is dead there is no alternative?
Well, Fukuyama’s book was very quickly replaced a year later by a book by his teacher at Harvard Samuel Huntington’s The Clash of Civilizations: Remaking of World Order. And Huntington described the real organization, civilization, is U.S. nationalism, a neo-liberalism and its doctrine of a unipolar world, that was his definition of civilization as a universal world. Other civilizations are basically how indigenous populations were treated, and Huntington warned that the United States faced future fights that were not simply a move from a different trade and monetary policy by countries seeking to escape from the legacy of colonialism and U.S. dominance.
He meant a clash of culture and that’s really the key: Not to accept U.S. dominance was deemed to be trying to create a new civilization. So it wasn’t just the fight of the English settlers of America or the Jewish settlers of Palestine to take land. It was a cultural civilizational fight. That’s what made it basically different for all this and the principle of national self-determination and personal religious and political freedom used to be considered the basis of civilization.
Obviously, even though it was during the time of the Thirty Years’ War that what you’re describing was occurring in the settlement of America, but the U.S. neo-cons treated the idea of policy independence of other countries as all of a sudden a new alien civilization that threatens the entire West. The idea that there could be an alternative and that way of framing international relations inverts the whole traditional universal morality.
Well, so did the English settlement of America do it, and the Spanish settlement of America, but it was almost not even discussed by the legal theorists. It seemed to be outside the realm of something that could be discussed in terms of international law. And that gap, that creation of a new international law justifying settler colonialism, justifying the right of one nation to take over and destroy another’s people and culture, as well as just taking their land, is essentially what World War II was fought against, the principle of Nazism.
RICHARD WOLFF: If I could add, the way this is spun nowadays, I think, illustrates what Michael is trying to get us to understand. Only let me show you the words. The clash of civilizations is a very convenient way, and here’s a second way that is being used to make the same point: that one civilization is in favor of, and is roughly the equivalent of democracy, whereas the other civilization is the equivalent or equal to authoritarianism.
This is a wonderful dichotomization because what it allows you to do is to look at China and no matter how many times the Chinese tell you, ‘We have two goals.’ By the way, they’ve been saying this for 50 years. Number one, to end a hundred years of humiliation by which they mean colonialism, because even though China as a whole never became a colony, parts of it did: The cities along the coast were taken over, some by the Germans, some by the British (it was horrible); and they fought the Boxer Rebellion and they were defeated, and all the rest.
The second goal of China was to raise its people out of the worst poverty the world has ever seen. Two goals: not to be humiliated by foreigners and to raise their standard of living, basically. That’s what they set out to do and they have been the most successful in doing that in the history of the world, if you measure the amount of improvement and the time it took to achieve it. By those standards they are a roaring success. Notice I’m not commenting on their internal civil liberties or a whole lot of other qualities that are another conversation. But for the United States, it cannot see what they’re doing or why they’re doing it. They don’t anymore have the lingo of a great struggle between Capitalism and Socialism because that really doesn’t fit anymore.
So they have it between Democracy and Authoritarianism, which has no more pull or power of analysis than the old Capitalism versus Socialism ever did. These are ways of handling the rationalization that the United States needs to achieve what, for it, has become security. If you become a world power, then security requires you to control the world. If you don’t want to be worried about the rest of the world then don’t be a world power. Be a real strong power where the hell you are. But the United States has its 700-800 bases around the [world]. That’s the aspirations of a world power. And now it has the problem: How do you rationalize wanting to be perpetually what no empire has achieved? Answer: Everybody else is a threat to all that is good in the world. It is either non-human, or a real bad civilization, or authoritarian.
Last point. The irony here which – either a Hegel as philosopher, or a Bertolt Brecht as a theater writer, or a George Carlin as a comedian – you need that level of brilliance to capture. The most authoritarian political structure exists inside every capitalist corporation. The CEO tells everybody else what to do. And the people he orders about, the employees have absolutely no recall over him whatsoever. They don’t vote for him. They don’t approve anything he does. If he doesn’t like them, they’re fired. Oh my god. Finding other societies authoritarian when this is your reality five out of seven days a week for the vast majority of, that takes extraordinary ideological discipline, because it’s hard to be so blind in one area that you can call another area bad names that apply to you.
This is an extremity and I don’t think these cultures can long sustain it. And if I’m right then that’s another reason for those who run the United States to be very, very worried about their situation.
MICHAEL HUDSON: Well then, the question is what are we going to do about it? What’s the outcome going to be? When the English attacked the Native Americans, they didn’t have an opportunity to create an alternative. All they could do is retreat further and further westward until they were backed into reservations, or what the Nazis called concentration camps.
Well, U.S. Presidents Biden and Donald Trump both have repeatedly tried to express their great fear that other countries will do what the Native Americans and the Palestinians couldn’t do, that they’d create an alternative. And that’s why they’ve designated China as America’s existential enemy, and to prepare the ground for conquering it, they’ve said, ‘well, that requires weakening Russia and Iran because they’re China’s two great military allies and suppliers of oil of the energy that it needs.’
However U.S. foreign policy suffers from the Hubris that it has always had. It assumes that foreign countries will have no active response. They’ll passively surrender like the Native Americans did to the settlers or, like the Palestinians did when they simply left the country or got killed.
China and Russia have taken the lead in moving to create an alternative world order that is going to defend their independence. And that’s what we’ve been talking about on this show for about a month now. They’ve created a set of alternative organizations to those of the West.
The Shanghai Cooperation Organization has become a defensive counterweight to NATO, and the BRICS are creating a full-spectrum alliance to achieve trade and financial self-reliance independent of the U.S. and NATO bloc. Well, NATO’s foray into Ukraine to try to end Russia’s ability to survive as a fiscal state has failed. Russia’s got even stronger and Ukraine’s NATO-backed troops are close to total defeat.
So, the United States has shifted its military support to its long-term aim of gaining control of the world’s oil trade. For instance, well, if we can’t win on the battlefield, let’s control the key organs of control. And its policy here is very similar to that which it followed in Ukraine. It’s backing Israel to conquer the entire Near East, starting with the domestic Palestinian population and extending territory to absorb Lebanon, Syria, Iraq, culminating in the long-expressed hope that they’re going to be able to defeat Iran and pull it into greater Israel and control, as I said, the whole swath of oil, lands, and geography from the Mediterranean to the Indian Ocean. And like Ukraine, Israel’s military is focused much more on the population that’s in its way than on military targets. It really doesn’t care about that.
If you can destroy a civilization’s hospitals, infrastructure, its culture, the basis that holds it together politically and culturally, then you don’t need to engage in a military war that you’re sure to lose. Well, it is this focus on attacking civilians and cultural genocide that violates the civilized world’s rules of warfare that I talked about at the beginning. The U.S.-NATO countries don’t have any troops of their own, so their target is extended to include entire populations: ‘Well, we can bomb them. We’re not going to fight them.
All we can do is bomb them, as long as they don’t have a bomb to fight back.’ And the Palestinians have no bombs, and they’re not being supported by other Islamic countries. There’s no religious or ideological support of the countries around the Near East and West Asian area that are willing to realize that they’re all under threat, that this drive for Lebensraum is not simply a Judaic Lebensraum, for its own population, it’s for the Western Lebensraum to control natural resources, sub-soil resources, oil, minerals, the land, infrastructure.
The concept of Lebensraum has morphed into great control of all of the pre-conditions of social survival. That’s why the Israeli soldiers concentrate on killing children and bombing hospitals and schools. If you kill the children, there won’t be any population you have to fight in the future. Netanyahu and the Israeli cabinet: Again, ‘that’s why we’re killing children. That’s why we’re bombing hospitals. We don’t want the population to survive.’
Well, that aim is genocide and it’s to prevent other peoples and countries from surviving and living to provide an alternative. Like Ukraine, Israel’s promoting racial hatred to justify its genocide against the Palestinians and Arabs. Just as it calls adversaries sub-human, just as the Ukrainians called the Russian speakers cockroaches, sub-human, the Israelis are treating the Arabs as that. That’s really what Huntington’s Clash of Civilizations means in progress, in practice: There’s really only one civilization in his view, and the other civilizations are the indigenous population in the way of the settlers. What’s this done? It’s reviving World War II Nazi ideology of hatred that was so shocking that it’s driving the whole world into an alliance to defend itself.
That’s what the United States, our planners, didn’t realize: that countries fear that the genocide in Gaza and Israel’s West Bank may be their own fate if the United States seeks to prevent them from following their own independence or achieving their own self-reliance, their own monetary system, their own trade, their ability to tax American corporations or to fine them if they’re polluting their land, if they deviate from the U.S. neoliberal policies. That is basically the U.S.-new religion. If other countries try to escape from their dollar debt or the incessant regime change consequences, they’re going to end up like the victims of the settlers.
So we can think of economic settlement of a country, economic settlement of taking over the rules of a country’s trade, its domestic laws, its ability to tax corporations to control its oil and mineral resources in its own natural interest, instead of letting American and European firms take them over and siphon off all of their output and the economic value of these resources for itself.
So we’re really in a fight for what kind of civilization we’re going to have. And there may be a global fracture, but if there is a global fracture between the 15% of the population that’s U.S.-NATO and the 85% of all the rest of the world, the part of the world that is industrialized, the part of the world that has the natural resources, well then, the fight that we’re seeing today, this new Cold War is really about what civilization’s all about, in contrast to the U.S.-NATO’s really anti-civilization.
RICHARD WOLFF: Let me add, if I could, because I think there’s another dimension. You get a different insight if you ask yourself, what comes next? Israel presumably is concerned about its security. That’s what it says all the time and I assume that that’s part of the story. Okay.
If you’re a nation worried about your security, here’s what you’re doing: You’re making yourself the absolute enemy of all Arabs and most Muslims by what you are doing, which, in case Americans don’t know, is widely advertised. The destruction in Palestine is front-page news in every Muslim country on this planet, every day. So, not like the United States, this is we, our people, our co-religionists, our brothers and sisters, being slaughtered.
Number one, Israel is going to have to deal with however this ends, whenever it ends, with a level of global isolation and enmity that is going to be expressed in a million big decisions, little decisions and medium decisions made by hundreds of millions, billions of people around the world, every chance they get. It’s not just the Houthis who figured out how they can strike a blow. Everybody else.
Number two and probably more important. This effort is destroying the Israeli economy. They will be dependent on the United States, totally, utterly, for many, many years, if not indefinitely. They will have no independence from the United States. It won’t just be a question of needing weapons all the time, but needing cash infusions, trade deals. You name it, they’re going to need it.
And the United States with whatever regimes come to power in the United States will hold all the strings. In short, Israel is creating by its war a level of insecurity, dependence, uncertainty that will haunt that society indefinitely into the future. This is not a strategy that gets them either security or independence. It is a joke. It’s not a funny joke. It’s a joke on them, by telling themselves it’s us or them, by refusing to try to find a way out. They are creating, they are painting themselves into an international, political, ideological corner. They’re going to be desperate for a long, long time.
MICHAEL HUDSON: I think that Israel is only one of the first arenas in this large international fight. The United States hasn’t said the Palestinians are an existential enemy. They noticed that the other Islamic countries are supporting Israel. Turkey is supporting Israel. Saudi Arabia is supporting Israel. Egypt is especially supporting Israel. They’re not fighting against it because the leaders are essentially bought off and are making money by supporting Israel, and they’re putting the benefit of their own leaders over their whole national destiny.
I’m more concerned about what other countries are going to do that will be able to mount a much stronger response than the Near Eastern countries are doing. Essentially, the response is going to be something that the Near Eastern oil countries haven’t done. The BRICS are moving to decouple from the West in order to create their own multipolar world, mutual benefit and development. This is the same issue that was fought over in the Thirty Years’ War.
The problem is that there seems little chance of the West accepting a Peace of Westphalia, permitting such a world, or at least a world that the United States, Europe, and Israel would want to be a part of. That’s the difference. At least at the end of the Thirty Years’ War, Europe did accept a common interest in ending war and establishing ‘We don’t want more to tear our civilization – if you can call it that – apart.’ That’s not the case today.
The United States’ policy is to tear other countries resisting American policy apart, saying they’re not only a different civilization, they’re actually different species. Each civilization is a species and, somehow, we’re back into the ethnic racial stereotyping that underlay the settler colonialism and the American wars in Asia, Vietnam, Korea, everywhere else. The problem is that they’re not interested in mutual gain. They’re not interested in a world where everybody can live peacefully together. That’s why there’s not going to be a two-state solution to Israel. All the U.S. wants is the ability to use its brute power to control, grab whatever resources and revenue it wants. The aim is conquest without regard for the economic costs and benefits.
So you can’t look at it and say, ‘Well, what’s in the economic interest of the United States and Europe? Isn’t their economic interest to join with Russia and China and all have a prosperous world for mutual gain?’ Its leaders say, ‘No, we don’t care.’ The German leaders are willing to sacrifice the German economy, to destroy its industry, to shrink its GDP, quarter after quarter after quarter, to reduce its living standards, all because that’s the price of preventing an alternative world order to what the United States – which supports us – is interested in.
Andrei Martyanov has suggested that the United States is fighting today the closing years of World War II, in the sense that it’s fighting over the principles, what all of that was about, about what kind of international relations are going to be established, and it’s a fight against all other peoples as if it were a struggle for survival between different species, a kind of Darwinian survival of the fittest.
And yet, the West is now the least economically fit, and the least militarily fit, except for its atomic weapons. And there it’s a tie, because both the U.S. and Russia and China all have the power to blow up the whole world and start again with the Neo-Paleolithic age. So this fight treats populations that seek their own policy independence as a species to be exterminated.
That’s the essence of Nazi ideology and it’s being repeated today. So if there is a clash of civilization, where does all this leave the United Nations? All the countries except the U.S.-NATO and Israel want peace. But the United Nations is powerless to exclude the most genocidal violators of international law.
When Israel blocks humanitarian United Nations emergency food from being delivered to the starving victims of Gaza, the United Nations has no military power to just overcome Israel’s blockage. It doesn’t have its own tanks to just say, ‘You want to let their trucks in, we’re going to send the trucks in behind the convoy of tanks and if your Israeli guards block us, we’re just going to shoot you down.’
It doesn’t have any power like that. Egypt has the power, but the Americans manipulated the Arab Spring to put in the chosen successor to Mubarak. The dictator was put in place by the entirely corrupt Egyptian ruling class. And the only question is whether the army somehow is going to have a memory of Abdul Nasser. It doesn’t have to be this way. So far there is no sign that Egypt will not be an applauder of Israel and a backer of Israel, as it’s been right now. It’s not going to help deliver food aid. It has put up just the opposite. It puts up blocks saying, ‘We don’t want any Palestinians here. We want them to be starved instead of coming into Egypt.’ That is utterly contemptible.
I don’t think that arenas further eastward around China, Russia, Central Asia, South Asia are going to be anywhere near as passive and corrupt as you’ve seen in the Islamic states. You can see that they are working very rapidly to create an alternative in which the Islamic countries basically have no interest at all in joining. They’re trying to play it both ways, just as Turkey is trying to say, ‘Well, we’re going to be part of NATO but at the same time going to be part of BRICS.’ As the Chinese say, a man who tries to take two roads at once is going to have a broken hip joint. That’s basically what we have there.
So, if the United States cannot even admit Palestine as a member, what will it do? It was the United Nations that created Israel and it itself bears the responsibility for recognizing Israel and endorsing its explicit aim of genocide against Palestinians from the new settler countries.
In 1948, the United Nations accepted the settler state, even as the Stern Gang was killing all the Palestinians to let its Zionist followers come in, and the United Nations was powerless to stop it. And the United Nations is powerless to act in the very way it’s constructed, with a Security Council that can be blocked by the United States, and where you can have votes to condemn Israel by the only two countries opposing the United States, Israel and a few Pacific Island countries. The whole rest of the world is against them and cannot do anything.
It’s obvious that if there is going to be any way of preventing what we’re describing, this attack on civilization, there has to be a new alternative to the United Nations, and that alternative has to have a military enforcement arm of international law, and it has to realize that this is an existential issue that requires its own ideological doctrine to be spelled out, what the principles are and how these principles are going to be defended. I don’t see any sign of that happening right now.
United Nations officials tend to paper over this problem by expressing the fantasy that somehow, ‘well, we really want a two-state solution but we’re not going to recognize Palestine and we’re not going to do anything at all about Israel’s genocide. We’re not going to order the arrest. We’re not going to isolate Israel. We’re going to let trade with Israel. We’re going to accept Israel genocide because it has its own freedom to do whatever it wants.’ So, the United Nations has essentially become an arm of the U.S. State Department and military, and that’s an impossible way to survive if there’s going to be an alternative to the U.S. kind of order that we’ve been talking about.
President Netanyahu claims that the essence of Judaism itself is to exterminate the non-Jewish population there and he says it to protest against genocide. To claim that the Palestinians are people and should not be killed is anti-Semitic because Israel is a Jewish state and its settlers may suffer retaliation if, as they kill the indigenous population, and because they’ve killed so many Palestinians, it’s only natural that the Palestinians and Arabs would want to fight back.
And it’s that reality that they want to defend themselves that, as you’ve just said, is an existential threat to Israel. And so, any country that fights back against the attacks by the bombs of the United States (they’re the United States’ bombs that Israel is dropping) is anti-Semitic. Germany and the United States then pass laws that any support of the Palestinians, any claim that they are human beings, any demonstrations on campus, any political demonstrations are legally breaking the law.
That’s what’s so contemptible, certainly about Germany, but also about the United States and the other NATO nations. We’re talking about an ideology that is anti-civilizational in principle. We don’t have to reinvent the wheel because the wheel was basically already invented, in many ways, after the Thirty Years’ War. That became, I think, the basis for German philosophy and the whole European philosophy of law. They’re trying to reinvent it, but international law needs a means of enforcement. As long as you have the United Nations subject to veto power, you can’t do anything.
So, the principles of the United Nations are pretty clear. The principles, the aims should be similar to those of 1648, aiming to end the opportunities by America’s neo-liberal inquisition to interfere with the policies of other nations. The nation of Georgia has recently made a positive start in all of this. They’ve closed down the NGOs that are being financed by the U.S. National Endowment for Democracy. That is fascism to promote regime change, and to meddle in the internal politics of countries in the hope of creating a local Boris Yeltsin or Zelensky or a Shah. The National Endowment for Democracy wants to make Georgia into another Ukraine fighting to the last Georgian, if they can put in some U.S. puppet to go to war with Russia.
So, here’s the problem that has to be addressed. The West has to go beyond the idea of a clash of civilizations. It’s going beyond this idea of a clash of civilization, it wants to be the only civilization left, in fact. But it’s uncivilized. So its ideology of destroying countries moving to resist its political and economic conquest is the opposition of civilization. It’s barbarism.
So, instead of having a clash of civilization for nations, as in Europe’s Thirty Years’ War, we’re experiencing a war against civilization itself, and the great question is whether the global majority of civilization is going to realize how truly existential America’s fight to reverse the principles of civilization is for these other countries. And the most immediate short-term test is going to be America’s sponsorship of Israel’s fight against Iran, I think.
What appeared in the 1990s to be the end of civilization is a war of survival for countries seeking to withdraw from the U.S.-NATO orbit and this U.S.-Israeli-Ukrainian policy of dehumanizing the enemy is a military tactic going way back to biblical times, as we’ve discussed – what Israel calls Amalek and U.S. diplomacy calls Autocracy or Socialism.
Russia’s President Putin regrets now how gullible he was in believing that the West would somehow act in a way to avoid war in Ukraine because that was in the West’s interest. It was in Europe’s interest to import Russian oil because that was the basis of its industry and yet it didn’t do that. U.S. officials never had any intention of keeping their promise not to expand NATO eastward.
Likewise, Iran’s newly elected president regrets how gullible he was in believing that if Iran refrained from defending its country against Israel bombing and assassinating its officials, the West would remove, or at least lighten, the trade and financial sanctions against Iran. That didn’t happen so now he’s hardened his position. So, the big question is, where does this leave Chinese foreign policy – since America says China is America’s existential enemy – based on offering a win-win agreement that would benefit both countries for international gain?
But the U.S. leaders have no intention in that kind of policy because it doesn’t want anyone else to have the gains that are to be made from technological and economic progress. They have only one goal: unipolar control of the entire planet and its governments, its economies, its natural resources, its land, and its water. As in a religious war, they’re willing to die for the ideal and to bring all the world down in an atomic war if they fail. That’s what’s being threatened in Ukraine today, and in Israel and Iran this week.
RICHARD WOLFF: One of the questions that a lot of people have about all of this is why governments, particularly in Europe, but also governments elsewhere, remain – most of them – unwilling to challenge what the United States is doing. You have the Houthis – they do – but they’re not even a government. They are a part of Yemen.
Yemen is one thing and the Houthis are a community within Yemen. But you have to look long and far, where else you get people willing to do stuff. I understand, much is done – hidden – that we don’t know about, or we can’t measure, or we can’t see. So, I want to address if I can, in the time we have, why it would be that Olaf Scholz in Germany, or Emmanuel Macron in France, or the E.U. leadership, and on and on and on and on, are willing – as Michael correctly says, and as many have pointed out – to go along with the United States in Ukraine.
And I mean go along: condemn Russia as the total evil here, supply weapons, supply money, all the rest of it, to the Ukrainians; why they basically go along with Israel in the Middle East, some more, some less, I understand, but why are they doing it? And then people ask, well, why would Sweden and Finland join NATO? Why is that happening? Why, even when Germany is in recession? I believe last quarter, and this quarter they came in below zero in GDP growth, so that qualifies (two quarters in a row below zero, you’re in an official recession, at least by the usual standard of that measure).
So here’s my answer. For the last 75 years of United States dominance coming out of World War II, any government that the United States found in power anywhere in the world, but particularly in Europe, that wasn’t aligned with American objectives was considered unacceptable. In the beginning, for example, coming out of World War II – just to remind people since the history of this is so poorly known – the first post-World War II government in France had several members of the French Communist Party in the cabinet of Charles de Gaulle. Okay.
That meant that the United States had to deal with a government of France, a member of the Security Council of the United Nations, which had a Communist Party (which at that time was very pro-Soviet), sitting in the cabinet. The second largest political party for 20 years after World War II was over in Italy, the Italian Communist Party, the largest Communist Party outside of Russia anywhere in the world. So, you developed in Europe, in places like Germany, France, Italy, everywhere, even Britain, you had a version of what in the United States was called McCarthyism. It wasn’t as bad as the United States. You couldn’t do to the Communist and Socialist Parties there what you were able to do in the United States.
That’s because of particular historical cultural differences between them. But you were able to shut them down. What you were able to do was to create a situation in which the heights of political power, the dominant role in the major political parties, was people who were acceptable to the United States. And this became so routine and so normal that you didn’t have to impose it anymore from the outside. It was understood inside. People who sided with the United States saw their careers much more smoothly upward bound than people who had the temerity not to go in that direction. And there’s one after another in every one of these countries that learned that. So now we get to the present.
What you have are dominant political structures overwhelmingly populated by people who have decided, from their own experience, that going with the United States is the way to go, and going against the United States is a recipe for defeat and for decline, for disaster. They’re not unaware of what the Russians and the Chinese are doing, but they’re not yet convinced that the United States won’t be able to impose on those others what they have so successfully imposed on the Europeans. Olaf Scholz can’t think outside that box, neither can Mr. Macron, neither can Jens Stoltenberg, or Josep Borrell, or any of the other leading figures in European politics. And that’s true from Scandinavia to Greece, and from England to the Central European countries. That’s how they see the world.
The effort of the Soviet Union, let’s remember, was shown not to be up to the task by the reversals of 1989, 1990, 1991, and the place where that hasn’t happened – the far east – is far away from Europe. So, here’s what’s going on. The European leadership has decided to go with the United States – that’s the horse they’re betting on to win the race because it always has – but they are very worried, more now than ever, that they may have bet on the wrong horse. Right below the surface in European politics is a movement, partly on the right – that’s the rise of all the quasi-fascists, you know, the government in Italy, Alternativ für Deutschland in Germany, Marine Le Pen in France – but also on the left with the arrival of Sarah Wagenknecht in Germany, very clear on her position against the war in Ukraine; Jean-Luc Mélanchon in France, who now is the head of the largest political party in the French Assemblée Nationale, is a Marxist. So is Sarah Wagenknecht on the left, they have been Marxists all of their political lives, and they’re known as such in their countries, very clearly.
Okay. I think you’re going to see, very disturbing to the United States in the months and years ahead, you’re going to see eruptions of difference. You’re going to see emergence of more governments like those of Mr. Orbán on the right in Hungary, the Czech government, and others, that are going to be even less and less sure.
That’s why the United States is desperate. That’s part of why Israel is desperate. They are now convinced that time is not on their side. They’re frightened. They won’t say so, and they’re right to be frightened, because their allies in Europe – the ones they still count on even though they’re disrespectful of them, but they’re convinced they need them – and they do.
It’s very important people understand: Europe is in a terrible, terrible situation and the Europeans kind of know it. They’re caught between the United States and China. It’s not clear what place for Europe will emerge in this new BRICS versus G7. In the G7, Europe is a footnote. In the G7 versus China, Europe is even more of a footnote.
Europe is not used to being a footnote.
Europe is used to being in charge. They have a hard row to hoe, how to manage all of this. It’s going to be tumult, it’s going to be turmoil inside Europe now for a long time, and it’s going to be rough and difficult. And one of the things that may emerge is an attempt, either to make a real third player in the world out of Europe – with its own army, its own nuclear, its own ‘all that’ – or to join with BRICS and China and go after a multipolarity in which the Europeans, by getting in on it, have a place they won’t have if they don’t get in on it.
These are real existential conditions that are going to be fought out over the next period, and the horror of much of it is that – and here I want to take off my hat to you, Nima, for making these conversations happen – this is what has to be talked about. If you believe, à la Aristotle and Plato, that the unexamined life is not worth living; if you think it’s better to understand what’s happening to you than not to; to want to know the good, the bad, the risks, the hopes; then these are the conversations that have to happen, and the mainstream media keeps as far away from them as it is possible to be.
People like you, and these programs, are therefore crucial. It’s not a question about agreeing with what I say, or with what Michael says, it’s not. It’s important to have these questions opened up, to have to contend with the history that Michael reviewed with us and for us today; to have to contend with what that points to, rather than living in a make-believe world in which a clash of civilizations is going on, so you don’t have to face the real issues that are going to shape what happens to us all.
MICHAEL HUDSON: Well, President Putin said a few months ago that someday Russia and Germany and Europe will trade again, but it may take 30 years.
RICHARD WOLFF: It might. Here’s my guess: From the little I know (and it isn’t much) but I speak German, I read German, you know, so I’m able to access what goes on in that country. I can assure you, whatever else, it will be less than 30 years. Inside Germany is an enormous conversation and debate going on about these issues, with much more blunt honesty than we imagine here in the United States. Just like you have to say inside Israel, there’s more opposition to what Netanyahu is doing than we have allowed here in the United States.
The irony: they have a newspaper, they had access, they can actually have (I’m not saying it’s adequate and I’m not denying what Israel is basically doing not for a minute), but there is an opposition that the Israelis have mounted to the policy of their government. We shouldn’t forget that, and that these political winds can change. Israel is not (let me say this to my American audience) winning in Gaza, is not winning in Lebanon. It may win.
I’m open, I understand, but not yet. And, wow, you know, a year into Hamas, and there’s still a Hamas? After what you’ve done? That’s amazing! I ask my fellow Americans if, in this country, one of our 50 states was subjected to the kind of destruction that Israel has done in Gaza, would there be a strong resistance? Don’t answer so quickly because the truth is we don’t know.
In Israel, we do know. There is a Hamas; they’re still fighting back. That’s amazing, and in the long run, that’s going to be just as important as it turned out after the end of World War II, when we all learned about the Norwegian resistance and the French resistance and the Italian partisans, turned out that there were opponents to the Nazis in every country, including Germany.
MICHAEL HUDSON: Well, I do write a monthly column for the German financial press auf deutsch. So you’re right, there is a resistance.
NIMA ALKHORSHID: I don’t know if you’ve learned that CNN reported that Joe Biden is going to be in Germany to receive Germany’s highest award.
RICHARD WOLFF: Yes, we see that’s Mr. Scholz trying to play ‘We are on your side, don’t worry, we are loyal, you help me get here, so I’m going to help you get there’. Absolutely. By the way, same relationship between Biden and Netanyahu.
NIMA ALKHORSHID: Yeah. Thank you so much for being with us today, Richard and Michael. See you soon.
“Have you no sense of decency?”
The recent Congressional hearings leading to a bloodbath of university presidents brings back memories from my teen-age years in the 1950s when everyone’s eyes were glued to the TV broadcast of the McCarthy hearings. And the student revolts incited by vicious college presidents trying to stifle academic freedom when it opposes foreign unjust wars awakens memories of the 1960s protests against the Vietnam War and the campus clampdowns confronting police violence.
I was the junior member of the “Columbia three” alongside Seymour Melman and my mentor Terence McCarthy (both of whom taught at Columbia’s Seeley Mudd School of Industrial Engineering; my job was mainly to handle publicity and publication). At the end of that decade, students occupied my office and all others at the New School’s graduate faculty in New York City – very peacefully, without disturbing any of my books and papers.
Only the epithets have changed.
The invective “Communist” has been replaced by “anti-Semite,” and the renewal of police violence on campus has not yet led to a Kent State-style rifle barrage against protesters. But the common denominators are all here once again. A concerted effort has been organized to condemn and even to punish today’s nationwide student uprisings against the genocide occurring in Gaza and the West Bank. Just as the House Unamerican Activities Committee (HUAC) aimed to end the careers of progressive actors, directors, professors and State Department officials unsympathetic to Chiang Kai-Shek or sympathetic to the Soviet Union from 1947 to 1975, today’s version aims at ending what remains of academic freedom in the United States.
The epithet of “communism” from 75 years ago has been updated to “anti-Semitism.” Senator Joe McCarthy of Wisconsin has been replaced by Elise Stefanik, House Republican from upstate New York, and Senator “Scoop” Jackson upgraded to President Joe Biden. Harvard University President Claudine Gay (now forced to resign), former University of Pennsylvania President Elizabeth Magill (also given the boot), and Massachusetts Institute of Technology President Sally Kornbluth were called upon to abase themselves by promising to accuse peace advocates critical of U.S. foreign policy of anti-Semitism.
The most recent victim was Columbia’s president Nemat “Minouche” Shafik, a cosmopolitan opportunist with trilateral citizenship who enforced neoliberal economic policy as a high-ranking official at the IMF (where she was no stranger to the violence of “IMF riots”) and the World Bank, and who brought her lawyers along to help her acquiesce in the Congressional Committee’s demands. She did that and more, all on her own. Despite being told not to by the faculty and student affairs committees, she called in the police to arrest peaceful demonstrators.
This radical trespass of police violence against peaceful demonstrators (the police themselves attested to their peacefulness) triggered sympathetic revolts throughout the United States, met with even more violent police responses at Emory College in Atlanta and California State Polytechnic, where cell phone videos were quickly posted on various media platforms.
Just as intellectual freedom and free speech were attacked by HUAC 75 years ago, academic freedom is now under attack at these universities. The police have trespassed onto school grounds to accuse students themselves of trespassing, with violence reminiscent of the demonstrations that peaked in May 1970 when the Ohio National Guard shot Kent State students singing and speaking out against America’s war in Vietnam.
Today’s demonstrations are in opposition to the Biden-Netanyahu genocide in Gaza and the West Bank. The more underlying crisis can be boiled down to the insistence by Benjamin Netanyahu that to criticize Israel is anti-Semitic. That is the “enabling slur” of today’s assault on academic freedom.
By “Israel,” Biden and Netanyahu mean specifically the right-wing Likud Party and its theocratic supporters aiming to create “a land without a [non-Jewish] people.” They assert that Jews owe their loyalty not to their current nationality (or humanity) but to Israel and its policy of driving the Gaza Strip’s millions of Palestinians into the sea by bombing them out of their homes, hospitals and refugee camps.
The implication is that to support the International Court of Justice’s accusations that Israel is plausibly committing genocide is an anti-Semitic act. Supporting the UN resolutions vetoed by the United States is anti-Semitic.
The claim is that Israel is defending itself and that protesting the genocide of the Palestinians in Gaza and the West Bank frightens Jewish students. But research by students at Columbia’s School of Journalism found that the complaints cited by the New York Times and other pro-Israeli media were made by non-students trying to spread the story that Israel’s violence was in self-defense.
The student violence has been by Israeli nationals. Columbia has a student-exchange program with Israel for students who finish their compulsory training with the Israeli Defense Forces. It was some of these exchange students who attacked pro-Gaza demonstrators, spraying them with Skunk, a foul-smelling indelible Israeli army chemical weapon that marks demonstrators for subsequent arrest, torture or assassination. The only students endangered were the victims of this attack. Columbia under Shafik did nothing to protect or help the victims.
The hearings to which she submitted speak for themselves. Columbia’s president Shafik was able to avoid the first attack on universities not sufficiently pro-Likud by having meetings outside of the country. Yet she showed herself willing to submit to the same brow-beating that had led her two fellow presidents to be fired, hoping that her lawyers had prompted her to submit in a way that would be acceptable to the committee.
I found the most demagogic attack to be that of Republican Congressman Rick Allen from Georgia, asking Dr. Shafik whether she was familiar with the passage in Genesis 12.3. As he explained” “It was a covenant that God made with Abraham. And that covenant was real clear. … ‘If you bless Israel, I will bless you. If you curse Israel, I will curse you.’ … Do you consider that to be a serious issue? I mean, do you want Columbia University to be cursed by [God of the Bible](http://1 https://m.youtube.com/watch?v=syPELLKpABI 2 https://stefanik.house.gov/2024/4/icymi-stefanik-secures-columbia-university-president-s-commitment-to-remove-antisemitic-professor-from-leadership-role 3 Nicholas Fandos, Stephanie Saul and Sharon Otterman, “Columbia’s President Tells Congress That Action Is Needed Against Antisemitism,” The New York Times, April 17, 2024., and “Columbia President Grilled During Congressional Hearing on Campus Antisemitism,” Jewish Journal, April 18, 2024. https://jewishjournal.com/news/united-states/370521/columbia-president-grilled-during-congressional-hearing-on-campus-antisemitism/#:~:text=Columbia%20President%20Grilled%20During%20Congressional%20Hearing%20on%20Campus%20Antisemitism 4 Miranda Nazzaro. “Netanyahu condemns ‘antisemitic mobs’ on US college campuses,” The Hill, April 24, 2024.)?”
Shafik smiled and was friendly all the way through this bible thumping, and replied meekly, “Definitely not.”
She might have warded off this browbeating question by saying, “Your question is bizarre. This is 2024, and America is not a theocracy. And the Israel of the early 1st century BC was not Netanyahu’s Israel of today.” She accepted all the accusations that Allen and his fellow Congressional inquisitors threw at her.
Her main nemesis was Elise Stefanik, Chair of the House Republican Conference, who is on the House Armed Services Committee, and the Committee on Education and the Workforce.
Congresswoman Stefanik: You were asked were there any anti-Jewish protests and you said ‘No’.
President Shafik: So the protest was not labeled as an anti-Jewish protest. It was labeled as an anti-Israeli government. But antisemitic incidents happened or antisemitic things were said. So I just wanted to finish.
Congresswoman Stefanik: And you are aware that in that bill, that got 377 Members out of 435 Members of Congress, condemns ‘from the river to the sea’ as antisemitic?
Dr. Shafik: Yes, I am aware of that.
Congresswoman Stefanik: But you don’t believe ‘from the river to the sea’ is antisemitic?
Dr. Shafik: We have already issued a statement to our community saying that language is hurtful and we would prefer not to hear it on our campus.
What an appropriate response to Stefanik’s browbeating might have been?
Shafik could have said, “The reason why students are protesting is against the Israeli genocide against the Palestinians, as the International Court of Justice has ruled, and most of the United Nations agree. I’m proud of them for taking a moral stand that most of the world supports but is under attack here in this room.”
Instead, Shafik seemed more willing than the leaders of Harvard or Penn to condemn and potentially discipline students and faculty for using the term “from the river to the sea, Palestine will be free.” She could have said that it is absurd to say that this is a call to eliminate Israel’s Jewish population, but is a call to give Palestinians freedom instead of being treated as Untermenschen.
Asked explicitly whether calls for genocide violate Columbia’s code of conduct, Dr. Shafik answered in the affirmative — “Yes, it does.” So did the other Columbia leaders who accompanied her at the hearing. They did not say that this is not at all what the protests are about. Neither Shafik nor any other of the university officials say, “Our university is proud of our students taking an active political and social role in protesting the idea of ethnic cleansing and outright murder of families simply to grab the land that they live on. Standing up for that moral principle is what education is all about, and what civilization’s all about.”
The one highlight that I remember from the McCarthy hearings was the reply by Joseph Welch, the U.S. Army’s Special Council, on June 9, 1954 to Republican Senator Joe McCarthy’s charge that one of Welch’s attorneys had ties to a Communist front organization. “Until this moment, senator,” Welch replied, “I think I never gauged your cruelty or your recklessness. … Have you no sense of decency, sir? At long last, have you left no sense of decency?”
The audience broke into wild applause. Welch’s put-down has echoed for the past 70 years in the minds of those who were watching television then (as I was, at age 15). A similar answer by any of the three other college presidents would have shown Stefanik to be the vulgarian that she is. But none ventured to stand up against the abasement.
The Congressional attack accusing opponents of genocide in Gaza as anti-Semites supporting genocide against the Jews is bipartisan. Already in December, Rep. Suzanne Bonamici (D-Ore.) helped cause Harvard and Penn’s presidents to be fired for their stumbling over her red-baiting. She repeated her question to Shafik on April 17: “Does calling for the genocide of Jews violate Columbia’s code of conduct?” Bonamici asked the four new Columbia witnesses. All responded: “Yes.”
That was the moment when they should have said that the students were not calling for genocide of the Jews, but seeking to mobilize opposition to genocide being committed by the Likud government against the Palestinians with President Biden’s full support.
During a break in the proceedings Rep. Stefanik told the press that “the witnesses were overheard discussing how well they thought their testimony was going for Columbia.” This arrogance is eerily reminiscent to the previous three university presidents who believed when walking out of the hearing that their testimony was acceptable. “Columbia is in for a reckoning of accountability. If it takes a member of Congress to force a university president to fire a pro-terrorist, antisemitic faculty chair, then Columbia University leadership is failing Jewish students and its academic mission,” added Stefanik. “No amount of overlawyered, overprepped, and over-consulted testimony is going to cover up for failure to act.”
Shafik could have pointedly corrected the implications by the House inquisitors that it was Jewish students who needed protection. The reality was just the opposite: The danger was from the Israeli IDF students who attacked the demonstrators with military Skunk, with no punishment by Columbia.
Despite being told not to by the faculty and student groups (which Shafik was officially bound to consult), she called in the police, who arrested 107 students, tied their hands behind their backs and kept them that way for many hours as punishment while charging them for trespassing on Columbia’s property. Shafik then suspended them from classes.
The clash between two kinds of Judaism: Zionist vs. assimilationist
A good number of these protestors being criticized were Jewish. Netanyahu and AIPAC have claimed – correctly, it seems – that the greatest danger to their current genocidal policies comes from the traditionally liberal Jewish middle-class population. Progressive Jewish groups have joined the uprisings at Columbia and other universities.
Early Zionism arose in late 19th-century Europe as a response to the violent pogroms killing Jews in Ukrainian cities such as Odessa and other Central European cities that were the center of anti-Semitism. Zionism promised to create a safe refuge. It made sense at a time when Jews were fleeing their countries to save their lives in countries that accepted them. They were the “Gazans” of their day.
After World War II and the horrors of the Holocaust, anti-Semitism became passé. Most Jews in the United States and other countries were being assimilated and becoming prosperous, most successfully in the United States. The past century has seen this success enable them to assimilate, while retaining the moral standard that ethnic and religious discrimination such as that which their forbears had suffered is wrong in principle.
Jewish activists were in the forefront of fighting for civil liberties, most visibly against anti-Black prejudice and violence in the 1960s and ‘70s, and against the Vietnam War. Many of my Jewish school friends in the 1950s bought Israel bonds, but thought of Israel as a socialist country and thought of volunteering to work on a kibbutz in the summer. There was no thought of antagonism, and I heard no mention of the Palestinian population when the phrase “a people without a land in a land without a people” was spoken.
But Zionism’s leaders have remained obsessed with the old antagonisms in the wake of Nazism’s murders of so many Jews. In many ways they have turned Nazism inside out, fearing a renewed attack from non-Jews. Driving the Arabs out of Israel and making it an apartheid state was just the opposite of what assimilationist Jews aimed at.
The moral stance of progressive Jews, and the ideal that Jews, blacks and members of all other religions and races should be treated equally, is the opposite of Israeli Zionism. In the hands of Netanyahu’s Likud Party and the influx of right-wing supporters, Zionism asserts a claim to set Jewish people apart from the rest of their national population, and even from the rest of the world, as we are seeing today.
Claiming to speak for all Jews, living and dead, Netanyahu asserts that to criticize his genocide and the Palestinian holocaust, the nakba, is anti-Semitic. This is the position of Stefanik and her fellow committee members. It is an assertion that Jews owe their first allegiance to Israel, and hence to its ethnic cleansing and mass murder since last October. President Biden also has labeled the student demonstrations “antisemitic protests.”
This claim in the circumstances of Israel’s ongoing genocide is causing more anti-Semitism than anyone since Hitler. If people throughout the world come to adopt Netanyahu’s and his cabinet’s definition of anti-Semitism, how many, being repulsed by Israel’s actions, will say, “If that is the case, then indeed I guess I’m anti-Semitic.”
Netanyahu’s slander against Judaism and what civilization should stand for
Netanyahu characterized the U.S. protests in an extremist speech on April 24 attacking American academic freedom.
What’s happening in America’s college campuses is horrific. Antisemitic mobs have taken over leading universities. They call for the annihilation of Israel, they attack Jewish students, they attack Jewish faculty. This is reminiscent of what happened in German universities in the 1930s. We see this exponential rise of antisemitism throughout America and throughout Western societies as Israel tries to defend itself against genocidal terrorists, genocidal terrorists who hide behind civilians.
It’s unconscionable, it has to be stopped, it has to be condemned and condemned unequivocally. But that’s not what happened. The response of several university presidents was shameful. Now, fortunately, state, local, federal officials, many of them have responded differently but there has to be more. More has to be done.
This is a call to make American universities into arms of a police state, imposing policies dictated by Israel’s settler state. That call is being funded by a circular flow: Congress gives enormous subsidies to Israel, which recycles some of this money back into the election campaigns of politicians willing to serve their donors. It is the same policy that Ukraine uses when it employs U.S. “aid” by setting up well-funded lobbying organizations to back client politicians.
What kind of student and academic protest expressions could oppose the Gaza and West Bank genocide without explicitly threatening Jewish students? How about “Palestinians are human being too!” That is not aggressive. To make it more ecumenical, one could add “And so are the Russians, despite what Ukrainian neo-Nazis say.”
I can understand why Israelis feel threatened by Palestinians. They know how many they have killed and brutalized to grab their land, killing just to “free” the land for themselves. They must think “If the Palestinians are like us, they must want to kill us, because of what we have done to them and there can never be a two-state solution and we can never live together, because this land was given to us by God.”
Netanyahu fanned the flames after his April 24 speech by raising today’s conflict to the level of a fight for civilization: “What is important now is for all of us, all of us who are interested and cherish our values and our civilization, to stand up together and to say enough is enough.”
Is what Israel is doing, and what the United Nations, the International Court of Justice and most of the Global Majority oppose, really “our civilization”? Ethnic cleansing, genocide and treating the Palestinian population as conquered and to be expelled as subhumans is an assault on the most basic principles of civilization.
Peaceful students defending that universal concept of civilization are called terrorists and anti-Semites – by the terrorist Israeli Prime Minister. He is following the tactics of Joseph Goebbels: The way to mobilize a population to fight the enemy is to depict yourself as under attack. That was the Nazi public relations strategy, and it is the PR strategy of Israel today – and of many in the American Congress, in AIPAC and many related institutions that proclaim a morally offensive idea of civilization as the ethnic supremacy of a group sanctioned by God.
The real focus of the protests is the U.S. policy that is backing Israel’s ethnic cleansing and genocide supported by last week’s foreign “aid.” It is also a protest against the corruption of Congressional politicians raising money from lobbyists representing foreign interests over those of the United States. Last week’s “aid” bill also backed Ukraine, that other country presently engaged in ethnic cleansing, where House members waved Ukrainian flags, not those of the United States. Shortly before that, one Congressman wore his Israeli army uniform into Congress to advertise his priorities.
Zionism has gone far beyond Judaism. I’ve read that there are nine Christian Zionists for every Jewish Zionist. It is as if both groups are calling for the End Time to arrive, while insisting that support for the United Nations and the International Court of Justice condemning Israel for genocide is anti-Semitic.
What CAN the students at Columbia ask for:
Students at Columbia and other universities have called for universities to disinvest in Israeli stocks, and also those of U.S. arms makers exporting to Israel. Given the fact that universities have become business organizations, I don’t think that this is the most practical demand at present. Most important, it doesn’t go to the heart of the principles at work.
What really is the big public relations issue is the unconditional U.S. backing for Israel come what may, with “anti-Semitism” the current propaganda epithet to characterize those who oppose genocide and brutal land grabbing.
They should insist on a public announcement by Columbia (and also Harvard and the University of Pennsylvania, who were equally obsequious to Rep. Stefanik) that they recognize that it is not anti-Semitic to condemn genocide, support the United Nations and denounce the U.S. veto.
They should insist that Columbia and the other universities making a sacrosanct promise not to call police onto academic grounds over issues of free speech.
They should insist that the president be fired for her one-sided support of Israeli violence against her students. In that demand they are in agreement with Rep. Stefanik’s principle of protecting students, and that Dr. Shafik must go.
But there is one class of major offenders that should be held up for contempt: the donors who try to attack academic freedom by using their money to influence university policy and turn universities away from the role in supporting academic freedom and free speech. The students should insist that university administrators – the unpleasant opportunists standing above the faculty and students – must not only refuse such pressure but should join in publicly expressing shock over such covert political influence.
The problem is that American universities have become like Congress in basing their policy on attracting contributions from their donors. That is the academic equivalent of the Supreme Court’s Citizens United ruling. Numerous Zionist funders have threatened to withdraw their contributions to Harvard, Columbia and other schools not following Netanyahu’s demands to clamp down on opponents of genocide and defenders of the United Nations. These funders are the enemies of the students at such universities, and both students and faculty should insist on their removal. Just as Dr. Shafik’s International Monetary Fund fell subject to its economists’ protest that there must be “No more Argentinas,” perhaps the Columbia students could chant “No More Shafiks.”
Image by Ivana Tomášková from Pixabay
Platypus interview on The Destiny of Civilization
The destiny of civilization: An interview with Michael Hudson
On July 15, 2022, Platypus Affiliated Society member D. L. Jacobs interviewed Michael Hudson to discuss his new book, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism (2022). An edited transcript follows.
D. L. Jacobs: Can tell us about your background regarding Marxism and how you came to political economy?
Michael Hudson: Well, I grew up in a Marxist household. My father was a political prisoner, one of the Minneapolis 17.1 Minneapolis was the only city in the world that was a Trotskyist city, and my parents worked with Trotsky in Mexico. So, I grew up not having any intention of going into economics. I wanted to be a musician, and when I was 21, I began writing a history of the connection between music, art, drama theory, and the Renaissance in the 19th century. But then I went to New York and went to work on Wall Street just to get a job. I met the translator of Marx’s Theories of Surplus Value, Terence McCarthy, who convinced me that economics was more interesting than anything else that was happening. He became my mentor, I took a PhD in economics, and that’s it.
DLJ: You begin The Destiny of Civilization by talking about how it was the historical task of both industrial capitalism and classical political economy to emancipate the economy from feudal rentiership. How was classical political economy revolutionary?
MH: Marx said that the role of industrial capitalism was to cut costs of production in order to compete with industrial capitalists in other countries. There are two ways of reducing the costs if you are a capitalist. One is to simply lower wages, but if you lower wages, you don’t get high productivity labor. The Americans, by the 19th century, realized that the higher the wage was, the higher the labor productivity, because productive labor was well-educated. well-fed, healthy labor. The idea of capitalism was, number one, to reduce the costs of production that were unnecessary. Namely, what did labor have to pay just to live that wasn’t really necessary. The biggest cost of labor was land rent — this paid for high food prices if there was agricultural protectionism, as in London, England until 1846 — and housing rent. The idea was that socialism would replace all landlords as rent recipients by either taxing away the land rent or nationalizing the land.
The state would be the landlord and that would be its source of fiscal funding. It didn’t have to tax labor, but would tax landlords. The other way that capitalism would reduce labor’s living costs was working to prevent monopolies, to prevent all forms of economic rent. That was revolutionary because feudalism was based on a hereditary landlord class: the heirs of the warlords, the Normans, who had conquered France, England, and the rest of the earth. The monopolies that had been privatized and created were largely by governments running into war debts. The bank of England was a monopoly created with £1.2 million to be paid and government debt. Many British trading companies and monopolies, like The South Sea Company of the South Sea Bubble, were created this way in order to finance their war debts.
Capitalism wanted to get rid of all of the economic overhead and to be a more efficient society. Instead of having private monopolies produce basic needs like health care, it will have public health care. Instead of monopolies providing communications, transportation, or telephone services, the government would have these basic needs provided either freely or subsidized so that labor wouldn’t require a high salary from its industrial employers to pay for its own education, health care, or the other basic needs. In the late-19th century, everybody thought that industrial capitalism was evolving into socialism of one kind or another: not only Marx, but a proliferation of socialists and books on socialism, e.g., John Stuart Mill, Christian socialists, libertarian socialists. The question was, what kind of socialism would everyone take? That made capitalism revolutionary, until the point that World War I broke out and changed the whole direction.
DLJ: You begin Chapter 5 of Destiny with, “[t]he 19th century’s fight to tax away land rents, nearly succeeded, but lost momentum after World War I.”2 Can you elaborate on this?
MH: In the late 1890’s, the rentiers began to fight back. In academia the real-estate interests and the banks got together and denied that there was any such thing as economic rent. Capitalism is revolutionary, because it wanted to bring market prices in line with the actual cost of production; economic rent was the excess of price over the intrinsic cost value. The idea was that economic rent was a free lunch. and that because it was an empty price, it was a price without a corresponding cost-value. In the U.S., John Bates Clark was saying, there’s no such thing as economic rent. The landlord actually provides a public service in deciding who to rent to and the banks provide a public service in deciding to whom they will make loans. Everybody deserves whatever they can make. This concept underlies today’s Gross National Product (GNP) accounting. If you look at America’s GNP accounting, you have a rent and interest included as a profit — not only interest, but bank penalties and fees.
A few years ago, I called up the Commerce Department that makes the national income and product accounts, and I said, “where do bank and credit card companies’ penalties and late fees occur?” I’d read that banks make even more money on late fees and penalties than they do on the enormous interest charges on their credit cards. And they said, “that’s financial services.” I asked, “how is that a financial service?” And they said, “that’s what banks do: they provide the service, and what they charged was the value of the service.” That’s not what the classical economists would have said. They would have said that what banks charge is an economic rent for the service, and this should be a subtraction from the national income and product accounts, not in addition to it.
I’m working with Dirk Bezemer and others on an article where we calculate how much of the GNP, the reported product, is actually overhead. In other words, what is Gross Domestic Product (GDP) without the FIRE sector (finance, insurance and real estate)? A strict classical economist would say, let’s take out the monopolist rent. How much of American industry’s reported profits, e.g., in healthcare, are really monopoly rent? The idea of industrial development today is to carve out a monopoly where there’s no competition and get super profits. This is a concept that has been dropped, really, ever since World War One, about a century ago. There’s no distinction between productive and unproductive labor, between wealth and overhead. John Bates Clark said that if somebody’s wealthy, they earned the wealth; there’s no such thing as unearned wealth. Today wealth is mainly achieved by asset-price inflation; by capital gains. You won’t find a single wealthy family that made money simply by saving up what they earned. They make money by increasing the price of their stocks and bonds and real estate holdings, not by saving up their earnings. Yet, capital gains, i.e., asset-price inflation, are left out of the statistics of almost every country. So it is very hard to explain how wealth is achieved, and yet that was the purpose of economics in the 19th century and centuries before. But suddenly the idea of wealth has been suppressed as sex was in the day of Sigmund Freud.
DLJ: In Destiny and your articles, you note how the classical conception of the free market has been inverted.3 I.e., it used to be freedom from rentiership, and now it is the freedom of rents. You made reference to GDP, and this goes back to Adam Smith and Ricardo’s distinction of productive and unproductive labor, or net revenue and gross revenue. But Smith also described the government officials as unproductive in that sense, and you can find it in Smith’s translators and Marx.4 In Destiny, you bring up Simon Patten talking about the “fourth factor of production.”5 How does that fourth factor relate to what Smith and Ricardo talk about regarding value? They would say the government officials are not productive labor, yet you’re discussing how they reduce costs by providing public infrastructure.
MH: From Antiquity up through Adam Smith’s time, the main government expense was war, e.g., ancient Rome. Almost all of the public budget was war-making and police, which Smith sees as the same thing. Government had not begun to provide many public needs by the late-19th century. Things that change there were basically from 1815 when the Napoleonic Wars ended outbreak of war in 1914. They call, that was almost a people. Call it a war free Century, despite the Crimean War, and the Civil War, but basically, there wasn’t a World War at that time. Increasingly more of the government budget was spent on public utilities as they were introducing the new industrial, transportation, and health technology.
After the Civil War, American students interested in economics mainly went to Germany to study, and they came back to the U.S. with an idea of Bismarckian state socialism. The chair of the first business school at Wharton School of Economics at the University of Pennsylvania was Simon Patten, who said that land, labor, and capital all receive the respective forms of income, but there is a fourth factor of production: public infrastructure. Public infrastructure differs in that it’s not trying to make a profit or an economic rent. It sells at less than the cost of production, because it’s trying to subsidize the economy, and its productivity should be measured in principle by the degree to which it lowers the economy’s overall cost of production by providing subsidized or free public services.
That concept is antithetical to Margaret Thatcher and Ronald Reagan, who began privatizing these public utilities. The difference is that a privatized, public utility is going to use borrowed money usually — so you have interest charges — and it must make a profit — so you have profits added on the price. In fact, public utilities are natural monopolies, which is why they’re public in the first place. You have economic rent added on, along with other privatized costs that have to be covered. Government doesn’t have to cover the cost: that’s what the taxes are for. If the taxes are a public collection of rent, a rent tax, they’re not only preventing economic rent and lowering the whole economies close to production, but they’re funding public infrastructure to further lower the cost of production. That’s what helped the U.S. undersell Europe, especially England, and become the leading industrial power — by staying out of WWI, except to act as a creditor — emerging from WWI as by far the world’s major intergovernmental predator, to such an extent that it brought on the Great Depression and WWII to resolve the reparations and inter-allied debt problem from WWI.
DLJ: You mentioned Bismarck, and I think of the famous painting of the Battle of Sedan6 where he’s sitting with Louis Bonaparte, the other Bonaparte — to use this language in Europe at the time. Right after the 1848 revolutions, Louis Bonaparte invested in railroads and a lot of investment in Paris, and Marx refers to this as “Imperialist Socialism.”7 The state is stepping in but doing so in order to quell the class struggle. How do you see that then related to this question of government intervention? On the one hand we could say yes, lowering the cost, but on the other hand, isn’t it preserving the conditions that are giving rise to capitalist exploitation and production?
MH: The question is who’s going to control the state? Is the state going to be run by leaders who are engaged in long-term planning as to how to make the economy more productive and raise living standards, or is the state going to be taken over by a financial oligarchy that wants to increase the cost and deindustrialize?
Already 2,500 years ago, Aristotle said that many economies and constitutions that are thought of as being democracies are really oligarchies. That certainly is the case today. Oligarchies call themselves democracies. President Biden says, the world is dividing into two right now: democracy versus autocracy. The autocracy is in the U.S. That’s the oligarchy. Democracy is a confusing word. Political democracy has not been effective in checking economic oligarchy, because, as Aristotle said, democracies tend to evolve into oligarchies and they make themselves into hereditary aristocracies.
The only counter example in early history of what America calls autocracy or Karl Wittfogel called “Oriental Despotism” was the Near-East take off. Every Near-East, Mesopotamian, Egyptian ruler would begin their reign with a debt cancellation, a clean slate. They would free the indentured servants, cancel the debts, and return land that was forfeited to the former holders to prevent an oligarchy developing. Civilization in the 3rd–1st centuries BC — all non-Western cultures, going all the way to India and China — try to prevent a mercantile and financial oligarchy from developing.
The West didn’t do that. They had no tradition of royal clean slates, and when they did have their own revolutions in Greece, you had the so-called tyrants. I.e., reformers, who overthrew the closed aristocracy, canceled the debts and redistributed the land. They did just exactly what the Near East did and they catalyzed democracy in Greece. There was infrastructure spending in ancient Greece in the 7th and 6th centuries BC. By the 3rd and 2nd century BC the Greeks were saying that when the oligarchy had taken over, a reformer was someone seeking tyranny. That’s when tyranny took on a bad connotation, like “socialism” today.
The same thing happened in Rome. Rome began with kings trying to make Rome grow in a mosquito-laden, hilly area near the Tiber River. Rome began by offering land rights to fugitives fleeing debt bondage, and the neighboring towns of central Italy. The kings were overthrown in 509 BC, the oligarchy took over, and there were five centuries of revolts by the Romans: the secession of the plebs in the 490s BC, the second secession after 450, and then the many fights. The oligarchy accused any reformers urging alleviation, urging more equal distribution of “seeking kingship.” because there can’t be any state strong enough to check their ability to impose land rent and other forms of economic rent.
When President Biden juxtaposes democracy to autocracy, he wants America to fight against any country — Russia, China — that does not privatize its public domain like Thatcher and Reagan were doing. Biden defines an autocracy as a country that does not privatize and make a free market for the rentiers to take over. The ideal of American neoliberalism is what the Americans did to Russia under Boris Yeltsin: take all of the public assets, the nickel mines, oil, gas, and the land and give it to the managers to register in their own name. The result was that Russia lost more of its population as a result of neoliberal privatization than it had lost during WWII, as President Putin likes to say. This is the whole framework of Destiny, where I am trying to clarify, what is democracy, and what is autocracy, and what is socialism?
DLJ: You write that this is something Western civilization has never dealt with8 — even the political economy has shown it to be unproductive. Marx frequently makes reference to the debtor and creditor struggles in ancient Rome and he usually quotes Simone de Sismondi, who will say that whereas the ancient proletariat lived at the expense of society, modern society lives at the expense of the proletariat.9 Likewise, Smith in Wealth of Nations says that the modern representative institutions were unknown in ancient Rome.10 While there have been examples of debt cancellations today, wouldn’t one say that they also had a different organization of society, when a king would cancel debts in ancient traditional societies? To some degree, yes, we can do it today, but there are different institutions, and the bourgeois revolution might complicate the cancellation of debts, at least, creating a kind of political problem unknown in ancient Greece.
MH: They’re different kinds of debts, and canceling them requires different kinds of institutions. E.g., what’s most in the news these days is student loan debt and that it could be canceled by just an act of President Biden, which he won’t do, because he’s the person that sponsored the bankruptcy law.11 That law made it impossible to cancel student debts by bankruptcy laws. It could be done by a congressional law. The government has all sorts of regulatory agencies to handle corporate debt write-downs. Corporate write-downs in bankruptcy proceedings are a normal course, taking place almost continually, and we’re going to see that again. There are real estate debts.
When the junk mortgage frauds peaked in 2008, President Obama ran by promising to write-down the junk mortgage debts to the actual market value of the homes bought by the victims of bank fraud and to bring the mortgage payments in line with the current rent. As soon as he was elected, Obama invited the bankers to the White House and said, “don’t worry. I’m the only guy standing between you and the pitchforks. That was just to get elected. I’m on your side.” He proceeded to evict seven or eight million American families.
Not only did Obama not write-down the debts, but he started quantitative easing that has given nine trillion dollars to support the real estate market, the stock market, and the bond market, so that the banks and the wealthy rentier 10% of the American economy would not lose any money.
The result was that American home ownership rates have fallen from 69% and plunged into the 50s. America is being turned from a middle-class home ownership economy into a landlord economy. We’re regressing back towards the 19th century, including its legacy of feudalism. That’s what we’re moving toward, as official government policy. We still have a strong government, but the role of the government is now to enforce the debts, not to write them down, and the most serious debts in the news are actually international debts. And of course, international debts cannot be settled by one nation. What is the vehicle to cancel the debts of global South countries like Argentina, that is now in yet another crisis with the International Monetary Fund (IMF). The Argentinian crisis, Sri Lanka — all this will characterize the Global South by this fall as a result of rising energy prices for oil and gas, rising food prices, and capital flight to the U.S. as it raises its interest rate.
If countries have to pay more for food and energy, how can they afford to pay their foreign debts? It’s necessary to have a new international organization to sponsor this. That’s what both President Putin and President Xi have said: we’re going to create a BRICS12 bank as an alternative to the World Bank and the IMF and this will have to accompany a new world court. We are going to provide a different philosophy of operations for this bank: the principle is that no country should be obliged to lower its living standards, bankrupt itself, and privatize its public domain in order to pay foreign debts. If a country can’t pay its debt, it’s a bad loan, and just as individuals and corporations are allowed to declare bankruptcy, countries should be able to declare bankruptcy.
These are mainly dollarized debts. Even though they’re not owed to the U.S., they’re often owed to their own oligarchies. Most dollar debts in Brazil are owned by Brazilians. Most dollar debts of Argentina are owned by wealthy Argentines because no one else is going to take a risk that they won’t pay. But the Brazilians say, we run the presidency, the central banks, and most of all, we run the police: if someone wants to cancel the debts, we’ll just kill them.
Violence has always been hand-and-hand with a high finance ever since Rome, through the Spanish, English, and French empires. The advocates of debt cancellation, from Catiline to Julius Caesar, were assassinated. There were five centuries of assassinations of Roman senators and reformers wanting to alleviate the debt. The U.S. is engaged in similar practices today. So you are right to put the debt in the political context. What is the vehicle to oversee debt cancellation, when in almost every Western economy, the oligarchies — often creditor oligarchies — have taken control of the government, as in the U.S. via election funding and dominating policy. This is unique in Western Civilization.
There’s always been empires consolidated by extortion of colonies. Today, we don’t say that America is involved in colonialism; we say America is a leader of globalization, which is a euphemism for colonialism, specifically, financial colonialism that indebts other countries, using that as a lever to privatize their public domain, utilities, national resources, and their commanding heights.
DLJ: Returning to the 1890s, this is the period leading up to 1914, which is, as you put it, the turning point for the dollar creditocracy: the 1890s as the imperialist era, in the Second International and going into the Third International. I was thinking about Lenin’s view of the growth of finance and of how you had banks that were taking over different companies, that were maybe even competing with each other and/or different sectors. He saw this as an opportunity for socialism. In your text, you mention how finance capitalism has diverted from socialism, or inhibited or blocked that opportunity.13 I was thinking of Lenin’s famous line, “[w]ithout big banks socialism would be impossible.”14 This doesn’t mean that J. P. Morgan and Bank of America are socialist, but rather that they created the institutional apparatus that could be the transformation into a socialized society.
MH: In terms of how economies allocated their resources and how they were planned, this forward-planning was coordinated largely by banks, often in conjunction with the government. This occurred most clearly in Germany where the German government worked with the Reichsbahn and heavy industry, especially in the military field, to build warships and armaments. The idea was state capitalism in Germany: a three-way linkage between government, industry, and finance. In the U.S., these were separated: finance took the form of the mother of trusts. The Wall Street banks would create a steel trust, a copper trust, and they would integrate all the different companies in the field to create a monopoly. In this case they were the former planners trying to create monopolies, but there was the Sherman Antitrust Act of 1890 and Teddy Roosevelt coming on as a trust-buster. Roosevelt tried to prevent finance acting as a promoter of the rentier class, as the monopoly class, to prevent industrial capitalism from being turned into monopoly capitalism. All of this momentum ended in the wake of WWI.
But there was this question of what kind of socialism are we going to have? What kind of government are we going to have? Are we going to have a government that is in charge of steering prosperity and raising living standards or a government by the 1%, the elite, who will impoverished societies? Two things happened in 1913 in the U.S.: first, income tax that only fell on the wealthiest 1% of Americans, mainly on monopoly rent and real estate. The other event of 1913, at the very end of the year, was the Federal Reserve was created to replace the Treasury and to take over the Treasury’s function, shift financial policy, moving away from Washington to Wall Street, and other financial centers, such as Philadelphia and Boston. This was the explicit aim.
The National Monetary Commission published a series after the 1906–07 crash: a wonderful set of volumes about reviewing the global financial situation all over the world. David Kinley wrote a book on the U.S Treasury, showing that essentially the Treasury was performing all of the functions that we now think of as part of the Federal Reserve. The Federal Reserve has 12 districts, the Treasury had sub-Treasuries all over the country that were in charge of local development. All of this was privatized under the leadership of J.P. Morgan, who organized the Fed and sponsored President Wilson, who also got the country into war. The Democrats were, from the very beginning, the party of the rentiers, the anti-Labor party, as they are today. They were the sponsors of Wall Street as opposed to the Republicans, who until the 1970s and 80s, had represented industrial capitalism protecting itself from the rentiers.
Looking at the turn of the 20th century, you see the different roads that could have been taken, and you realize that there were many alternatives and that there’s nothing natural in the way that today’s economy is structured. Economists say this is the result of Darwinian struggle for existence, and that’s what the free market is, and there is no alternative as Thatcher said. But there were plenty of alternatives back in the 1890s, when the world seemed to be moving towards socialism of one form or another, especially the Marxian socialism dominated by the wage-earning class which was going to be democratic socialism.
Instead we have oligarchic socialism in the U.S. and oligarchic state capitalism really isn’t state capitalism. Think of America’s policy as state neo-feudalism, because the purpose of the state is to protect the rents of finance, real-estate, oil, mining, and natural resources. The idea of the Biden Administration — really of both the Republican and Democratic Parties — is that since America has moved its industry and manufacturing to Asia in order to lower the wages here, how can Americans continue to get high-living standards, if it doesn’t produce raw materials or manufacturers? How can it be a post-industrial society, getting rich on economic rents and interest on and profits paid by foreign countries? How can America get rich by being a parasite? That was a problem that the Roman Empire had, and we know what happened to the Roman Empire. It was a problem that the British Empire had, and we know what happened to that: it can’t be done.
This attempt to make America into a post-industrial society means a rent-seeking, neo-feudal society, treating the rest of the world as a colony under globalization. How can that work? Well, It’s not working. Biden’s war, the NATO war, against Russia in the Ukraine is the catalyst dividing the world into two. That’s why Secretary of State Anthony Blinken said that the Ukraine war is part of a process that will go on for at least two decades, because it takes time for the world to split away into a neo-feudal West and a productive, basically socialistic Asia, or industrial capitalist and socialist Asia, and Eurasia, along with much of the global South.
DLJ: You have an interesting history about Georgists, socialists, and the debates between them regarding the rent question, or the emphasis on capital and labor. Is the neo-feudalism or the new rentiership of the West bound up with a failure of socialism in some way? I.e., you discuss the manner in which mainstream socialists forgot the rent question or subordinated it to capital and labor.15
MH: Henry George was one of the first investigative reporters that exposed the inequity of rent-seekers. His first book was a wonderful exposé of how the railroads got land grants in order to develop the land, using the land grants to become highly exploitative landlords throughout the western states. This was impoverishing the farmers by siphoning farm income off in the form of land rent and railroad charges. George became popular in the large cities that were largely Irish — New York, and Boston — by writing a wonderful book on the Irish land question. His writings inspired a generation of journalists in the 1870s–90s, such as Ida B. Wells and Upton Sinclair. Many of these reformers had originally been supporters of George. When there was a New York City election, the socialists and the labor parties selected George to run as mayor, as a celebrity-candidate, because he had written Progress and Poverty (1879). It’s not a very good book, but it was very popular at the time.
George said he could only run if he could get rid of everything that the socialists had wanted; everything that the working-class had wanted. He said, “I have a panacea, it’ll solve everything: just tax the land. You don’t need control of landlords, you don’t need to make them have decent housing. All you need is land-rent.” The socialists said, “There’s much more to the economy than taxing the landlord; there’s a labor problem. There’s a financial problem. The banks seem to be running everything.” George said, “the enemy is big government.” The socialists replied, “you need a strong enough government to check the landlords, who are the strongest class in New York City which is largely a rental city?” So, George formed his own political party, expelling any socialists and he defended the banks.
Many bankers supported him because he called for the banks to remain in private hands. He said, “I can’t figure out a way to tax a bank interest, like you can tax land-rent.” He was criticized for that, the party didn’t go anywhere, and he ended up expelling his strongest supporters, who had joined him thinking that taxing the land was part of an overall social restructuring. The word panacea, sort of developed specifically because it went hand-in-hand with the name of the Georgists. George’s followers became libertarians and anti-socialist.
Followers of George and the socialists went all around the U.S., having debates, most of which were transcribed and published by Charles H. Kerr & Co., the socialist collective that published Marx’s Capital in English. The common theme of the debate was that society is going to go in one direction or another: either socialist or middle-class. The problem is that taxing the land rent doesn’t solve the labor problem. It doesn’t solve the tension between wage-earners and employers as to working conditions that they have. It doesn’t have anything to do with economic planning. George had actually become libertarian and anti-socialist, and his followers became so anti-socialist that in Europe they were the among the earliest supporters of the Nazis. In the U.S. they were noted Nazi sympathizers. Many of the leading Georgists were known for their anti-Semitism. When I went to the Henry George School Library in New York, I was amazed at all the anti-semitic books in their library. I knew a number of teachers there, and they said that because the school was supporting Germany early in WWII, most of the attendants were FBI agents. The head of the School told me that the number two guy at the Henry George School was part of the Nazi intelligence operation in the U.S. before escaping back to Germany.
I realized that a government strong enough to check the landlords has to be a socialist government. You can’t say, I’m a libertarian, I’m against strong government, and then hope that the landlords are going to end up being taxed. That’s an oxymoron.
DLJ: You write:
[i]t always should be borne in mind that solving the problem of finance capitalism and the rentier legacy of feudalism would still leave the class conflict of industrial capitalism in place. Freeing the economy from rentier overhead charges would not solve the problem of exploitation of labor by its employers. But taking the intermediate step of creating a classical economy free of rentier claims is a precondition before the labor/capital conflict can become the focal point of political reform, having finally freed capitalism from the rentier legacy of feudalism.16
It seems the socialists should have paid heed to this question of rentiership and that this was an opportunity missed at the turn of the 20th century. You’re saying that today financialization is a more immediate barrier rather than subordinating finance to the capital-labor relationship.
MH: This shows the role of personalities in history. The Georgists were so anti-socialist that the socialists left the rent issue to followers of George. That’s why it was Marxists and socialists who wrote about finance capitalism, whereas most of the society treated finance as if it were part of the industrial system, not extraneous to the industrial system.
So you’re right. The socialists after WWI didn’t focus highly on finance, but things changed quite a bit after WWII. The CIA put money into supporting progressive literary and cultural figures as leaders of the socialist movement, focussing on what the CIA called, “the mighty Wurlitzer,” to control public opinion concerning the socialist parties. This results in the British Labour Party having Tony Blair, who was to the Right of Thatcher, who identified Blair as her greatest legacy, in privatizing Britain’s railroads. The social democratic parties in Europe jumped on the neoliberal bandwagon largely because of the U.S. meddling in foreign politics, which pushed neoliberals and socialists to stop talking about economic issues.
In the U.S., there is identity politics, but the one kind of identity you don’t have is the identity of wage earners. That’s been stripped away from the socialist parties of the United States and Europe, and so the socialist parties are no longer socialist. The irony is that what people thought of as being a socialist in a sense of a more efficient economy, free of bad statism and free of war — the Republicans in the U.S. and the nationalists in France and Germany are against the war in Ukraine, the NATO War. The socialists, Bernie Sanders and AOC, voted for giving money to Ukraine. So the word socialism has changed quite a bit into the opposite. Almost the whole economic vocabulary that is used today is the opposite of what it meant a century ago, and that’s what my book, J is For Junk Economics is all about.17 That’s what I talk about when I’m in China.
DLJ: Do you see China as realizing the ideals of classical political economy better than the West? That might be a provocative statement because, for a lot of Americans, China means communism, and so it would mean the opposite of Adam Smith — at least that’s what we’ve been taught since the 20th century by something like the Adam Smith Institute, a neoliberal think-tank.
MH: The Adam Smith Institute hates everything that Adam Smith stood for. That’s why it’s called the Adam Smith Institute: to confuse people! Smith wanted to tax land-rent. The Adam Smith Institute wants to glorify the landlords, privatize public housing, and create a rentier and financial utopia for the 1%. There’s a reason why the economics curriculum in the U.S. no longer has the history of economic thought, because if you study the history of economic thought, which they taught when I was in school 60 years ago, you would know that when people talk about Adam Smith and free markets, it’s the exact opposite of the kind of free market that Smith talked about. What Marx described was capitalism. That’s why he called his book Capital, not Socialism.
What the Chinese government is trying to follow has been called a “state-capitalist society” or a “communist society”: the focus is on productive labor and productive investment. The most important feature of China is that it kept the banking sector and money creation in the public domain. In the West, commercial banks create credit against assets that are already in place. Mortgage loans are made against real estate in place. Corporate takeover loans are made to corporations in place. Government control of money, as it was in Germany in the late 19th century, created new means of production, especially public infrastructure.
China does not have its banks make loans for corporate takeovers, or for mergers and acquisitions. China makes them increase the means of production. In that sense they are following the industrial capitalist policy that evolves naturally into socialism, which is why they call themselves a socialist economy, and rightly so, because they’re not running the economy on behalf of the 1%. Obviously, by letting a hundred flowers bloom, they realized that the state cannot act as the Stalinist state did as a central planner. They need innovation, they need individual innovators to create market opportunities and new products and that’s been best done by letting market forces take place. But when somebody achieves such a hyper-billionaire level, as did Jack Ma with his phone payments company, they coordinate the private wealth that is created to serve the long-term public interest. That’s why there is a strong state.
The Communist Party of China is delegated to administer economic democracy, something that political democracy has not been able to do in the Western countries. You need a state to act as the agent of social planning, so that it’s not the banks and the rentier sector that does it, as occurred in the U.S. and Western Europe. Europe. China is doing what most of the world was doing before Western civilization took off and in an oligarchic form.
DLJ: Do you think the U.S. could do that? In many ways, China’s extraordinary growth, especially post-Deng Xiaoping reform era has presupposed the U.S.’s current account deficit; these “twin deficits” where the U.S. is this large importer from China. I’m thinking to what degree there’s also a mutual character to it as well. Maybe that has been in crisis. When Trump came to office – I’m not saying whether or not he was correct – he was expressing to some degree a process of deindustrialization in the U.S. that has turned the U.S. into a consumer nation without having any production. When I think of two nations having industrial production, I also think back to the end of the 19th century, what Karl Kautsky called the fall of the Manchester School: once one country begins to have state intervention, it encourages other nations to have state intervention. How do you see this working out, besides the more violent past? What do you think would be a more positive way of this working out?
MH: Technologically, of course, the U.S. could redevelop; it has developed before. But it can’t do so, because politically it’s controlled by the anti-labor party. Both Democrats and Republicans are controlled by the rentier interests that seek to increase corporate profits by looking around the world for the cheapest labor, which is not in the U.S.
An even more serious problem is that the rulings in the Supreme Court have turned America into a failed state, e.g., how the Supreme Court ruled that the existing anti-pollution laws, the environmental protection laws by the EPA were unconstitutional, because the government has no power over the states. Or when they say “we on the Supreme Court know that the Constitution was written by slave owners who wanted state power to be in the states, not the federal government, because they feared that if there were a federal government and the northern population wanted to abolish slavery, we could abolish it. Every state gets to go their own way.”
America is an evolved slave-owning state, even though there’s no more slavery, the fight against federal power has been adopted by rentier class. It’s literally a neo-feudalism class. If you cannot have the government, either Congress or the president impose basic environmental, social, educational, or any other social regulation, and if everything is deregulated state-by-state, you have a dissolution of the government and a paralysis. The U.S. now is in a state of political paralysis locking itself into the current status quo, which means that the U.S. cannot have any kind of an industrial recovery, because that requires a federal policy to check the overhead of the banking system, the real estate sector, and the insurance sector. You can’t have a Supreme Court that would prevent any kind of a public health system, a single-payer public health system, and yet 18% of America’s GDP is for medical care. America has priced its labor and its industry out of world markets by having to pay so much debt service, so much insurance for medical care, home insurance, and real estate rents. As long as this revenue is paid out in the form of rent, you’re not going to develop.
DLJ: It almost sounds like you’re pointing to the need for a political revolution. If the potential for development in the U.S. is checked by a rentier class, it is an infringement upon the people, from the perspective of classical bourgeois political theory.
MH: If other countries in the past had a problem like the U.S. now has with the Supreme Court, they would have had a revolution. A European prime minister would invite the court into the office and say, “I’m sorry but I’ve got to make a choice: either you resign or I’m going to have to either execute you or let the mob outside come in and lynch you.” Wouldn’t you rather resign? It would be settled by some kind of revolt like you’re seeing with the Yellow Vests in France or like you saw in the 1848 Revolutions throughout Europe. That’s not likely in America because there’s no real consciousness that there is an alternative.
There’s no group in America, no political party, that is offering an alternative to the current political and economic system in America. The fact that you have two parties in America that are really the same party, means that there’s no room for a new party to come and, as it would in Europe, get represented in Congress. In Europe, you can have any number of parties, and they would be represented in Parliament in proportion to their votes. A third party would be kept off the ballots in the U.S., and that’s why Bernie Sanders and others decided not to run as a third party; there’s no way we can meet the court challenges by the Republicans and the Democrats together. Sanders had to pretend to run as a Democrat. But we’ve seen that the Democrats don’t want any part of anything progressive. There’s an illusion that somehow the Democrats can be progressive because they have people who can’t find any alternative, who are running as a Democrat. Whereas in Europe, they are running as nationalists, as third parties, e.g., Alternative für Deutschland.
I just don’t see the political development in the U.S. that would be a precondition for an economic restructuring to get back on the pre-WWI track. There was anti-monopoly legislation that would be hard to impose. Biden talks as if he’s against monopolies. but he’s supporting the monopolies, e.g., for Pfizer with regard to the vaccines: the government does the research and gives it to Pfizer who makes huge monopoly rents protected by the Biden Administration. Large companies are able to buy control of the politicians by paying for their election contributions under the Citizen’s United Supreme Court ruling, and they do. They control the mainstream media. People just don’t have an idea that there is an economic alternative, which would not be the socialism that is represented by people who call themselves socialist, but are actually enable neoliberals.
DLJ: I’m trying to think about Destiny and its purpose. How could it raise consciousness in the U.S.? You mentioned going back to pre-WWI conditions. In the Communist Manifesto (1848) Marx and Engels speak of reactionary reformers who want to turn back the wheel.18 I.e., for Marx and Engels, it was always a question of how opportunities develop out of the present, rather than trying to clean the slate. The financialization in the United States, for them, poses the question of developing this neo-feudalism into socialism. In other words, we can’t go back to pre-1914. How does one find the opportunities in the present to even point towards alternatives within the U.S.?
MH: I have not found an alternative for the U.S., and so I can’t come up with a panacea. I remember Max Schachtman gave a speech in the late 1960s, where he asked, “what’s happened to all my old socialist friends? What happened to the socialists?” He said, they all went out West; they all withdrew. They thought, “we can just have community development,” and there were all sorts of ideas and utopian communities founded throughout the U.S.. There were French followers of Saint Simon attempting to make utopian communities, followers of Henry George, making utopian land-tax communities. They’re all middle-class bourgeois communities today. All the socialist communities were all very artsy: they’ve all become arts and crafts centers today. The last thing they want is a land tax that prevents their housing prices from going up.
I don’t see how things can be fixed in the U.S., which is why I’ve spent most of my time analyzing what’s happening in Asia and working primarily with countries from Asia and elsewhere, which seems to be where most of the flexibility and innovation resides. My idea is that if people see that what Asia is doing is quite simply what America could be doing and isn’t, it would be the only way to show them that there is an alternative. You can’t just draw an alternative and apply it as an idealistic application. You have to show that it’s working somewhere. I’m trying to explain why China was able to make its economy grow and raise the living, educational, and health standards for its population, and that the West hasn’t. And that is the path on which the West would have to develop, but it has not been able to check oligarchies.
Non-Western countries are able to do that, and that’s what the fight of global South reform is going to be by this fall when the grace of the debt crisis, really is the trigger for a restructure.
DLJ: Economies are interdependent. I.e., it would still be a question of the Chinese working class and the American working class building bonds across nations.
MH: The Democratic Party has produced such an anti-Asian, hate-filled racism, that I don’t think that can be. The Democratic Party has done everything it could to spur an ethnic war between the black and Asian populations. You see that here in New York by the attacks on the subways, on the street, mainly by blacks against Asians. The Democratic Party, by pushing this ethnic identity, has pushed ethnic hatred.
That’s why the Democrats are surprised that the Hispanics and Asians are moving towards the Republicans. The Hispanics and Asians realize that the Democrats have a race-hatred policy, much like the Nazis. I don’t believe that any political progress can be made in the U.S. until the Democratic Party, certainly the current leadership, is swept away. There cannot be any progress in America today led by the Democratic Party, which is today the ideologically Right-wing party that has turned what should be an economic problem into an ethnic and non-economic problem. It’s like the old industrial capitalist was supposed to have said, “if I can get half the working class fighting against the rest of the working class, then we have won.” That’s the Democratic Party. They asked, “how do we do it?” We divide the working class into ethnicities, ethnic identity, gender identity.
DLJ: You can have the working class cancel each other.
MH: Yes.
Footnotes
- Carlos Hudson. See Michael Hudson, “Dad’s Many Proverbs” (June 17, 2017), available online at https://michael-hudson.com/2017/06/dads-many-proverbs/;.
- Michael Hudson, The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism (Glashütte: ISLET-Verlag, 2022), 85.
- Hudson, Destiny, 165: “Reversing the tradition of classical value, price and rent theory, neoliberal economics teaches that all income is earned, and that all forms of economic rent are not merely transfer payments but contribute to output, as measured by neoliberal formulations and redefinition of Gross Domestic Product (GDP). This inversion of classical logic is so far-reaching and censorial that it has influenced Chinese and Russian planning as well as that in the Western economies.”
- See Karl Marx, “Theories of Productive and Unproductive Labor,” in Theories of Surplus Values (1863), available online at https://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch04.htm;.
- Hudson, Destiny, 120: “China has invested in a vast public infrastructure network to facilitate its industrial production by minimizing the cost of living and doing business. This has saved employers from having to pay higher wages for labor to afford privatized education, health care, transportation and other essential services. These basic needs are provided by public infrastructure, which Simon Patten called a ‘fourth factor of production.’”
- Wilhelm Camphausen, “Napoleon III and Bismarck, on the morning after the Battle of Sedan” (1878).
- Karl Marx, “The French Crédit Mobilier,” The People’s Paper 214, June 7, 1856, available in Marx and Engels Collected Works, vol. 15, and online at http://marxengels.public-archive.net/en/ME0978en.html;.
- Hudson, Destiny, 270: “These redistributive and fiscal principles are the basis of modern socialism but not of Western economies. Ever since classical Greece and Rome stopped the Near Eastern practice of Clean Slates, Western economies have not been able to save themselves from polarizing between creditors and debtors, landlords and tenants, patrons and clients. Today, the neoliberal reaction against social democracy has ensured such polarization, first by letting debts grow faster than the ability to be paid and hence concentrating wealth in the hands of creditors, and second by advocating that basic public utilities be privatized and run by financial managers, not provided as a human right.”
- Karl Marx, Preface to the Second Edition (1869), in The Eighteenth Brumair of Louis Bonaparte (1852), available online at https://www.marxists.org/archive/marx/works/1852/18th-brumaire/preface.htm;: “Lastly, I hope that my work . . . will contribute toward eliminating the school-taught phrase now current, particularly in Germany, of so-called Caesarism. In this superficial historical analogy the main point is forgotten, namely, that in ancient Rome the class struggle took place only within a privileged minority, between the free rich and the free poor, while the great productive mass of the population, the slaves, formed the purely passive pedestal for these combatants. People forget Sismondi’s significant saying: The Roman proletariat lived at the expense of society, while modern society lives at the expense of the proletariat. With so complete a difference between the material, economic conditions of the ancient and the modern class struggles, the political figures produced by them can likewise have no more in common with one another than the Archbishop of Canterbury has with the High Priest Samuel.”
- Adam Smith, “Book IV: On the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope,” in Wealth of Nations (1776), available online at https://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book04/ch07c-2.htm;: “The idea of representation was unknown in ancient times. When the people of one state were admitted to the right of citizenship in another, they had no other means of exercising that right but by coming in a body to vote and deliberate with the people of that other state. The admission of the greater part of the inhabitants of Italy to the privileges of Roman citizens completely ruined the Roman republic. It was no longer possible to distinguish between who was and who was not a Roman citizen. No tribe could know its own members. A rabble of any kind could be introduced into the assemblies of the people, could drive out the real citizens, and decide upon the affairs of the republic as if they themselves had been such. But though America were to send fifty or sixty new representatives to Parliament, the doorkeeper of the House of Commons could not find any great difficulty in distinguishing between who was and who was not a member. Though the Roman constitution, therefore, was necessarily ruined by the union of Rome with the allied states of Italy, there is not the least probability that the British constitution would be hurt by the union of Great Britain with her colonies. That constitution, on the contrary, would be completed by it, and seems to be imperfect without it. The assembly which deliberates and decides concerning the affairs of every part of the empire, in order to be properly informed, ought certainly to have representatives from every part of it That this union, however, could be easily effectuated, or that difficulties and great difficulties might not occur in the execution, I do not pretend. I have yet heard of none, however, which appear insurmountable. The principal perhaps arise, not from the nature of things, but from the prejudices and opinions of the people both on this and on the other side of the Atlantic.”
- Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
- Brazil, Russia, India, China, and South Africa.
- Hudson, Destiny, 42: “Finance capitalism aims to avoid what Marx and indeed the majority of his contemporaries expected: that industrial capitalism would evolve towards socialism, peacefully or otherwise. By finding its main source of exploitation to be rent-seeking, not only from land and natural resources but increasingly from privatizing public investment in infrastructure and creating new monopolies, finance capitalism renders economies high cost. That prevents industrialists from underselling competitors in less rent-and- debt-strapped economies…That is why it seemed a century ago that the destiny of industrial capitalism was to evolve into socialism. Public education, health care, roads and basic infrastructure and pensions were coming to be provided by government at subsidized administered prices or freely. Industrial capital backed this policy as a means of shifting as many ‘external’ costs as possible onto the public sector. But that is not the way matters have turned out. And today’s victorious finance capitalism, centered in the United States, is trying to prevent its takeover of industrial economies from being rolled back. That means preventing such a rollback from occurring in other countries. It also requires overcoming other countries’ resistance to finance capital’s takeover of their economies.”
- V. I. Lenin, Can the Bolsheviks Retain State Power? (October 1, 1917), available online at https://www.marxists.org/archive/lenin/works/1917/oct/01.htm;: “Capitalism has created an accounting apparatus in the shape of the banks, syndicates, postal service, consumers’ societies, and office employees’ unions. Without big banks socialism would be impossible. The big banks are the ‘state apparatus’ which we need to bring about socialism, and which we take ready-made from capitalism; our task here is merely to lop off what capitalistically mutilates this excellent apparatus, to make it even bigger, even more democratic, even more comprehensive. Quantity will be transformed into quality. A single State Bank, the biggest of the big, with branches in every rural district, in every factory, will constitute as much as nine-tenths of the socialist apparatus. This will be country wide book-keeping, country-wide accounting of the production and distribution of goods, this will be, so to speak, some thing in the nature of the skeleton of socialist society. We can ‘lay hold of’ and ‘set in motion’ this ‘state apparatus’ (which is not fully a state apparatus under capitalism, but which will be so with us, under socialism) at one stroke, by a single decree, because the actual work of book-keeping, control, registering, accounting and counting is performed by employees, the majority of whom themselves lead a proletarian or semi-proletarian existence.”
- Hudson, Destiny, 162: “One of the most fateful byproducts of George’s defense of capital was to so repel socialists that they left the issue of land taxation to his followers — and in so doing, socialists drifted away from rent theory. The socialist mainstream treated classical land and rentier problems as subordinated to problems between labor and industrial capital.”
- Hudson, Destiny, 103–04.
- Michael Hudson, J is For Junk Economics: A Guide to Reality in an Age of Deception (Glashütte: ISLET-Verlag, 2017).
- Karl Marx and Friedrich Engels “Part 1: Bourgeois and Proletarians,” in The Communist Manifesto (1848), available online at https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm.;
It may seem strange to invite an economist to give a keynote speech to a conference of the social sciences. Economists have been characterized as autistic and anti-social in the popular press for good reason. They are trained to think abstractly and use a priori deduction – based on how they think societies should develop. Today’s mainstream economists look at neoliberal privatization and free-market ideals as leading society’s income and wealth to settle at an optimum equilibrium without any need for government regulation – especially not of credit and debt.
The only role acknowledged for government is to enforce the “sanctity of contracts” and “security of property.” By this they mean the enforcement of debt contracts, even when their enforcement expropriates large numbers of indebted homeowners and other property owners. That is the history of Rome. We are seeing the same debt dynamic at work today. Yet this basic approach has led mainstream economists to insist that civilization could and should have followed this pro-creditor policy from the very beginning.
The reality is that civilization could never have taken off if some free-market economist had got into a time machine and travelled back in time five thousand years to the Neolithic and Bronze Age. Suppose that he would have convinced ancient chieftains or rulers how to organize their trade, money and land tenure on the basis of “greed is good” and any public regulation is bad.
If some Milton Friedman or Margaret Thatcher had persuaded Sumerian, Babylonian or other ancient rulers to follow today’s neoliberal philosophy, civilization could not have developed. Economies would have polarized – as Rome did, and as today’s Western economies are doing. The citizens would have run away, or else backed a local reformer or revolutionist to overthrow the ruler who listened to such economic advice. Or, they would have defected to rival attackers who promised to cancel their debts, liberate the bondservants and redistribute the land.
Yet many generations of linguists, historians and even anthropologists have absorbed the economic discipline’s anti-social individualistic world view and imagine that the world must always have been this way. Many of these non-economists have unwittingly adopt their prejudices and approach ancient as well as modern history with a bias. Our daily discourse is so bombarded with the insistence by recent American politicians that the world is dividing between “democracy” with “free markets” and “autocracy” with public regulation that there is much fantasy at work about early civilization.
David Graeber and I have sought to expand the consciousness of how different the world was before Western Civilization took the Roman track of pro-creditor oligarchies instead of palatial economies protecting the interests of the indebted population at large. At the time he published his Debt: The First Five Thousand Years in 2011, my Harvard group of assyriologists, Egyptologists and archaeologists was still in the process of writing the economic history of the ancient Near East in a way that was radically different from how most of the public imagined it to have occurred. David’s and my emphasis on how royal Clean Slate proclamations cancelling debts, liberating bond-servants and redistributing the land were a normal and expected role of Mesopotamian rulers and Egyptian pharaohs was still not believed at that time. It seemed impossible that such Clean Slates were what preserved liberty for the citizenry.
David Graeber’s book summarized my survey of royal debt cancellation in the ancient Near East to show that interest-bearing debt originally was adopted with checks and balances to prevent it from polarizing society between creditors and debtors. In fact, he pointed out that the strains created by the emergence of monetary wealth in personal hands led to an economic and social crisis that shaped the emergence of the great religious and social reformers.
As he summarized “the core period of Jasper’s Axial age … corresponds almost exactly to the period in which coinage was invented. What’s more, the three parts of the world where coins were first invented were also the very parts of the world where those sages lived; in fact, they became the epicenters of Axial Age religious and philosophical creativity.” Buddha, Lao-Tzu and Confucius all sought to create a social context in which to embed the economy. There was no concept of letting “markets work” to allocate wealth and income without any idea of how wealth and income would be spent.
All ancient societies had a mistrust of wealth, above all monetary and financial wealth in creditor hands, because it generally tended to be accumulated at the expense of society at large. Anthropologists have found this to be a characteristic of low-income societies in general.
Toynbee characterized history as a long unfolding dynamic of challenges and responses to the central concerns that shape civilizations. The major challenge has been economic in character: who would benefit from the surpluses gained as trade and production increase in scale and become increasingly specialized and monetized. Above all, how would society organize the credit and debt that was necessary for specialization of economic activities to occur – and between “public” and “private” functions?
Nearly all early societies had a central authority in charge of distributing how the surplus was invested in a way that promoted overall economic welfare. The great challenge was to prevent credit leading to debts being paid in a way that impoverished the citizenry, e.g., through personal debt and usury – and more than temporary loss of freedom (from bondage or exile) or land tenure rights.
The great problem that the Bronze Age Near East solved – but classical antiquity and Western civilization have not solved – was how to cope with debts being paid – especially at interest without polarizing economies between creditors and debtors, and ultimately impoverishing the economy by reducing most of the population to debt dependency. Merchants engaged in trade, both for themselves and as agents for palace rulers. Who would get the profits? And how would credit be provided but kept in line with the ability to be paid?
Public vs. private theories of how land tenure originated
Ancient societies rested on an agricultural base. The first and most basic problem for society to solve was how to assign land tenure. Even families who lived in towns that were being built up around temples and civic ceremonial and administrative centers were allocated self-support land – much like Russians have dachas, where most of their food was grown in Soviet times.
In analyzing the origins of land tenure, like every economic phenomenon, we find two approaches. On the one hand is a scenario where land is allocated by the community in exchange for corvée labor obligations and service in the military. On the other hand is an individualistic scenario in which land tenure originated by individuals acting spontaneously by themselves clearing land, make it their own property and producing handicrafts or other products (even metal to use as money!) to exchange with each other.
This latter individualistic view of land tenure has been popularized ever since John Locke imagined individuals setting out to clear the land – apparently vacant wooded land – with their own labor (and presumably that of their wives). That effort established their ownership to it and its crop yield. Some families would have more land than others, either because they were stronger at clearing it or had a larger family to help them. And there was enough land for everyone to clear ground for planting crops.
In this view there is no need for any community to be involved, not even to protect themselves from miliary attack – or for mutual aid in times of flood or other problems. And there is no need for credit to be involved – although in antiquity that was the main lever distorting the distribution of land by transferring its ownership to wealthy creditors
At some point in history, to be sure, this theory sees governments enter the picture. Perhaps they took the form of invading armies, which is how the Norman ancestors of landlords in John Locke’s day acquired English land. And as in England, the rulers would have forced landholders to pay part of their crops in taxes and provide military service. In any case, the role of government was recognized only as “interfering” with the cultivator’s right to use the crop as he saw fit – presumably to trade for things that he needed, made by families in their own workshops.
My Harvard-sponsored group of assyriologists, Egyptologists and archaeologists have found an entirely different genesis of land tenure. Land rights seem to have been assigned in standardized plots in terms of their crop yield. To provide food for these community members, late Neolithic and early Bronze Age communities from Mesopotamia to Egypt allocated land to families in proportion to what they needed to live on and how much they could turn over to the palace authorities.
This tax yield turned over to palace collectors was the original economic rent. Land tenure came as part of a quid pro quo – with a fiscal obligation to provide labor services at designated times of the year, and to serve in the military. It thus was taxation that created land-tenure rights, not the other way around. Land was social in character, not individualistic. And government’s role was that of coordinator, organizer and forward planner, not merely predatory and extractive.
Public vs. private origins of money
How did early societies organize the exchange of crops for products – and most important, to pay taxes and debts? Was it simply a spontaneous world of individuals “trucking and bartering,” as Adam Smith put it? Prices no doubt would have varied radically as individuals had no basic reference to cost of production or degrees of need. What happened as some individuals became traders, taking what they produced (or other peoples’ products on consignment) to make a profit. If they traveled large distances, were caravans or ships needed – and the protection of large groups? Would such groups have been protected by their communities? Did supply and demand play a role? And most important, how did money emerge as a common denominator to set prices for what was traded – or paid in taxes and to settle debts?
A century after Adam Smith, the Austrian economist Anton Menger developed a fantasy about how and why ancient individuals may have preferred to hold their savings in the form of metals – mainly silver but also copper, bronze or gold. The advantage of metal was said to be that it did not spoil (in contrast to grain carried around in one’s pocket, for instance). It also was assumed to be of uniform quality. So pieces of metal money gradually became the medium by which other products came to be measured as they were bartered in exchange – in markets in which governments played no role at all!
The fact that this Austrian theory has been taught now for nearly a century and a half is an indication of how gullible economists are willing to accept a fantasy at odds with all historical records from everywhere in recorded world history. To start with, silver and other metals are not at all of uniform quality. Counterfeiting is age-old, but individualist theories ignore the role of fraud – and hence, the need for public authority to prevent it. That blind spot is why U.S. Federal Reserve Chairman Alan Greenspan was so unprepared to cope with the massive junk-mortgage bank crisis peaking in 2008. Wherever money is involved, fraud is omnipresent.
That’s what happens in unregulated markets – as we can see from today’s bank frauds, tax evasion and crime that pays very, very well. Without a strong government to protect society against fraud, lawbreaking, the use of force and exploitation, societies will polarize and become poorer. For obvious reasons the beneficiaries of these grabs seek to weaken regulatory power and the ability to prevent such grabitization.
To avoid monetary fraud, silver and subsequently gold coinage from Bronze Age Mesopotamia down through classical Greece and Rome was minted in temples to sanctify their standardized quality. That is why our word for money comes from Rome’s temple of Juno Moneta, where Rome’s coinage was struck. Thousands of years before bullion was coined, it was provided in metal strips, bracelets and other forms minted in temples, at standardized alloy proportions.
Purity of metals is not the only problem with using bullion money. The immediate problem that would have confronted anyone exchanging products for silver is how to weigh and measure what was being bought and sold – and also to pay taxes and debts. From Babylonia to the Bible we find denunciations against merchants using false weights and measures. Taxes involve a role of government, and in all archaic societies it was the temples that oversaw weights and measures as well as the purity of metallic metals. And the denomination of weights and measures indicate their origin in the public sector: fractions divided into 60ths in Mesopotamia, and 12ths in Rome.
Trade in basic essentials had standardized customary prices or payments to the palaces or temples. Taxes and debts were the most important used for money. That reflects the fact that “money” in the form of designated commodities was needed mainly to pay taxes or buy products from the palaces or temples and, at the end of the harvesting season, to pay debts to settle such purchases.
Today’s neoliberal economic mainstream has created a fairy tale about civilization existing without any regulatory oversight or productive role for government, and without any need to levy taxes to provide basic social services such as public construction or even service in the military. There is no need to prevent fraud, or violent seizure of property – or the forfeiture of land tenure rights to creditors as a result of debts. But as Balzac noted, most great family fortunes have been the result of some great theft, lost in the mists of time and legitimized over the centuries, as if it were all natural.
These blind spots are necessary to defend the idea of “free markets” controlled by the wealthy, above all by creditors. This is claimed to be for the best, and how society should be run. That is why today’s New Cold War is being fought by neoliberals against socialism – fought with violence, and by excluding the study of history from the academic economics curriculum and hence from the consciousness of the public at large. As Rosa Luxemburg put it, the fight is between socialism and barbarism.
Public vs. private origins of interest-bearing debt
Interest rates were regulated and stable for many centuries on end. The key was ease of calculation: 10th, 12th or 60th.
Babylonian scribes were trained to calculate any rate of interest as a doubling time. Debts grew exponentially; but scribal students also were taught that herds of cattle and other material economic output tapered off in an S-curve. That is why compound interest was prohibited. It also was why it was necessary to cancel debts periodically.
If rulers had not cancelled debts, the ancient world’s takeoff would have prematurely suffered the kind of decline and fall that impoverished Rome’s citizenry and led to the decline and fall of its Republic – leaving a legal system of pro-creditor laws to shape subsequent Western civilization.
What makes Western civilization distinctly Western? Has it all been a detour?
Civilization could not have developed if a modern Milton Friedman or kindred Economics Nobel Prize winner had gone back in time and convinced Hammurabi or the Egyptian pharaoh to just let individuals act by themselves and let wealthy creditors reduce debtors to bondage – and then to use their labor as an army to overthrow the kings and take over government for themselves, creating a Roman-style oligarchy. That is what Byzantine families tried to do in the 9th and 10th centuries.
If the “free enterprise” boys had their way there would have been no temple coinage or oversight of weights and measures. Land would belong to whomever could grab, foreclose on or conquer it. Interest would have reflected whatever a wealthy merchant could force a needy cultivator to pay. But to economists, everything that occurs is a matter of “choice.” As if there is no outright need – to eat or to pay.
An economic Nobel Prize was awarded to Douglass North for claiming that economic progress today and indeed throughout all history has been based on the “security of contracts” and property rights. By this he means the priority of creditor claims to foreclose on the property of debtors. These are the property rights to create latifundia and reduce populations to debt peonage.
No archaic civilization could have survived for long by following this path. And Rome did not survive by instituting what has become the distinguishing feature of Western Civilization: giving control of government and its lawmaking to a wealthy creditor class monopolizing the land and property.
If an ancient society had done this, economic life would have been impoverished. Most of the population would have run away. Or else, the Thatcherite/Chicago School elite would have been overthrown. The wealthy families that sponsored this grabitization would have been exiled, as occurred in many Greek cities in the 7th and 6th centuries BC. Or, discontented populations would have walked out and/or threatened to defect to foreign troops promising to free the bondservants, cancel their debts and redistribute the land, as occurred with Rome’s Secessions of the Plebs in the 5th and 4th centuries BC.
So we are brought back to David Graeber’s point that the great reformers of Eurasia rose at the same time that economies were becoming monetized and increasingly privatized – an epoch in which wealthy families were increasing their influence over how city-states were run. Not only the great religious reformers but the leading Greek philosophers, poets and dramatists explained how wealth is addictive, and leads to hubris that leads them to seek wealth in ways that injure others.
Looking over the sweep of ancient history, we can see that the main objective of rulers from Babylonia to South Asia and East Asia was to prevent a mercantile and creditor oligarchy from emerging and concentrating ownership of land in their own hands. Their implicit business plan was to reduce the population at large to clientage, debt bondage and serfdom.
That is what occurred in the West, in Rome. And we are still living in the aftermath. Throughout the West today, our legal system remains pro-creditor, not in favor of the indebted population at large. That is why personal debts, corporate debts, public debts and the international debts of Global South countries have mounted up to crisis conditions threatening to lock economies into a prolonged debt deflation and depression.
It was to protest this that David helped organize Occupy Wall Street. It is obvious that we are dealing not only with an increasingly aggressive financial sector, but that it has created a false history, a false consciousness designed to deter revolt by claiming that There Is No Alternative (TINA).
Where Western civilization went wrong
We have two diametrically opposed scenarios depicting how the most basic economic relationships came into being. On the one hand, we see Near Eastern and Asian societies organized to maintaining social balance by keeping debt relations and mercantile wealth subordinate to the public welfare. That aim characterized archaic society and non-Western societies.
But the Western periphery, in the Aegean and Mediterranean, lacked the Near Eastern tradition of “divine kingship” and Asian religious traditions. This vacuum enabled a wealthy creditor oligarchy to take power and concentrate land and property ownership in its own hands. For public relations purposes, it claimed to be a “democracy” – and denounced any protective government regulation as being, by definition, “autocracy.”
Western tradition indeed lacks a policy subordinating wealth to overall economic growth. The West has no strong government checks to prevent a wealth-addicted oligarchy from emerging to make itself into a hereditary aristocracy. Making debtors and clients into a hereditary class, dependent on wealthy creditors, is what todays economists call a “free market.” It is one without public checks and balances against inequality, fraud or privatization of the public domain.
It may seem amazing to some future historian that the political and intellectual leaders of today’s world hold such individualistic neoliberal fantasies that archaic society “should” have developed in this way – without recognizing that this is how Rome’s oligarchic Republic did indeed develop, leading to its inevitable decline and fall.
Bronze Age debt cancellations and modern cognitive dissonance
So we are led back to why I was invited to speak here today. David Graeber wrote in his Debt book that he was seeking to popularize my Harvard group’s documentation that debt cancellations did indeed exist and were not simply literary utopian exercises. His book helped make debt a public issue, as did his efforts in the Occupy Wall Street movement.
The Obama administration backed police breaking up the OWS encampments and did everything possible to destroy awareness of the debt problems plaguing the U.S. and foreign economies. And not only the mainstream media but also academic orthodoxy circled their wagons against even the thought that debts could be written down and indeed needed to be written down to prevent economies from falling into depression.
That neoliberal pro-creditor ethic is the root of today’s New Cold War. When President Biden describes this great world conflict aimed at isolating China, Russia, India, Iran and their Eurasian trading partners, he characterizes this as an existential struggle between “democracy” and “autocracy.”
By “democracy” he means oligarchy. And by “autocracy” he means any government strong enough to prevent a financial oligarchy from taking over government and society and imposing neoliberal rules – by force. The ideal is to make the rest of the world look like Boris Yeltsin’s Russia, where American neoliberals had a free hand in stripping away all public ownership of land, mineral rights and basic public utilities.
MGPE Seminar titled "De-Dollarization – Toward the End of U.S. Monetary Hegemony?" on 20 November 2019. (https://mgpe.ssc.cuhk.edu.hk/en/news/...)
Since the end of World War II, the United States has been the world’s hegemonic power. In economic, military, and cultural spheres, the U.S. has enjoyed nearly unrivalled supremacy. However, unlike past hegemons, which have been net creditors to the rest of the world, the United States is a net debitor; but this is a strength, not a weakness. U.S. debt is an integral feature of its economic dominance, through which the United States receives goods and services from the rest of the world in exchange for dollars it can print and keystroke into existence. Yet cracks are showing in the foundations of dollar hegemony, as countries look to find ways to escape from U.S. economic dominance. In this talk, Prof. HUDSON will discuss the prospects and challenges of global de-dollarization, and how countries like China may forge a way toward a different monetary system free of U.S. control.
Speaker: Prof. Michael HUDSON
Prof. Michael HUDSON is President of the Institute for the Study of Long-Term Economic Trends (ISLET), Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of …And Forgive Them Their Debts (2018), J is for Junk Economics (2017), Killing the Host (2015), The Bubble and Beyond (2012), America’s Protectionist Takeoff, 1815-1914 (2010), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), and Trade, Development and Foreign Debt (1992 & 2009), amongst many others. Michael acts as an economic advisor to governments worldwide, including Iceland, Latvia, and China on finance and tax law.
Moderator: Prof Peter BEATTIE 裴弼革教授
(https://mgpe.ssc.cuhk.edu.hk/en/facul...)
Prof. Peter BEATTIE is Assistant Professor and Assistant Programme Director of the MSSc in Global Political Economy at The Chinese University of Hong Kong, where he teaches political economy and political psychology. His published work has focused on the role of ideas in politics, and his research has been presented at conferences in Asia, Europe, South America, and the United States.
Nearly 50 years after the original publication of "Superimperialism", Michael Hudson revisits how the lucrative dollar-based economic system that the US set up after WWII has evolved with the rise of China and the Covid-19 pandemic. What financial weapons is the US likely to use, and does China's de-dollarisation protect it from such attacks?
The book provides a detailed analysis of how the US has used its economic might to control international relations. The book is complicated, but essentially documents how after WWII the US held an unprecedented amount of the world's gold reserves (50%). These reserves were depleted with the incursion into Korea, and subsequent involvement in Viet Nam, requiring the US to abandon the "gold standard" for valuing world currencies. A failure that proved itself valuable, pushing the US to develop multiple strategies that today allow it to make other countries pay for its military dominance.
Oscar Brisset:
Welcome to the first event of the Oxford Economics Society for this academic year. I’m Oscar, the Co-President of our society, and I’m glad to welcome you back for another term of exciting discussions. Although we were hoping last term to be back in-person by January, due to the worsening Covid-19 situation in the UK our events this term are going to remain online, so that everyone at home can still participate.
A new year calls for new resolutions, and our society’s resolution for 2021 is to increase the diversity of economic topics discussed. To give you an idea, we’ll be hosting a presentation on Decolonising Economics and its role in Emerging Markets by Dr. Ingrid Kvangraven, the executive board member of Diversifying and Decolonising Economics. We’ll be hosting Prof. Randall Wray, a strong proponent of the much-discussed modern monetary theory, who was also as I just discovered, professor at the University of Missouri-Kansas City, like our guest today. We’ll also be hosting a presentation on the Young Scholars Initiative run by the Institute of New Economic Thinking at Oxford, a community some of you will definitely be interested in joining that brings together more than 15,000 young economists from around the world. Finally, we’ll be organizing a moderated discussion with the FT’s Chief Economics commentator Martin Wolf, and many other events of course.
To start us off, we are proud to host Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, former balance-of-payments economist at Chase Manhattan, and an economic advisor to governments worldwide, including Iceland, Latvia and China, on finance and tax law. Now, nearly 50 years after the original publication of “Super Imperialism”, Professor Hudson will be discussing “Changes in Super Imperialism: The position of the USA & China in our Global Economic System”. How has the rise of China and the Covid-19 pandemic affected the USA’s capacity to control financial flows? How will the USA modify its behaviour as a result?
The talk will last 45 minutes, with 15 minutes of questions at the end. Make sure to send in your questions throughout the talk through our Pigeonhole page. The link should be in the description of this event. If you would like to re-watch our events, they’ll be posted to our YouTube channel afterwards.
Thank you for joining us, Professor Hudson…
Prof Hudson:
It’s good to be here. Thank you for inviting me, especially since you mentioned people that I’ve known for a long time. Randall Wray, both of us are now at the Levy Institute and working in other places, and Martin Wolf I’ve been friends with.
The reason that I’m writing a new version of Super Imperialism is that I was asked to by China, and I thought, “As long as they want to bring out a new translation and basically an update of the book, I might as well do it in English too.” I bought the rights back from Pluto and in about two or three months I will be reissuing the English language edition. The context for de-dollarization today by China, Russia and other countries is basically “How do you make an alternative to an international financial order that really was designed from the beginning to benefit the United States in its own self-interest?”
This issue was discussed after WWI when the intergovernmental debt system broke down into Allied debts and German reparations. It was discussed again at the 1930s when the United States sort of scuttled the London Economic Conference of 1933, and it was especially discussed in 1945 in December, in parliament. In the House of Commons, the British parliamentarians were discussing, “Do we want to accept the terms of the British loan?” which ended up being 3.75 billion USD, written down from what Keynes had wanted, or “Do we want to go it alone?”
It was the Conservative pro-empire Members of Parliament that wanted to reject the loan. Churchill wanted at least to abstain, but there was no alternative. In 1945 and again in 1971 when America moved off gold, in every case the alternative seemed to be anarchy. The U.S. strategy was to say, either you accept U.S. rules that favored the United States – in the beginning creditor rules, but debtor rules after 1971, and essentially gave it control of the world economy – or you go it alone and risk anarchy.
Britain was not able to go it alone in 1945. I did not include the parliamentary discussion in the first version of Super Imperialism, but I’ve included that discussion in the new version, because Britain said very clearly: “The United States basically wants to absorb the British Empire and the Sterling area into the Dollar area on its own terms and leave us almost broke. What can we do about it?” Both parties said: “We see that the United States is treating us, its ally in WWII, as a defeated party.” They came right out and said that. “But we don’t have an alternative because we can’t go alone. We have to rely on the United States.”
Let me review what the U.S. strategy is, and what’s led to major changes over time. Dollar supremacy was established after World War I by America’s creditor position. Something very novel happened after. In every previous war, for instance the Napoleonic wars and the earlier wars England had been involved with, the allies had forgiven all of their mutual debts at the end of the war. There was something that the British called “shared sacrifice”, and the idea was “We’re going to have a clean slate after the war.”
This idea goes all the way back to Babylonia in the second millennium BC. Throughout history there was a debt cancellation. There was no carryover of war debts after victory was achieved, because the idea was that if you leave war debts in place, that’s going to bankrupt the allies that you had during the war. It’s also going to bankrupt the defeated countries, and leave them no choice except to fight back.
The laws of Hammurabi showed this. His whole dynasty showed this. My book on Forgive Them Their Debts is a whole history of debt cancellations. But the United States broke this practice after WWI and said: “The debts have to be paid.” The amazing thing is that Europe went along with it. It had a pro-creditor ideology. It believed in the sanctity of debt, and was not going to question that because there was a guiding assumption – which is erroneous – that all debts somehow can be paid if only countries will either devalue or transform their economy, or impose austerity.
Keynes had a long debate with the anti-German Jacques Rueff of France and the American-Swede Bertil Ohlin. Keynes explained that there was no way that debtor countries like the allies or Germany could pay their debts to the creditor unless the creditor is willing to buy their exports, to provide them with the foreign exchange to pay. That debate obviously he won in reality, but that assumption was rejected by the United States, and continues to be rejected by the International Monetary Fund today. The junk economics that was brought in after World War One to consolidate the American position was: “Of course you can pay: simply destroy your economy and let us take you over, and sell out all of your industry and raw materials out to us, and that will enable you to pay.” That’s what the Americans demanded. It’s what the creditor demand has always been. Essentially you have to be willing to destroy your economy in order to pay your debts.
Keynes said this was crazy and he was right, but Europe went along with it and said, “Yes, we are willing to destroy our economies; we are willing to create the resentment for World War II rather than question the assumption that all the debts have to be paid.”
What Keynes pointed out was that there was a distinction between the budget problem – in other words, taxing the economy to raise a domestic fiscal surplus in German Marks or British Sterling – and the transfer problem of paying foreign currency. What happened was that the Allies said, “If America is going to insist that we pay, we’re not going to wreck our economies. We’re going to make Germany pay reparations.”
As you all know, the result was to bankrupt Germany, causing a hyperinflation there that was only solved by Germany essentially borrowing the money from the United States. German municipalities would borrow the money in dollars for local spending, use the dollars to turn over to the Reichsbank to pay the Bank of England and the Bank of France, in turn to pay their dollar debts to the United States. That was a circular flow.
It could only be kept going by the Federal Reserve making interest rates very low here in the United States to promote an outflow of foreign investment to Germany. But those low interest rates also created a stock market boom that crashed in 1939. In the end, the Inter-Ally debts had to be canceled. There had to be a moratorium [on those debts], along with German reparations, as the system broke down in 1931. There was an attempt to reconstruct the economy at the London Economic Conference of 1933 but Roosevelt scuttled that and said, “We’re going to go it alone.”
The basic principle of American foreign policy is that no other country can tell us what to do. We can tell other countries what to do, but they cannot tell us what to do. So we will not join any agreement in which we don’t have a veto power that gives us control of the World Bank and the International Monetary Fund, or the veto power in the United Nations and any international organization that the United States will join. So the question is: how could this supremacy be established all over again as World War II came to a close?
In 1944 and 1945, America made plans for the postwar economy. Its guiding logic was that: “In order to have full employment in the United States we have to have an export-based industry. Now that we’ve destroyed Germany and Japan our major enemy is the United Kingdom.” It became very clear that America’s enemy immediately on the ending of World War II was not Russia or the Soviet Union, but England. It developed a strategy that was designed to essentially bankrupt England with the 1946 British Loan, to force England to accept to end Imperial Preference, to break up its empire, to make it free the about 10 billion pounds Sterling, to be used for spending not in England as blocked currency as the British Board of Trade expected, but in the United States. So England was stripped of all of the blocked currency, stripped of the currency area, stripped of its exclusive Sterling Area, and thereby the empire that became absorbed into the Dollar Area.
The parliamentarians and members of the House of Lords said, “We know that we’re bankrupting Britain, but the alternative is to go it alone, and we can’t really make an alternative.” Keynes said, “Of course you could create your own currency and trading area with India, Canada and other countries, but that would involve a great shrinking.”
At the time they believed still that there had to be some means of settling international payments on creditor terms with gold. The United States had most of the gold in 1945. The British understood very clearly that what seemed to be the gold exchange standard – for countries that settled their balance of payments deficits in gold – was really the Dollar standard, because the dollar was defined in terms of gold. What seemed to be a gold standard was actually the Dollar standard, and in fact the arrangements that America created in 1945 were so one-sided that by 1950 it had drawn another five billion dollars’ worth of monetary gold into the United States out of Europe. There was a refugee flight of gold in the 1930s that was followed by a post-war flight out of Europe. British banks and the wealthiest classes began to move their money to the United States.
By the time of the Korean War in 1950 and 1951, America’s balance-of-payments deficit changed abruptly. From 1951 through the 1960s and 1970s, the entire U.S. balance of payments deficit was military. At first this deficit was welcomed by Europe and by other countries because finally the United States was providing the rest of the world with dollars that it needed to grow. The dollar outflows became the basis of Europe’s central bank reserves along with gold. Some of the dollars were cashed into gold especially by France, and by Germany even more.
The U.S. balance-of-payments deficit was entirely due to America’s military spending. The U.S. private sector was exactly in balance. All of the deficits were on government account, and were entirely military. American foreign aid actually made money in balance-of-payments terms. In the 1960s when I was working at the Chase Manhattan Bank, every Friday the Federal Reserve would publish statistics on the gold cover. All of the paper currency in the United States had to be backed 25 percent by gold. Every Friday we would look at what is the gold cover – how much over the 25 percent does America have in free gold to sell, to settle the military deficit from spending in Southeast Asia, in the Vietnam War and other military operations throughout the world.
It was obvious already in the mid-60s that the United States at some point would run out of gold if it continued its military spending. That led Chase Manhattan’s Chairman of the Board George Champion to oppose the Vietnam War, saying it was fiscally irresponsible. It was the business community and the right-wing in the United States that opposed America’s foreign war, not the labor movement. The labor movement was for the war because it was causing an inflation and helping wages rise. The golden age of American labor was the 1960s and 1970s, resulting from the balance of payments deficit. It was the business community that opposed the war – but not David Rockefeller when he took over from George Champion. Rockefeller wanted to “do the right thing.” He sort of followed what the Treasury asked Chase to do and the other Wall Street leaders followed suit.
Already in the mid-60s the United States faced the problem of how to avoid its balance-of-payments deficit. The solution was to make America the haven for criminal capital in the world. Somebody from the State Department joined Chase Manhattan, and asked Chase to set up enclave affiliates in the Caribbean to essentially attract the criminal capital of the world. As they explained it to me: “We want to be the new Switzerland.” They said the most liquid people in the world are the criminal class, the drug dealers. “We want the drug dealer money; we want the criminal money because it’s liquid. They have nowhere to go. Let’s make America safe for the flight capitalists, for the kleptocrats, for the crooked heads of states of the world for putting their money. Don’t have them put them in Switzerland to push up the Swiss currency. Have them put it in the branches of Wall Street banks that then would take this money in the Caribbean tax evasion and offshore banking center enclaves and then send the money to the head offices.”
The Federal Reserve every three months would publish statistics on head office bank liabilities to their branches in the Caribbean and Panama and Liberia and other countries that were used as tax avoidance centers. We were following that quite closely. Despite trying such stratagems, the United States went off gold in August 1971. At the time it worried about what on earth was going to happen. “Are we going to lose the creditor position that has enabled us to dictate the trade rules and the financial rules and political diplomacy of the world when they went off gold?”
In 1972, a year after the United States went off gold, my Super Imperialism was published. Its theme was that American diplomacy was in an even stronger position now that its deficit was not having to be paid with gold. What were other countries to do? How were foreign central banks going to hold their international reserves? There was only one currency that they could hold, and that was the U.S. dollar. So the fear by Wall Street and the U.S. Government that the dollar would be devalued as a result of its military spending didn’t materialize, because foreign central banks were in a quandary: If they did not recycle the dollars that they received from the America’s balance of payments deficit, their currencies would rise and that would hurt their export interests.
From the American point of view, central banks recycled dollars into Treasury bond holdings, because foreign central banks at that time could only invest in official government securities; they were not creating sovereign wealth funds. America’s balance-of-payments deficits thus financed its domestic budget deficits.
The response to my book on Super Imperialism was not primarily from the Left but from the U.S. Government, especially the Defense Department. I went to work for the Hudson Institute with Herman Kahn, and immediately we got a contract from the Defense Department to explain to them how Super Imperialism was working. I didn’t want to call the book Super Imperialism. I wanted to call it Monetary Imperialism, but the publisher thought differently. Most of the copies were sold in Washington to the Defense Department, the State Department and the CIA, and Herman Khan brought me numerous times down to the White House to discuss this. The Americans made it very clear that – for instance when OPEC quadrupled its oil prices in 1973 and 1974, after America quadrupled its grain prices – Kissinger and the State Department and Treasury told them that they could charge whatever they wanted for the oil, but whatever they charged they had to recycle into U.S. financial markets, mainly into government bonds. They also could buy U.S. stocks and U.S. corporate bonds, but couldn’t buy majority ownership of any big American industry. American had to be in control of its industry. The Arab countries were told “you can buy all the stocks you want through the stock market”. I think one of the Saudi Arabian kings bought a million shares of every company on the Dow Jones Industrial Average.
So you had a recycling. The more dollars Americans spent abroad on its military deficit, the more money flowed into the bond market to finance America’s budget deficit. What the American government had achieved by its creditor status before 1971, it achieved by its debtor status after 1971. Once again, it told the rest of the world: “What’s the alternative? The alternative is anarchy.” Essentially it used that threat. President Johnson insisted that Europe give America special trade favoritism, special advantages, and the rest of the world felt that it had to go along to survive.
At the time there was a discussion concerning the advantages of gold. Herman Khan was a monetary right-winger, and believed that gold should be reintroduced into the international monetary system. He and I went down and gave a presentation to the U.S. Treasury, saying, “Gold is a peaceful metal because it’s a constraint on the balance of payments. If countries had to pay their balance-of-payments deficit in gold, they would not be able to afford the balance-of-payments costs of going to war.” That was pretty much accepted and that was why the United States basically responded, “That’s why we’re not going back to gold. We want to be able to go to war and we want the only alternative to hold central bank reserve to be the United States Dollar.”
The United States also arranged the World Bank and the International Monetary Fund to favor the U.S. economy. In the World Bank it would only make foreign currency loans to other countries. It sent out missions to foreign countries to say “What does the country need?” and almost every mission said “What Latin America, Africa and the Near East need is not foreign currency. They need domestic currency for agricultural development.” You had a latifundia problem in Latin America. The United Nations came out with two wonderful reports on the need for land reform throughout the Third World in order to grow domestic food. But the World Bank was set against other countries becoming food independent. The most important heads of the World Bank were former Secretaries of Defense like McNamara and John McCloy. You can look through who the heads were. The Americans said that any foreign country wanting to grow its own food instead of depending on U.S. grain exports was counted as an Act of War and would be overthrown. That was the explicit reason why the United States established military dictatorships and client oligarchies in Latin America.
The World Bank did promote plantation agriculture but the plantation agriculture was for tropical export crops to compete with other exporting countries, to lower the price of export crops, of tropical crops that could not be grown in the United States. These countries were not supposed to grow their own food supply.
The World Bank became a huge market for American firms to build dams etc. I was told that the World Bank person in charge of designing dams had been a chronic bed-wetter as a child, sort of acting it all out. It also got countries into debt, and once countries were in debt they were forced into the International Monetary Fund, which said basically” “In order to pay your debts, you have to engage in a vicious class war against labor”. You have to lower wages because it’s the only variable in world trade. There’s a common world trade [price] in raw materials: All countries pay the same price for copper, machinery, and other materials. There’s a common world price for oil; there’s a common world price for capital goods. The one variable in foreign trade is the price of labor. So the IMF said, “You’ve got to prevent unionization, you’ve got to prevent any kind of pro-labor reform. Your only way of paying debts is to polarize your economy and impoverish your labor force.”
That is exactly what the opponents of Keynes had urged in the 1920s, and you saw the result in Germany. The same thing was imposed on the Third World countries. That is why, until a few years ago, all the countries of the world tried to get free of the IMF’s “conditionalities,” the terms on which the IMF would lend money. You should essentially think of the IMF as a small office in the basement of the Pentagon, deciding what countries to support, and what countries are following policies that the United States does not want and therefore wants to wreck. That explains why the IMF will give loans to completely non-creditworthy countries such as Argentina under the dictators, or the Ukraine with no visible means of paying off the debt.
The loans to Ukraine, the loans to Greece recently that ended up bankrupting it, the loans yet again to Argentina have demoralized the IMF staff. They complained that every forecast they make shows that the debts can’t be paid, but the IMF continues to make them anyway. The IMF has become a pariah among competent financial analysts throughout the world. The United States is still trying to force countries into the IMF as a means of controlling them, saying “Either you engage in a pro-American war against labor and [engage in] neoliberalism, or the alternative is wreckage.”
Ironically what’s changing all this is the United States’ cold war against Russia and China. The United States has begun to impose sanctions on the Russian and other post-Soviet economies, and on China. This is driving them into a position where their only defense is to do what Britain could not do in 1945: to create an alternative economic order with its own rules. So for the last five years or so China, Russia and other countries are discussing how to de-dollarize their economy.
What do they want to do? They say: “The first thing we have to do is we don’t want to hold our international reserves in loans to the U.S. Government, because that finances the United States military deficit, building its 800 military bases all around us, to try to threaten us militarily. If we withdraw from this international financial system based on the U.S. dollar free-lunch, then dollars can’t be spent ad infinitum without any constraint on military policies that we don’t agree with – right-wing and anti-labor policies that we don’t agree with. So we’re going to take the lead in creating a new grouping – China, Russia, Iran, the Shanghai Cooperation Organization members basically – to do this.”
They’re trying to do what the world began to talk about doing in 1933 at the London Economic Conference: “How do we make a fair system?” When Keynes outlined his plans for Bretton Woods in 1944, his alternative was the Bancor. He said there should be a central bank that can make loans, creating fiat money to enable deficit countries to pay. So that if they ran a balance-of-payments deficit, they wouldn’t have to impose austerity. Austerity and anti-labor policies never enable a country to pay debts. It makes them less able to pay, and even more dependent on creditor countries. So the Chinese and Russians are discussing today “How do we create a currency, a central bank that will help us actually develop? We’ll use international reserves to promote the industrialization and the upgrading of labor and public infrastructure investment, instead of the U.S. demand to privatize infrastructure development and sell it off to foreign rent-seekers.”
What China and Russia found out very quickly is what initially seemed to be an economic rivalry between America and China and other countries was not really an anti-China rivalry as such. It’s a conflict of economic systems. The conflict is between neoliberalism – a financialized world order that wants to privatize all infrastructure and create monopoly rents for transportation, education, healthcare, like what occurs in the United States – and having these basic investments in the public domain, to be subsidized and their services provided at minimum cost. The question at issue is what kind of economy the world is going to have. Will it be a neoliberal economy, a privatized economy – Reaganized, Thatcherized and financialized, organized by central planning in Wall Street – or is the government going to plan?
China and Russia do not want a centrally planned economy anywhere near as centralized as the United States is promoting with Wall Street. In the United States the center of economic planning has been shifted from Washington to Wall Street financial institutions. Banks create credit not to create new means of production, not to build new factories and plant and equipment, but essentially to extend credit against assets already in place. Eighty percent of bank loans in the United States and in England are mortgage loans for real estate, against real estate that’s already in place. I think three percent of mortgage loans are for new construction as long as these loans are already collateralized with promises to buy apartments etc.
So the question is what kind of financial system are you going to have to back up a central banking system and credit creation? Is credit going to be a public infrastructure enterprise as it is in China, where the banks of China are able to decide who is going to get the loans. A public bank is not going to make corporate takeover loans or loans to corporate raiders. It’s going to make loans to actually increase the tangible economy, not to take it over and turn public infrastructure – the education system, healthcare, transportation and communications – into rent extraction.
We’re having today finally a revival of the kind of debate that classical economics was all about in the 19th century – Adam Smith, John Stuart Mill, down through Marx and Alfred Marshall. At issue was how to minimize unearned income as economic rent. At that time, the main form of economic rent they were trying to minimize was land rent. The idea was to get rid of the hereditary landlord class, which was treated as a form of overhead. In today’s economy the main rentiers are financial. There’s not a landlord class anymore, because two-thirds of Americans own their own home (on credit, to be sure). Home ownership rates are higher in continental Europe and England. You don’t have a hereditary landlord class living off land rent. What you do have is a financial class that’s emerged after World War I in a way that they have become the new central planners. It’s a new concentration of wealth, engaging in a new kind of economic war, not only against labor but against government as well, to appropriate the public domain by financializing it. This is done by getting governments into debt and having them sell off the public infrastructure. That’s happening in America at the state and local level, for indebted cities and states like New York.
How do China and Russia avoid their economies becoming financialized? How do they avoid a financialized economy from becoming a high-cost economy and losing their international trade advantage? What’s at stake in de-dollarization is how to create an alternative to a financialized, dollarized economy, one that is going to try to minimize the cost of living and minimize the cost of doing business, instead of a high-cost economy as is occurring in the United States.
The answer they have is that to some extent there’s going to be gold as a means of settlement. But most of all China, Russia, Iran, and other countries are going to mutually hold each other’s trading currencies. They’re replacing dollars with gold and with each other’s currencies. That essentially is the response that the world could have taken after World War One and didn’t, and could have taken after World War II if it had followed Keynes’s policies. Finally, with the help of Donald Trump isolating China and Russia, U.S. diplomacy is creating an independent bloc and helping them do what was unthinkable in the past.
Oscar Brisset:
Great, thank you very much. We’ve got some questions coming in.
To start off, yesterday Joe Biden was inaugurated, making him the 46th President of the United States. What are your expectations regarding his stance on China? We’ve heard him talk a lot about democracy as a guiding foreign-policy principle to distinguish between what is good and what is bad for the U.S. Which measures are likely to be used to advance the USA’s interests: will it be tariffs, sanctions or could we even see a military buildup and embargoes?
Prof Hudson:
The question is, what are the U.S. interests? Again and again in the 1920s, the 1930s and today, the U.S. Government interests were the opposite of U.S. industrial interests, opposite of U.S. economic interests. Just because the Biden administration has an emotional hatred of Russia does not mean that it’s in the U.S. interest. The Biden administration said, “On second thought we’re not going to join the Iran agreements because we’re going to talk to Israel first,” and Blinken, his neocon Secretary of State, said that we won’t do anything without Israel’s approval regarding Iran. Biden also said that the United States will not do anything about solving the world problem of global warming that the oil industry doesn’t like, because basically what’s called the “interest of the United States” is that of his political campaign contributors. So almost his first act was to approve more oil drilling. Here we have the Supreme Court’s Citizens United ruling that lets campaign contributors dominate U.S. policy, not the voters. The American voters were not given a choice in this election. Biden did not do well in the early primaries and Kamala Harris got only one percent of the primary vote.
Polls show that what American voters want is basically a Bernie Sanders type policy. They want what you have in Europe. They want public healthcare, universal healthcare. They don’t want to have to pay 18 percent of America’s GDP for medical insurance and medical expenses, because there’s no way that American industry can compete in markets and American labor be employed in export industries, having health care monopolies protected by successive administrations.
The American public didn’t want the Obama administration to evict 10 million American families, and it looks like the Biden administration is going to outdo Obama. Biden basically says, “We’re going to evict another 10 million American families. What Obama did I can do more.” Many families have not been able to pay the rent or even pay the mortgage if they’ve been unemployed or if their income is reduced because of the Coronavirus. There’s going to be a huge wave of evictions in the United States that will be even larger than the Obama evictions.
The Obama evictions were targeted mainly against Black and Hispanics, who were the victims of the junk mortgage loans. Biden has made a point of appointing many Black women and men to administer positions as a cover story for the fact that his policies are going to be just as viciously anti-Black and anti-minority and anti-Hispanic as the Obama administration’s were. They found that as long as you can have identity politics front and center you can do whatever you want economically to crush the people that you pretend to be representing in identity politics.
Nobody can see really any way in which the American economy can recover. The stock market can recover because the Federal Reserve credit and quantitative easing has been going into supporting stocks and bonds, including junk bonds. Sheila Bair wrote a Wall Street Journal editorial on that. But the underlying economy is shrinking rapidly while the stock market’s going up. That’s what the American economists call a K-shaped recovery – up for the One Percent, down for the 99 Percent.
Oscar Brisset:
I’m going to ask one more question on the China topic and then talk a bit more about historical things you mentioned. China has been building up a network of support and trade deals to drive its expansion. You mentioned some of the policies. It’s also been growing its presence in the U.N. system and even putting together alternative international organizations like the Asian Infrastructure Investment Bank. Is there a line that the U.S. would not tolerate China crossing, after which the U.S. would start devoting much larger resources and spending to contain China, or is the U.S. already at full power?
Prof Hudson:
The United States is muscle-bound. Despite its huge military budget it can’t field an army. It has a foreign legion. ISIS, for instance, is part of its foreign legion. The European NATO is part of its foreign legion. But there’s no way American can ever have a land war again, so you can never invade and conquer a country with a military army. All America has is the Atom bomb, and that’s muscle bound. It cannot go to wage any kind of war except atomic war. There’s nothing in between.
I think Russia and China know that, and Russia at least has taken steps to protect itself and said, “If the United States wants atomic war, we’ll be wiped out but it’ll be wiped out too, and Europe will be wiped out.” I think probably the first exchange would be to wipe out England and Europe, to say “We don’t want to go to war with you and really blow up the world, America. Let’s just show you what we can do. Let’s blow up England and Europe so at least you won’t have your colonies there.” If America persisted, it would be the end of the world. Will America really do that? There was worry that Donald Trump would do that so he could go down in history as the man who destroyed civilization, but I don’t think other people are going to do that.
Oscar Brisset:
Moving now into some of the historical things you mentioned, for example in the 19th century the most powerful European empire was the British Empire. I am trying to see if there’s a parallel between the UK and the American. Did the UK establish such currency dominance similar to the one the U.S. has today? Did it use similar methods to the U.S. to establish its dominance, for example creating international organizations in which it had an institutional advantage, or for example through the control of key energy deposits?
Prof Hudson
England thought that it was establishing currency dominance with the Sterling area. In other words it would spend money abroad and other countries would save their money in Sterling. All during the 1930s the surpluses earned by India and by other members of the Sterling area were basically kept in London, paid to England. But then England ran a deficit with the United States so ultimately the benefit of England’s Sterling area, the financial benefit, was all spent to the United States already in the 1930s. You can look up the balance of payments articles on that.
In 1945, as I mentioned, England thought, “We have 10 billion Pounds of all the savings of Argentina and India, countries that have been providing the raw materials for the World War that we fought, World War II. Now there is going to be a demand for English exports and we can recover by employing our labor to make exports.” But the terms of America’s British Loan said: “No, you have to open up the Sterling area and let these countries cancel their contracts with England.” England had long four-year and five-year capital purchase contracts from India, Argentina. “They can cancel them all and buy from the United States”. England went along with that. So the attempt to create a currency area was smashed by the United States.
Ever since the 19th century America looked at England as the great rival, not the Soviet Union. The Cold War in the 19th century was against England. The fight for protectionism in the United States went so far as to create state colleges and universities that would teach an alternative to Anglo-centered free-trade economics and Anglophile moral philosophy. There was a feeling in the late 19th century of America creating a new civilization and it would not be the religious-based, unscientific civilization of Europe. It would be a new secular civilization. That feeling of a new civilization in America is what led Americans to think, “We will never let other countries tell us what to do because they’re part of the decadent old world and we’re the new world. We’re going to make our own rules.”
Oscar Brisset
You also discussed Bretton Woods. Would it be beneficial to recreate, very hypothetically, a system similar to the Bretton Woods one today? I think a key question that underlies that is, “Does the country that runs such a system reap a benefit from running it or are they just constrained?” Will there be an interest for China to set up such a system?
Prof Hudson
They realize that they cannot set up any system in which the United States is a member because the United States will insist on veto power. If it has veto power, then they can’t do the kind of economic system that I described. Bretton Woods was designed one-sidedly to give all the benefit to the United States, and to make other countries dependent on the U.S. economy, on U.S. exports – largely of agriculture, but also industry – and also on the U.S. dollar. Obviously, that’s not going to be done. The agreement that is being developed on an ad hoc spontaneous basis between China, Russia and neighboring countries is their own system of international payments that will be based on mutual benefit, of holding of each other’s currencies, of preventing any payment surplus country – and it could be China – any payment surplus country ending up with so much credit in a creditor position vis-a-vis debtors. The new system will not impoverish the debtors.
The IMF system was designed to impoverish debtors. The purpose of the IMF was to make other countries so poor and dependent on the United States so they could never be militarily independent. In the discussion of the British loan for instance, in the 1930s the discussion in the London Economic Conference was, “Yes, we’re bankrupting Europe, but if we give Europe enough money to avoid austerity, they’re just going to spend the money on the military.” That was said by the Americans in the State Department and the White House again and again, especially by Raymond Moley who was basically in charge of President Roosevelt’s foreign policy towards Europe.
The question is: how do you create an international financial system designed to promote prosperity, not austerity? The Bretton Woods perspective is for austerity for everybody except the United States, which will have a free ride forever. The question that I’m involved with in the work I’m doing in China and with other countries is how to create a system based on prosperity instead of austerity, with mutual support between creditors and debtors, without the kind of financial antagonism that has been built into the international financial system ever since World War I. Financial reform involves tax reform as well: how do we end up taxing economic rent instead of letting the rentiers take over society. That is what classical economics is all about: how do we revive it?
Oscar Brisset
Final question: these austerity and anti-labor policies which the IMF imposes on countries of the global South seem to be well known practices from before the IMF was created, from what you’ve discussed. Did the IMF invent anything new? In addition, in the 19th century, was predatory lending something common, or was direct invasion always the go-to method for subjugating a territory?
Prof Hudson
The 19th century was really the golden age of industrial capitalism. Countries wanted to invest to make a profit. They didn’t want to invest in dismantling an existing industry, because there wasn’t much industry to dismantle. They wanted to make profit by creating industry. There was a lot of investment in infrastructure, and it almost always lost money. For instance, there was recently a criticism of China saying, “Doesn’t China know that the Panama Canal went bankrupt again and again, and that all the investments in canals and the railroads all went broke again and again?” Of course China knows that. The idea is that you make investment not to make a profit on basic large infrastructure. The 19th century was basically inter-state lending, inter-governmental lending, public sector lending. That’s where the money was made. The late 20th century was one of financialization, dismantling the industry that was already in place, not lending to create industry to make a profit. It’s asset-stripping, not profit-seeking
Oscar Brisset
Thank you very much for joining us today. Our next event will be on February 4th and we look forward to seeing you all then. Thank you very much Prof. Hudson.
Michael Hudson is Professor of Economics at the University of Missouri-Kansas, former balance of payment economist at Chase Manhattan, political consultant, and has written on many topics relating to the history of debt and the international financial system.
Remarks given at the 1st ASECU Teleconference ‘Systematic Crises Triggered the Current Pandemic & Progressive Way-Outs, May 8, 2020.
Well, I think you’re quite right in organizing the conference to point out that today’s pandemic crisis hastens and intensifies the internal contradictions that have been building up. Many of these contradictions are going to be blamed simply on the virus. But there is an underlying problem that the virus is exposing and turning into a crisis. That underlying problem is the debts that have been building up for the last few decades.
We are in a situation much like a war. There are winners and there are losers in a war. In this case the winner is the aggressor – the financial sector. Its demands for payment have set the stage for today’s economic breakdown. This has been the case throughout history. Finance always has been the great destabilizing factor. Right now, you’re having businesses – retail stores, restaurants, hotels, airlines and other businesses that are being closed down or operating at only a small capacity far below break-even levels. These businesses are not able to pay their stipulated rents or mortgage debt service. Their landlords are not able to pay their banks.
Workers have been laid off, and they’re unable to pay their landlords or creditors. So they are falling more deeply into debt. Entire states and the cities, like New York State and New York City, are being squeezed. In addition to having to pay local unemployment insurance, they have to maintain basic infrastructure and social services. But their d tax revenues ae plunging as a result of fewer sales taxes and income taxes. So the pandemic is creating a fiscal crisis as part of the overall debt and real-estate crisis.
The question is, how do we get out of it? What is happening is what legal contracts call an Act of God. What do you do when economic activity is disrupted and the flow of payments that people have every month – their debt service, their rents or their mortgage, or their credit cards and other basic ongoing expenses. What do you do when they can’t be paid? I think that this crisis is laying the problem bare. It is a problem that’s occurred in Western civilization for the last 2,000 years. But what is so striking is how much more adroitly ancient civilizations handled this problem. They did so in a completely different way from how other civilizations have handled things.
I have written quite a bit about Bronze Age archaeology in the ancient Near East. That is where the Act of God stipulation originated. It appears in the Laws of Hammurabi c. 1750 BC. The problem that the Babylonians had to deal with was what to do when there is a flood, a drought, warfare or a pandemic. What should be the rules when, suddenly out of nowhere, cultivators and the citizenry on the land are rendered unable to grow and harvest crops, out of which to pay the debts that they have run up during the year and are falling due. They owe the taxes, sharecropping or other rent that could not be paid.
Hammurabi was quite specific about how to handle this situation. Paragraph 48 of his Laws said that there would be a debt and a tax amnesty when the weather god, Adad, created a flood or otherwise prevented debts and other obligations from being paid. If the storm god floods the lands, the debts and rents don’t have to be paid. A fresh start was made under conditions of balance for the next crop season.
The basic problem was similar to that today: How does a society restore continuity and save itself from disruption creating a permanent loss and distortion of existing wealth and income relationships? What Hammurabi and every other Babylonian, Sumerian ruler and other Near Eastern rulers did between about 2,500 BC and the 1st century BC was to proclaim amnesties in such circumstances. If they hadn’t done that, cultivators would not have been able to pay their creditors and they would have fallen into bondage. They would have owed their labour and crops to their creditors.
This would have caused a serious fiscal problem for rulers. If victims of a crop failure or other economic interruption had to pay their creditors with their labour and crop surplus, this labor and crop tax wouldn’t be available to pay the palace its normal claims for taxes and corvée labour duties to build infrastructure or even serve in the army. Social balance and continuity would have been destroyed – from within. So when Hammurabi and every ruler of his dynasty proclaimed a clean slate cancelling the debts and rent arrears that had mounted up unpaid, proclaiming a return to the normal situation prevented a creditor oligarchy from emerging and seeking its own interest as distinct from that of the palace.
All this changed in Roman times. Classical antiquity protected the financial and rentier elites. Cicero and the other Roman leaders said that all the debts had to be paid, even (or indeed, precisely because!) this led to the enslavement of poorer Romans and Greeks. Rome’s creditor oligarchy used every crisis as an opportunity to grab the land of the smallholders, to force the population into bondage and to get control of their land.
We’re seeing the same basic dynamic occur throughout the post-Roman Western world. Creditors are now already planning to buy up distressed real estate from landlords that default as their rents are not paid. There is going to be a huge bankruptcy sale. Large private capital funds have already announced their intention to begin buying out the retail stores that have gone bankrupt, along with their real estate.
Individuals who are unable to pay their debts, workers who’ve been laid off, are told to borrow from their pension funds or social security accounts. That means that they won’t be receiving the retirement income they need to live. Likewise, the states and the cities that Jeffrey Sachs mentioned also are facing a debt crisis with their bondholders. Mitch McConnell, the Republican Senate head, said that Democratic states like New York, New Jersey and California should cover their shortfall by taking the pension funds that they’ve set up for public employees. The financial sector’s intention is to use this crisis to wipe out the pension funds and transfer the savings of the wage-earners to pay bondholders and other creditors. The promises that state and local governments made for pension in exchange for not asking for higher wages are to be wiped out.
The debts that have been built up are being used as a financial warfare tactic. It is more efficient than military warfare. Debt has been used to strip away the assets of middle-class people, of home owners, of employee pension funds, to suck their savings and property up to the top of the economic pyramid. The pandemic crisis has created a battlefield. Its rules have been written by the financial sector and their lobbyists as an opportunity for the largest property and financial grab since the Great Depression.
The result will be that much of the American and European economies are going to end up looking like the Greek economy five years ago, when it was unable to pay its euro-debts. You can look at Greece as the future of the United States, catalysed by the coronavirus pandemic.
Thank you, thanks a lot. Michael, it’s your turn and allow me, before you start, because there was an extra question addressed to you, but also to the rest, included perhaps in the previous questions: who are the big winners, in economic terms, after current developments?
I’ll talk about the questions in reverse order, beginning with the idea that there may be an inflation to help pay off the debts.
Just the opposite: What we are facing now is an era of debt deflation. It’s the worst debt deflation since the Great Depression. I’ve already described how there are going to be major defaults in real estate, especially for commercial real estate, for stores and all the other businesses that are going without income while their rents have accrued. If we are going to have a close-down for at least three more months, with no income for stores, entertainment, motion-picture houses and museums, paying three months’ back rent is not viable. There’s no way in which stores, or many wage-earners, can earn enough to pay the rent out of normal work and business. So, they’re going to go out of business.
There is going to be a wave of bankruptcy, and that will be followed by fire sales of real estate. Unemployment is going to lead to lower wage levels, and there also will be cutbacks in public spending for social services, transportation and other normal programs. Privatisation sell-offs will occur, much like Margaret Thatcher’s in England. this is now going to be imposed upon Europe. It’s possible that the Eurozone will break up if it does not change its rules and create the euro-money to enable Italy and Spain to get by. But at present the Eurozone rules are that all the money, all of the credit that is needed to grow in Europe, should be borrowed from banks at interest.
Banks can create this money on their keyboards electronically. The government could do the same, but relinquishes this privilege to the privatized banking sector. As Modern Monetary Theory explains, a central bank can simply print the money that is needed to fuel economic growth. But the financial sector has captured the hearts and minds of central bankers, from Europe to the United States.
The problem is these banks don’t lend money to create means of production or livelihood. They don’t lend money to build factories. Banks lend money against assets already in existence, mainly real estate, houses, buildings, and also companies – and to corporate raiders to buy other companies on credit. So, the effect of this bank lending has been to inflate the price of real estate, because a house or a building is worth whatever a bank will lend against it.
The financial sector has become less and less productive, and more predatory. It has prevented European governments from having a central bank that directs deficit spending into the real economy. Only the banks and financial sector, the elite One Percent, are supported, as in the United States. Ten trillion dollars ’s put into the economy, mainly into the stock and financial markets, the bond market and the real estate market, but not into production.
The Eurozone does not do that. This means that the governments of Europe are not really democratic. Europe is governed by the European Central Bank. It works for its customers, the commercial banks. And the commercial bankers say: “We want to starve the economy of credit, so that we, the commercial bankers, can create the money to lend to our customers, and charge interest and financial fees. Our own financial speculation that all the growth, the surplus that Europe produces, should be turned over to the financial sector.” That’s what the Europeans have voted for. In effect they vote for lower wages, cutbacks in public services and shorter pensions. These living standards are threatened by the way in which the financial dimension of the coronavirus crisis is being managed.
You’re seeing a disparity between Italy and the Mediterranean countries and northern Europe. Countries need credit in order to recover. But the Eurozone refuses to provide the credit that is needed to get through the coronavirus suspension of economic activity and its aftermath of unpaid debts, rents and other obligations. The Eurozone is treating Italy, Greece, Portugal and Spain just like President Trump here in America is treating the Democratic states like New York, New Jersey and California. The effect is to create a deflationary crisis. That makes it impossible to pay the backlog of debts and rents.
We may see a power grab creating something much like feudalism. In the United States it’s suggested that for student loans, or for loans to wage-earners collateralized by the debtor promising to pay 10%, 20%, 25% of everything they earn for the rest of their life. This is like a tax, but it’s really a form of debt peonage. It’s a payment much like medieval serfs had to turn over their economic surplus to their landlords. Well, now the wage-earners, small business and even big business in America and in Europe are going to have to turn over even more of their earnings to the financial sector in order to survive.
This may seem a crazy way to organize society, but it is how Western civilization has been structured on the basis of protecting creditor rights, not debtor solvency and overall social balance and continuity. Unlike non-Western societies, unlike even China today, credit in Europe and America is privatized. The supply of credit, like money, should be a public utility. Just like public health should be a public utility. Just like roads and communication should be a public utility. Europe has let it be privatized in an aggressive, predatory way.
As long as governments subordinate the will of democratic voters to whatever the central banks tell you, you are not a democracy. Jeffrey earlier mentioned what Aristotle thought. Aristotle explained a kind of eternal political triangle. He said that many constitutions appeared to be democratic, but they’re, actually, oligarchic. That’s because democracies tend to evolve into an oligarchy. The oligarchy makes itself hereditary into an aristocratic ruling class. Finally, thank heavens, some of the wealthy aristocrats fight among themselves and they try – like Cleisthenes did in Athens as early as 406 BC – to take the masses into their camp, and become democratic and order to mobilize support in the citizens against the other aristocrats. Then you have a democratic revolution, but democracy once again develops into oligarchy. That’s the eternal political triangle that Aristotle described.
And that’s what you have in Europe. It’s not a democracy anymore; it’s an oligarchy making itself into the same kind of hereditary aristocracy that occurred in classical antiquity. Many of you hoped that Europe had overthrown the aristocracy after World War I when you did indeed get rid of the kings and royalty. But you opened the way for a new kind of oligarchy turning itself into a hereditary aristocracy, that of finance. That’s the task before you to solve. The only thing I can say is that, perhaps, this crisis has indeed catalysed this basic internal contradiction and will create a response that deals with the pandemic by cancelling debts and de-privatizing the banking sector.
Photo by Laura Seaman on Unsplash
The end of America’s unchallenged global economic dominance has arrived sooner than expected, thanks to the very same Neocons who gave the world the Iraq, Syria and the dirty wars in Latin America. Just as the Vietnam War drove the United States off gold by 1971, its sponsorship and funding of violent regime change wars against Venezuela and Syria – and threatening other countries with sanctions if they do not join this crusade – is now driving European and other nations to create their alternative financial institutions.
This break has been building for quite some time, and was bound to occur. But who would have thought that Donald Trump would become the catalytic agent? No left-wing party, no socialist, anarchist or foreign nationalist leader anywhere in the world could have achieved what he is doing to break up the American Empire. The Deep State is reacting with shock at how this right-wing real estate grifter has been able to drive other countries to defend themselves by dismantling the U.S.-centered world order. To rub it in, he is using Bush and Reagan-era Neocon arsonists, John Bolton and now Elliott Abrams, to fan the flames in Venezuela. It is almost like a black political comedy. The world of international diplomacy is being turned inside-out. A world where there is no longer even a pretense that we might adhere to international norms, let alone laws or treaties.
The Neocons who Trump has appointed are accomplishing what seemed unthinkable not long ago: Driving China and Russia together – the great nightmare of Henry Kissinger and Zbigniew Brzezinski. They also are driving Germany and other European countries into the Eurasian orbit, the “Heartland” nightmare of Halford Mackinder a century ago.
The root cause is clear: After the crescendo of pretenses and deceptions over Iraq, Libya and Syria, along with our absolution of the lawless regime of Saudi Arabia, foreign political leaders are coming to recognize what world-wide public opinion polls reported even before the Iraq/Iran-Contra boys turned their attention to the world’s largest oil reserves in Venezuela: The United States is now the greatest threat to peace on the planet.
Calling the U.S. coup being sponsored in Venezuela a defense of democracy reveals the Doublethink underlying U.S. foreign policy. It defines “democracy” to mean supporting U.S. foreign policy, pursuing neoliberal privatization of public infrastructure, dismantling government regulation and following the direction of U.S.-dominated global institutions, from the IMF and World Bank to NATO. For decades, the resulting foreign wars, domestic austerity programs and military interventions have brought more violence, not democracy.
In the Devil’s Dictionary that U.S. diplomats are taught to use as their “Elements of Style” guidelines for Doublethink, a “democratic” country is one that follows U.S. leadership and opens its economy to U.S. investment, and IMF- and World Bank-sponsored privatization. The Ukraine is deemed democratic, along with Saudi Arabia, Israel and other countries that act as U.S. financial and military protectorates and are willing to treat America’s enemies as theirs too.
A point had to come where this policy collided with the self-interest of other nations, finally breaking through the public relations rhetoric of empire. Other countries are proceeding to de-dollarize and replace what U.S. diplomacy calls “internationalism” (meaning U.S. nationalism imposed on the rest of the world) with their own national self-interest.
This trajectory could be seen 50 years ago (I described it in Super Imperialism [1972] and Global Fracture [1978].) It had to happen. But nobody thought that the end would come in quite the way that it is happening. History has turned into comedy, or at least irony as its dialectical path unfolds.
A veteran of Wall Street who now serves as Distinguished Research Professor of Economics at the University of Missouri, Kansas City, Professor Hudson has an intriguing CV that entails working with bodies ranging from the White House to the Vatican.
. . . And Forgive Them Their Debts has had a long gestation: he has been writing a history of debt since 1980. More recently, he has been inspired by his concern that, in the wake of 2008, “any lessons were forgotten pretty quickly.”
“It was obvious to me that, if you are going to avoid a massive foreclosure movement, and if you are going to avoid imposing austerity on debtor countries, you have to write down the debts, and most people — especially on the Left — said ‘Well, this is impossible’,” Professor Hudson tells me from his office in New York. “I began to look through history . . . at how different societies have handled their debt problem, and how they have written down the debts.’”
Studying the Bronze Age, he discovered that “for thousands of years in Sumer and Babylonia, and all the rest of the Near East, every new ruler taking the throne would write down the debts, and, instead of creating a crisis, it prevented a crisis from happening and preserved stability.”
This history has been neglected, he says. Today, our leaders believe that “stability is making everybody pay the debts that they promised to pay, regardless of their ability to do so.”
THE cover picture on Professor Hudson’s book shows Jesus throwing the money-lenders from the temple. It is his view that Christ was crucified because of his economic views.
He points to Luke 4 and Christ’s very first sermon, “unrolling the scroll of Isaiah, saying that he had come to proclaim the Year of the Lord, meaning the debt cancellation. . . . He said that the Pharisees and the rabbinical school of Hillel had hijacked Judaism and made it into a creditor-orientated religion.”OTHER STORIESHow to fix the broken economic systemRegulation alone is not enough, says Hector Sants — and there is a crucial part for the Churches to play
Professor Hudson echoes academic work by theologians such as Dr Lyndon Drakeb, who argues that Jesus’s use of the word “debt” in “forgive us our debts” would have been jarring to his contemporaries if he had meant only “sins” (as it is often translated), and that Jesus directly argued against the so-called prosbul clause which was used to avoid the Torah’s call for periodic debt-forgiveness.
“Jesus wanted to restore the original law, and Luke says that, after he gave his sermon and announced that he had come to promote this debt cancellation, people got very angry at him, and the Pharisees decided they had to kill him, just as creditors were killing debtor advocates all over the ancient world at his time.”
Many people today “don’t understand the linguistics of debt and sin”, he says. “Again and again, Jesus denounces the creditors: they were the sinners, not the debtors. That’s the most important message that he had.”
JESUS’s debt advocacy was presaged in the Old Testament, Professor Hudson argues.
“The prophets, especially Isaiah, warned that if you let the creditors foreclose on the land of debtors, you are going to have large land-ownings created, and . . . if you can’t pay debt and have to serve as a bond servant, there are going to be runaways and capital flight and depopulation.”
To say that Michael Hudson’s new book And Forgive Them Their Debts: Lending, Foreclosure, and Redemption from Bronze Age Finance to the Jubilee Year (ISLET 2018) is profound is an understatement on the order of saying that the Mariana Trench is deep. To grasp his central argument is so alien to our modern way of thinking about civilization and barbarism that Hudson quite matter-of-factly agreed with me that the book is, to the extent that it will be understood, “earth-shattering” in both intent and effect. Over the past three decades, gleaned (under the auspices of Harvard’s Peabody Museum) and then synthesized the scholarship of American and British and French and German and Soviet assyriologists (spelled with a lower-case a to denote collectively all who study the various civilizations of ancient Mesopotamia, which include Sumer, the Akkadian Empire, Ebla, Babylonia, et al., as well as Assyria with a capital A). Hudson demonstrates that we, twenty-first century globalists, have been morally blinded by a dark legacy of some twenty-eight centuries of decontextualized history. This has left us, for all practical purposes, utterly ignorant of the corrective civilizational model that is needed to save ourselves from tottering into bleak neo-feudal barbarism.
This corrective model actually existed and flourished in the economic functioning of Mesopotamian societies during the third and second millennia B.C. It can be termed Clean Slate amnesty, a term Hudson uses to embrace the essential function of what was called amargi and níg-si-sá in Sumerian, andurārum and mīšarum in Akkadian (the language of Babylonia), šudūtu and kirenzi in Hurrian, para tarnumar in Hittite, and deror (דְּרוֹר) in Hebrew: It is the necessary and periodic erasure of the debts of small farmers — necessary because such farmers are, in any society in which interest on loans is calculated, inevitably subject to being impoverished, then stripped of their property, and finally reduced to servitude (including the sexual servitude of daughters and wives) by their creditors, creditors. The latter inevitably seek to effect the terminal polarization of society into an oligarchy of predatory creditors cannibalizing a sinking underclass mired in irreversible debt peonage. Hudson writes: “That is what creditors really wanted: Not merely the interest as such, but the collateral — whatever economic assets debtors possessed, from their labor to their property, ending up with their lives” (p. 50).
And such polarization is, by Hudson’s definition, barbarism. For what is the most basic condition of civilization, Hudson asks, other than societal organization that effects lasting “balance” by keeping “everybody above the break-even level”?
There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.
The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.
An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.
Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.
For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.
Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.
Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.
The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. https://www.paulcraigroberts.org/2018/04/26/capitalism-works-capitalists/ Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.
Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.
Plato and Aristotle described a grand pattern of history. In their minds, this pattern was eternally recurrent. Looking over three centuries of Greek experience, Aristotle found a perpetual triangular sequence of democracy turning into oligarchy, whose members made themselves into a hereditary aristocracy – and then some families sought to take the demos into their own camp by sponsoring democracy, which in turn led to wealthy families replacing it with an oligarchy, and so on.
The medieval Islamic philosopher Ibn Khaldun saw history as a rise and fall. Societies rose to prosperity and power when leaders mobilized the ethic of mutual aid to gain broad support as a communal spirit raised all members. But prosperity tended to breed selfishness, especially in ruling dynasties, which Ibn Khaldun thought had a life cycle of only about 120 years. By the 19th century, Scottish Enlightenment philosophers elaborated this rise-and-fall theory, applying it to regimes whose success bred arrogance and oligarchy.
Marx saw the long sweep of history as following a steady upward secular trend, from the ancient slavery-and-usury mode of production through feudalism to industrial capitalism. And not only Marx but nearly all 19th-century classical economists assumed that socialism in one form or another would be the stage following industrial capitalism in this upward technological and economic trajectory.
Instead, Western industrial capitalism turned into finance capitalism. In Aristotelian terms the shift was from proto-democracy to oligarchy. Instead of freeing industrial capitalism from landlords, natural resource owners and monopolists, Western banks and bondholders joined forces with them, seeing them as major customers for as much interest-bearing credit as would absorb the economic rent that governments would refrain from taxing. Their success has enabled banks and bondholders to replace landlords as the major rentier class. Antithetical to socialism, this retrogression towards feudal rentier privilege let real estate, financial interests and monopolists exploit the economy by creating an expanding debt wedge.
Marx’s Theories of Surplus Value (German Mehrwert), his history of classical political economy, poked fun at David Ricardo’s warning of economic Armageddon if economies let landlords siphon off of all industrial profits to pay land rent. Profits and hence capital investment would grind to a halt. But as matters have turned out, Ricardo’s rentier Armageddon is being created by his own banking class. Corporate profits are being devoured by interest payments for corporate takeover debts and related financial charges to reward bondholders and raiders, and by financial engineering using stock buybacks and higher dividend payouts to create “capital” gains at the expense of tangible capital formation. Profits also are reduced by firms having to pay higher wages to cover the cost of debt-financed housing, education and other basic expenses for workers.
This financial dynamic has hijacked industrial capitalism. It is leading economies to polarize and ultimately collapse under the weight of their debt burden. That is the inherent dynamic of finance capitalism. The debt overhead leads to a financial crisis that becomes an opportunity to impose emergency rule to replace democratic lawmaking. So contrary to Hayek’s anti-government “free enterprise” warnings, “slippery slope” to totalitarianism is not by socialist reforms limiting the rentier class’s extraction of economic rent and interest, but just the opposite: the failure of society to check the rentier extraction of income vesting a hereditary autocracy whose financial and rent-seeking business plan impoverishes the economy at large.
Greece’s debt crisis has all but abolished its democracy as foreign creditors have taken control, superseding the authority of elected officials. From New York City’s bankruptcy to Puerto Rico’s insolvency and Third World debtors subjected to IMF “austerity programs,” national bankruptcies shift control to centralized financial planners in what Naomi Klein has called Crisis Capitalism. Planning ends up centralized not in the hands of elected government but in financial centers, which become the de facto government.
England and America set their economic path on this road under Margaret Thatcher and Ronald Reagan by 1980. They were followed by even more pro-financial privatization leaders in Tony Blair’s New Labour Party and Bill Clinton’s New Democrats seeking to roll back a century of classical reforms and policies that gradually were moving capitalism toward socialism. Instead, these countries are suffering a rollback to neofeudalism, whose neo-rentier economic and political ideology has become mainstream throughout the West. Despite seeing that this policy has led to North America and Europe losing their former economic lead, the financial power elite is simply taking its money and running
Michael: Well, from the very beginning, after working on Wall Street, I realized something that should be mathematically obvious. The debts now today are too large to be paid without bankrupting society and polarizing it, in much the way that has occurred again and again in history. It occurred in Rome, it occurred earlier in Sparta. You have a constant historical movement here. So my focus primarily was to trace the history of debt cancellations. What I realized is that when Luke 4 reports the first speech of Jesus, when he goes to the temple and gives his first sermon, he unrolls the Scroll of Isaiah, and says he has come to proclaim the Jubilee year …. The word he used, and that Isaiah used, the deror, was this Babylonian, Near Eastern long tradition that was common throughout the whole Near East. Now most of the Biblical translations miss this point. They were translated in the 17th and 16th century, when people didn’t know cuneiform, so they had no idea what these words meant and what the background of the Jubilee year was. And 50 years ago, there was almost a universal idea that the Jubilee year was something idealistic, utopian, and could never actually be applied in practice. But we know that in Babylonia, Sumer and Near Eastern regions, it was applied in practice.
Not only do we have the royal proclamations, we have the lawsuits by debtors saying “This creditor didn’t forgive me the debt,” and the judgments for that. Each member of Hammurabi’s dynasty after him ending up with this great grandson Ammi-Saduqa had more and more detailed anderarum acts, debt cancellations, to close all the loopholes that creditors tried to resort to. So what Jesus was referring to was a very tangible fight. In his time, this was the fight throughout Greece, it was the fight throughout the whole ancient world – the fight to promote debt cancellation. The Dead Sea Scrolls show this. For instance, Melchizedek 12 is a huge midrash of all of the Biblical citations of the Jubilee year, tying them together. And we now understand that the Dead Sea Scrolls were not a sectarian Essene product, but they were basically the library of the Temple of Jerusalem, that was sent and put in these caves for safekeeping during the civil wars. So what Jesus was referring to was what was the class war between creditors and debtors that swept throughout the whole period, including Rome itself. This has not been clear to most people who think they’re taking a literal version of the Bible. It’s very funny that the people who call themselves fundamentalist Christians will have dioramas of dinosaurs and human beings all sharing the same landscape, literally. But what they ignore is, if you take the Bible literally, it’s the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation.
Michael Hudson: Christianity began as a protest movement, but it was a protest movement that was very conservative. We know from the Dead Sea Scrolls – essentially the library of the Temple of Jerusalem hidden to protect it from the Romans – that what Jesus wanted to do was just what he announced in the first sermon that he gave. It is reported in Luke, Chapter 4. He said “I’ve come to proclaim the year of the Lord,” meaning the Jubilee Year. He unrolled the scroll of the Prophet Isaiah that described the Jubilee Year.
He said that the rabbis who opposed to be cancelling debts – the Pharisees, a conservative group of rabbis led most notably by Hillel – had developed a special clause that was similar to what the Babylonian creditors had tried to do. It was called the prosbul clause. A debtor who needed money would have to sign a waiver saying, “I agree not to avail myself of the rights that the Bible promises me in the Jubilee Year. So if the debts are cancelled, I waive my rights and the creditor can foreclose anyway.”
Jesus explained in his sermon that this was against the Mosaic Law – the law of Leviticus, chapter 25. It was in fact against everything the Old Testament talks about. (My book has the relevant Dead Sea scrolls.) But rabbinical Judaism was being taken over by pro-creditor Pharisees. Luke quotes Jesus as describing them as being avid for money, and working for the creditor class.
At that time the great social fight not only in Judea but also in Greece and Rome was between debtors and creditors. There was a region-wide civil war. There were assassinations of Roman pro-debtor advocates such as the Gracchi brothers in 133 BC. A century of civil war followed, in which even Julius Caesar, who enacted a modest debt reform, was killed. Sparta’s King’s Agis and Cleomenes were killed for cancelling the debts. There were armed uprisings throughout Greece and Asia Minor over this.
This was a universal fight. But somehow, the economic message of Jesus has been taken out of context. It is as if what he was talking about was otherworldly. But he was talking about something very worldly – the debt issue. Jesus wanted to restore the debt cancellation as it was supposed to be according to Leviticus 25.
You are advocating a revival of classical economics. What did the classical economists understand by a free economy?
They all defined a free economy as one that is free from land rent, free from unearned income. Many also said that a free economy had to be free from private banking. They advocated full taxation of economic rent. Today’s idea of free market economics is the diametric opposite. In an Orwellian doublethink language, a free market now means an economy free for rent extractors, free for predators to make money, and essentially free for financial and corporate crime. The Obama Administration de-criminalized fraud. This has attracted the biggest criminals – and the wealthiest families – to the banking sector, because that’s where the money is. Crooks want to rob banks, and the best way to rob a bank is to own one. So criminals become bankers. You can look at Iceland, at HSBC, or at Citibank and Wells-Fargo in the news today. Their repeated lawbreaking and criminal activities have been shown tob e endemic in the US. But nobody goes to jail. You can steal as much money as you want, and you’ll never go to jail if you’re a banker and pay off the political parties with campaign contribution. It’s much like drug dealers paying off crooked police forces. So crime is pouring into the financial system.
I think this is what’s going to cause a return to classical economics – the realization that you need government banks. Of course, government banks also can be corrupted, so you need some kind of checks and balances. What you need is an honest legal system. If you don’t have a legal system that throws crooks in jail, your economy is going to be transformed into something unpleasant. That’s what is happening today. I think that most Europeans don’t want to acknowledge that that’s what happened in America (USA). There is such an admiration of America that there is a hesitancy to see that it has been taken over by financial predators (a.k.a. “the market”).
We always hear that oligarchies are in the east, in Russia, but hardly anyone is calling America an oligarchy… although alternative media says that it’s just a few families that rule the country.
Yes.
Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics. He can be reached at mh@michael-hudson.com
Although money and banking textbooks say that all interest (and fees) are a compensation for risk, any banker who actually takes a risk is quickly fired. Banks don’t take risks. That’s what the governments are for. (Socializing the risk, privatizing the profits.) Anticipating that the U.S. economy may be unable to recover under the weight of the junk mortgages and other bad debts that the Obama administration left on the books in 2008, banks insisted that the government guarantee all student debt. They also insisted that the government guarantees the financial gold-mine buried in such indebtedness: the late fees that accumulate. So whether students actually succeed in becoming wage-earners or not, the banks will receive payments in today’s emerging fictitious “as if” economy. The government will pay the banks “as if” there is actually a recovery.
“You can make all the loans to students you want. You can lend them as much money for any education, even for junk education, for junk colleges, or for-profit colleges like Trump’s college, and we know that the students are going to default, but we’re going to guarantee your loans and we’ll guarantee a higher rate of interest than you can make on any other loan, because we know these loans are risky. We know they won’t pay, but the government will take all the risk and we’ll pay you as if you were taking the risk and as if you were making a real loan, thinking you’d get repaid.”