Interview by Greg McInerney of Melting Press with Michael Hudson on February 15, 2014. Michael Hudson is a research professor of economics at the University of Missouri, Kansas City, and the author of two books “The Bubble And Beyond” and “Super Imperialism: The Economic Strategy Of American Empire”. You can listen to the audio here
This the first episode of Melting Press’ new “Alternative Voices” interview series.
Greg McInerney: This is Greg here from the MeltingPress.com.
This the first installment of our “Alternative Voices” series where we talk to people who give us different perspectives on everything from economics, to politics, to culture.
Today we’re joined by Professor Michael Hudson. He’s a research professor of economics at the University of Missouri in Kansas City. He’s also the author of “The Bubble and Beyond” which is his latest book, and “Super Imperialism: The Economic Strategy of American Empire” which I’ve read myself and is a brilliant read, you should go out and check that out.
Professor Hudson, thanks so much for joining us today.
Professor Hudson: Good to be here.
G: Professor, we’re based here in Ireland which is a country, as we both know, currently in economic ruin at the moment. Unemployment is at 14%, graduate unemployment is probably double that. Where did it all go wrong for Ireland?
Prof. H: Your unemployment is intentional policy by the Irish leadership, of both parties. None of this unemployment is necessary. It doesn’t have to be this way. The government was suckered in to paying the debts for its corrupt bankers.
The problem is that even when you Irish did – as you should have done – and voted out the party in power, the incoming party has the same policy as the former one. It’s much like the United States, where we voted out Republican George Bush, and then got an even more Republican Democrat – Barack Obama. They all promise change, and then follow the financial sector’s directions.
So the underlying problem is that there is no body of theory or policy in Ireland to show that there is an alternative to this unemployment. There’s a belief, a Thatcherite belief that There Is No Alternative, and of course there is an alternative! You shouldn’t have paid uninsured bank depositors and bondholders, and you should not have to pay the European Central Bank, the I.M.F. or the other parties that misinformed you by telling your leaders that the cost of government bailouts would be easily managed, not a lost decade and economic disaster.
You should establish as a basic legal principle of international law that no country should be obliged to pay foreign debts at the price of driving out 10 – 20% of its population, at the price of austerity, and at the price of committing economic suicide.
Nation states are not supposed to commit suicide. But that is what Ireland is doing.
G: Right, and Ireland really has been the poster-child of neo-liberal economic theory in Europe, for probably a few decades now. Could you speak a bit to that? About the policy of low corporation tax attracting multinationals.
Prof. H: Poster-child? I always thought Latvia was the poster-child.
G: Haha! There’s a few.
Prof. H: Look, criminal behavior’s the real common denominator. That’s pretty universal. The low corporate tax was simply an attempt to make Ireland into another Hong Kong, an international banking center by having corporations park their cash there.
This might have worked better if you did what Hong Kong did. It used this money to finance a huge capital investment in real estate, and made money on it. Ireland attracted foreign capital by giving a tax break, and by offering very high rates of return for “hot money” to money managers (mainly from London) to put their money in a few ambitious banks.
But what did Ireland do with this inflow of money? It turned it over to crooks! And let them steal it. Then, what really caused the problem, was that instead of letting the speculators, uninsured depositors and bondholders take the loss – that risk was why they were paid such high rates of return with such low taxes – Ireland’s politicians let the I.M.F. and European central bank come in and say “Well, they took a risk, but don’t make them pay for it. Make the taxpayers absorb the loss!”
The Irish people agreed to do this. “We would rather be poor than make the rich lose the money, because the rich are our job producers.” Unfortunately they’re your job producers in America, in Germany, and the other countries that you’re emigrating to.
G: Right, and just tracking back a bit to a point you made, we also had another problem specific to Ireland: the housing bubble that took place over the last twenty years or so. Is that something that is necessary or is it a result of the low corporation, neoliberal policies that you have to inflate asset prices like this to, compensate for income?
Prof. H: The housing bubble has nothing to do with the corporation tax. It has to do with the absence of a land tax on real estate. If the land value were taxed, you would not have had all of this free rental income and the prospect for capital gain. This is what Henry George wrote about in The Irish Land Question back in 1881. Great book, just read Henry George and The Land Question and you’ll get everything you need to know about why Ireland should have had the tax base on the land instead of turning over the rental income to banks – which then lent it to crooks, who stole it.
G: As you said the land value tax, which is a very interesting policy, was proposed to the new government, Fine Gael that came in afterwards. But instead of implementing a land value tax, they just implemented a flat property tax, which is regressive, and has in no way made any difference. As a result we see another property bubble may be developing at the moment, just like we see occurring in the UK.
Prof. H: In the UK it’s mainly in London. The real estate bubble in London is different. That’s flight capital going into London property. I’m told that 80% of central London property is owned without a mortgage, so the London property price gain is not being fueled on credit. It’s not debt leveraged at all. Most of the buyers, the Russian kleptocrats and the Hong Kong or Chinese entrepreneurs are paying all cash for their apartments. So you can’t compare Ireland’s rising land prices to Britain’s rising land prices.
Outside of London the economy is being pushed in to a depression by deciding that Britain doesn’t need manufacturing. All it seems to need is bankers. As long as they can steal money from Irishmen, who needs to manufacture anything?
G: We all know that you’re an independent economist, you offer a different point of view, but one thing that was really striking during the Celtic Tiger here was that the entire profession of economists completely bought into the ridiculously flawed neoclassical models. Can you talk about how the profession of economists played their role in building all this up?
Prof. H: They’re indoctrinated. There are two ways the Chicago School of economics pushed neoliberal theories. In Chile, they went down under the Pinochet regime and closed every economics department in the country that didn’t teach their Chicago School theories. They assassinated labor leaders, they assassinated economists and professors, and had a continent wide terrorism campaign, Operation Condor, which killed tens of thousands of intellectuals. They didn’t have to do that in Ireland or America.
In American they gained control of the main refereed economic journals. And that means that in the United States – and probably Ireland and Europe too – when you graduate with your PhD and want to go into teaching, you have to get promoted by being published in arefereed journal. But the referees are Chicago boys or Harvard neoliberals. They are ideological totalitarians. The free market boys realize that you cannot have a free market without having utter totalitarian control. That’s what they’ve achieved.
The aim of totalitarian control is to make sure that there is no alternative. So by the time I graduated from NYU, I was told – by a professor who worked for the CIA – that it was not worth while studying the history of economic thought, because if economic theories were good, they would have succeeded by Survival of the Fittest. If they weren’t taught, it’s because they were outdated and obsolete. So, in the United States they’ve dropped the history of economic thought from the academic curriculum. They’ve even dropped economic history. So you’re not going to learn what was taught when I was in school 50 years ago: the history of rent theory, price and value theory.
The whole edifice of analysing the distinction between earned and unearned income, economic rent and profit – all this has been stripped away from the curriculum and does not appear in the economic journals. So, what you really have in academic economics is junk economics. I think you’ve had Steve Keen on your show and he’s written a book, Debunking Economics, explaining much about that. I’ve written on similar lines on international trade theory.
G: Yeah, it’s interesting that you mention Latin American Michael. In the last twenty years or so we’ve seen a huge backlash to the, as you said, extremely violent neoliberal projects implemented there. Do you this it’s possible that through similar grass-roots movements here in Europe that something similar could take place.
Prof. H: If you’ve read the newspapers recently the US has just gone in to the Ukraine and has assassination squads murdering Ukrainian judges and leaders that do not want to push Ukraine along the neoliberal pro-European, as opposed to Russian practices. So, yeah, they only kill when they actually have to, and when people actually listen to them.
I don’t think anybody is listening to them in Ireland and I don’t hear any discussion there, so I don’t think there’s any need for violence there, because there’s a herd instinct there as you say, with Stockholm syndrome. You’ve adopted the view of your oppressors, as if somehow they’ll be nice to you, if you’ll only give more money to them. You may need another 60% of your population to emigrate before you realize there may be an alternative.
G: Indeed. What’s really interesting I think about Europe at the moment is what you’ve talked about: flaws in the free market. The eurozone, the way they’ve set up the central bank system and tax harmonization – surely it was destined to fail from the minute they thought of it?
Prof. H: Haha! Of course it was! So it was not a failure at all. It succeeded! The success is impoverishing the working class. The eurozone is an anti-labour, essentially, class war zone, and the banks are winning the class war. Why do you call it a failure? It’s reduced wages by 30% It’s caused mass unemployment, it’s stripped away pensions, it’s reduced laborers to poverty.
That’s not failure. It’s a victory if you’re a banker and a financier and the “1%”. This is the victory of the “1%” against the “99%”. That’s like saying that WW2 was a failure because the Germans didn’t win! But if you’re the Allies, you won. And this is how America rebuilt Europe.
G: You’re absolutely correct. Can you explain to the listeners Michael, we all know how visible the financial lobby is in the United States. I mean it’s completely transparent that the politicians there are bought, but in Europe it’s seen slightly more obfuscated. How does the lobbying work in Europe?
Prof. H: Largely through the educational system. I’ve met people in Latvia, Iceland and other countries who honestly believe the neoliberal line, because that’s the only economics they’ve been exposed to. The neoliberals realize that the way to make sure that There Is No Alternative is to make sure that people don’t know that there is one. What you have is Junk history, teaching Junk economics so that people think that the world has always been this way, and that there isn’t any other way of doing things. Of course, that’s crazy – but that’s what’s happening!
G: Can you tell us how specifically, the euro, the single currency, has restricted country’s ability to dig their way out of crisis.
Prof. H: Let’s compare how the US handled its bank bailout after 2008, and how Europe did.
In the US they didn’t raise taxes, and they didn’t borrow from foreigners. The Federal Reserve simply created four trillion dollars of credit electronically. That’s what a central bank is supposed to do. It’s supposed to create the money to monetize and finance government spending deficits.
The eurozone forbids this in two ways, and this is what the German court ruled in Karlsruhe last week. The European constitution prevents the European Central Bank from lending to governments. It won’t’ monetize debt that results from deficit spending – although it will create money to pay bondholders and speculators. It’s there to enrich the 1%, not the 99% – and even worse, it thinks that the main way to enrich the 1% is by impoverishing the 99%. That is why it is so dysfunctional and downright evil.
So, instead of creating the money that Europe’s central bank gives to the crooks – in the Anglo-American way – it actually make the taxpayers pay the crooks. This is completely unnecessary. You could just create money and give the crooks everything they want, without having to make things worse by taxing labor and industry to wreck the economy. But the eurozone aims deliberately to wreck the economy, in order to scale back wages. It thinks that whatever is taken from labor can be grabbed by the financial sector. There’s no concept of symbiosis, and that without a domestic market the debts ultimately will have to go bad.
The eurozone refuses to let a central bank finance government spending. Only commercial banks and bondholders can do this – and they charge interest. Crippling the central bank thus creates a huge transfer of interest to the commercial banks. Then, when the governments can’t pay, they go to Stage Two. That is where the governments have to pay by selling off the public domain: the land and natural resources, the forests, ports, electrical systems, natural monopolies basic infrastructure, roads and bridges. The economy is turned into a tollbooth economy. So you’re going back to feudalism. Ireland is back to the 14th century, quickly.
G: What I think is really interesting as well is that we’ve seen a separation in capitalism. There is the traditional capitalism of the worker and the factory owner, but now what we’ve seen is the rise of a financial class, which is even harmful to the traditional capitalists themselves.
Prof. H: That’s right. Instead of industrial capitalism, if you look at writers from the 19th century, everybody from Marx to business school professors expected the destiny of industrial capitalism to be to bring finance out of the medieval period into the modern period. The idea was to make banks serve the industrial system. That’s what the Saint Simonians advocated in France. They were the idealists of the 19th century. They developed the idea of investment banking that the Reichsbank and the large German banks did most effectively. It’s what Japan did after WW2, simply because they didn’t have any other source of money except by their ability to create their own credit through industrial banking.
Nobody expected that finance capitalism would dominate and ultimately stifle industrial capitalism. But that’s what’s happening.
All the futurists, even socialists, were optimists about capitalism. They thought it was going to evolve naturally into socialism, with an increasing government role in the economy to provide infrastructure, including banking. Instead, you have governments being carved up. That’s what neoliberalism is. It’s really neofeudalism. It’s a dismantling of democracy in favor of a financial oligarchy, to rule by appointing proconsuls and technocrats such as you have in Italy under Monti or in Greece under Papademos. You have a rolling back of history, and of the Enlightenment. If your college curriculum, your religion and the popular press doesn’t even talk about the enlightenment and about the history of economic thought, you’re not going to realize that what’s happening is a rolling back of the last 500 years.
G: It’s really made democracy completely redundant. For the most part, people aren’t going to be able to vote themselves out of this surely, are they not?
Prof. H: Well, in America you are able to vote. You can vote yes, yes please, and yes thank you. The question is, what are they going to vote about? In Ireland, both your parties are in agreement that you have to pay the crooks and you have to sacrifice your economy to pay these debts as a dead hand crushing your economy. As long as there is no alternative party like there is in Greece with its left-wing Syriza party, or in Latvia with the Harmony Centre, there is not going to be any alternative, except perhaps to learn Chinese and emigrate.
G: If an alternative did come along, Prof. Hudson, what would be your sketch of their plan of an economic policy? Would you leave the euro? Would you create a new currency?
Prof. H: As long as the eurozone has no central bank, it’s not really integration. The only way you can have the United States of Europe is to have a common tax policy and a common monetary policy. You remember what the American Revolution was about: ‘No taxation without representation’. Right now that’s not the case in Europe. Unless there’s real political integration, which I don’t see, then all the Eurozone is now is not the peaceful socialist/social democratic idea that it was 50 years ago. It is an anti-labour, pro-financial class war. There is no way that you can remain in that kind of Europe. There doesn’t seem to be a discussion that there is another kind of Europe, the kind of Europe that was meant in the 1940s and ‘50s.
G: The European political classes are interesting. They are working really hard to emphasize the unifying nature of Europe, but what they don’t realize is that they are creating the same conditions post WW1 that led to WW2. We all know what happens when capitalism fails, and it’s not pretty.
Prof. H: Well that’s what’s happening and the right wing parties all over Europe and you see the United States promoting the neo fascist parties in the Ukraine, the Baltics, and periphery of the former Soviet Union.
G: What is the United States’ view on Europe, we’ve seen, there was a time –
Prof. H: That Europe is a dead zone. They’re ignoring Europe. Remember when Donald Rumsfeld the Secretary of Defense, referred contemptuously to “Old Europe.” That’s how it’s viewed. Europe is shrinking, its population is leaving, so it doesn’t matter. Its leaders are American puppets that they can be ignored. It has no role to play in the world except to be like Japan, an appendage of NATO and US military encirclement of Eurasia.
G: Do you think that the US has actively contributed to the decline of Europe just as maybe it did with Japan and other rivals?
Prof. H: I was told 30 years ago that almost all of the transportation payments for members of the Socialist International – of which the Greek neoliberal prime minister Andreas Papandreou was the head of for many years – were paid for by the CIA. Now we’re finally seeing the maneuvering that has put the kind of European leaders in charge, from Germany to England. They are very pro-American. You can see from the cables that were leaked last week about how the United States is maneuvering to make pro-US puppets in the Ukraine, like they maneuvered in Russia to have Yeltsin put in.
G: Do you think the levels of inequality will surpass the US. Which we know is one of the most unequal societies in the western world.
Prof. H: It’s a race to the bottom. Hard to tell. It’ll be a tight race.
G: You’ve written extensively about the US and it’s funny, the US might be the first Empire that’s really never been called as much by the people living there. How has the US managed to obfuscate the fact that it’s the biggest global superpower to most of its citizens?
Prof. H: People don’t understand the balance of payments and the nature of the monetary system. They don’t understand that the dollar standard, internationally, means essentially that America’s balance-of-payments deficit – which is almost entirely military for many decades – is the basis of foreign central bank monetary reserves. So the world’s monetary reserves consist of loans to finance the American military surrounding of the rest of the world. People don’t look at what these central bank reserves end up being used for. When they hold US Treasury bills, what is the deficit resulting from? What is the balance of payments and the budget deficit resulting from? This kind of analysis, simply is not widely publicised there.
G: What we’ve also seen is the corporatisation of the media in the United States. I spent the last two or three years studying there, and it really is amazing the levels of disinformation that are passed off as news. And of course, news is massive corporations and is completely controlled by the same people we’re talking about.
Prof. H: The internet, fortunately is an alternative. Naked Capitalism and CounterPunch are my favorite sites. You get such a biased view in the mainstream. This week’s Nation magazine has an article by Stephen Cohen on the disinformation about Russia – all the anti-Russian propaganda that you get from the NY Times and the Washington Post. The seemingly objective press that really isn’t objective at all.
G: It’s shifted so far right that people in your profession, someone like Paul Krugman, who would have been considered a fairly moderate voice maybe 30 years ago, maybe even a centre right republican voice. They won’t even implement his very cosily liberal economic policies.
Prof. H: Well there is a type of Keynesianism, but its only Keynesianism for the “1%”.
G: Is there anyone you see, there’s obviously yourself, maybe people like Richard Wolff and David Harvey. Who else in the economic profession do you think is speaking the truth?
Prof. H: The ones you mentioned certainly, I had dinner with David Harvey the other night. Steve Keen, Dirk Bezemer in Holland, Yanis Varoufakis writing about Greece, and Michael Perelman here in the US. None of us are funded by an organization that is putting together an alternative national income account, banking or financial accounts. And we can’t spend our life as key punch operators. We thought there would be a self interest among debtors to back our analysis just like Keynes’ analysis was backed in the 1920s. But there aren’t any. There seems to be such a dispirited, depressive feeling among debtors there is very little we can do besides talk to people like you and other sites and write our books.
G: Just before we let you go, Professor Hudson, what’s the future do you think for Europe next five or ten years? Will it collapse or continue on at the expense of its citizens?
Prof. H: It’ll be a slow crash. It’ll be shrinking and shrinking and shrinking. It would only crash if people saw there would be an alternative. If there was (an alternative), the banking system would threaten to shut down and cause a crisis and close ATM machines and stop credit cards. They would cause a crisis to say, “You need us.” That’s what the governments have let happen, for the banking and financial system get a stranglehold on them. There is no question that Europe has to be willing to buck this counter revolution or counter-Enlightenment. You could say that the only way this could be done is by a broad popular movement.
It’s almost like what in America used to be called a Great Awakening, great moral waves of new understandings that you had in the progressive era of the 1890s and then again in the 1930s. It doesn’t seem to have gotten to that point. The Europeans are so dispirited.
There is a basic motto among oppressors: You don’t know when people will begin to fight back until they actually do. So they are just tightening the screws and tightening the screws. Latvia was a cruel experiment to see how far you could reduce living standards. There doesn’t seem to be a limit.
G: I think maybe part of the problem is that as we discussed earlier the separation between financial capitalism and industrial capitalism. In previous revolutions and movements its been easy to identify workers injustice, not being paid and their owners taking too much profit. but the shadow banking sector is just so invisible to the everyday worker. How are we going to dismantle this thing, if people don’t even know it exists.
Prof. H: There is a feeling that people can get rich by going into debt, and that debt leveraging is how to get rich. That works if you can borrow a billion dollars to swamp the market and become a monopoly, and to buy politicians and the courts. But if you have less than a billion dollars, borrowing money and debt leveraging doesn’t help you get rich. It just leads you into debt peonage. So the Irish should look at the whole of Irish history and that of other regions such as the Ottoman empire in the late 19th century and see the ruin of Egypt, the ruin of Persia. These were talked about regularly in the 19th century. All this has happened before. It’s not new. All they have to do is look at history and ask whether they want to go that route, or is there an alternative?
G: Brilliant. That was Michael Hudson. Please check out his work on his website on michael-hudson.com. He has two brilliant books out, and I suggest you read them. Prof. Hudson thanks so much for taking the time out today.
Prof. H: Good to be with you.
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China might be more interesting to look at in terms of Michael’s general thesis. They have expanded finance in 6 years to what took 100 in the West. Massive infrastructure projects were the ‘secret’, covered by news of their export of plastic rubbish to the rest of us. I’m less interested in what happens if the house of financial cards comes down, than the pace of the infrastructure building and the corruption involved. They may well have built the wrong stuff in the wrong places and a few may own half of central London and the rest.
However, the fact this level of infrastructure building could be organised is what interests me. Imagine Ireland or Scotland building huge green power capacity or any developed nations shifting to green infrastructure, guaranteed incomes and much that might actually be modern and democratic. I mean this question in terms of why we can’t give two fingers to the “financial implications” and see them as the chronic limiters of a decent, modern, sustainable globe. Who is building ghost cities in Ireland, China and stuff in central London for the profiteers to buy? Can anyone deny this is going on? So WTF is economics and banking, even in (laughably) communist China? Is there any historical or present evidence that any of this is about the sensible allocation of investment in production we need?
It makes more sense now to think of politics and economics as a control fraud religion forced on us by rubber-masked aliens than as democracy and market-regulated resource allocation. Michael is right. What I’d like to see is an opportunity cost analysis of what the situation might be if we weren’t under the spell of the rubber-faces.
An excellent read. He’s not pulling his punches is he?
“The eurozone is an anti-labour, essentially, class war zone, and the banks are winning the class war.”
That’s my view as well. I must admit I totally failed to see it coming back in the day, but the effect is clear. I personally don’t want to continue belonging to the EU if this is what it means. I’ll take my chances with Westminster, at least I understand how it works.
The more I hear from Hudson, the better I like him.
I used to work for a government emergency planning outfit and one of the things we were developing was a standing plan to cope with any closure (by terrorists of course) of banking and ATMs. We used to queue for our pay once and could manage again with brown envelopes for a while. The plan had a provision for troops to point weapons at non-cooperating bankers.
I like Mike.
Hudson says: ” It’ll be a slow crash. It’ll be shrinking and shrinking and shrinking.” Now that Obama has agreed to slash almost a billion dollars a year from the Food Stamp program, and unemployment benefits have been capped, we’re in the “elimination phase” for the “surplus population” that includes the vulnerable segment of the population (sick, elderly, children)
This is where dictatorial powers come in to suppress any resistance once the “elimination phase” kicks into high gear … hence the panoply of oppressive tools (NSA- DHS- militarized police forces) and their legitimization (Patriot Act- NDAA- executive orders etc)
The last Great Depression ended only through a combination of global warfare and harsh austerity along with some debt write downs. Even at that it took almost a dozen years for employment levels in the US to catch up to the 1929 peak. This time around global war is out of the question (though likely will occur in the end). In the Millennial New Depression, we’re on course to an official policy mass murder and a neo-Feudal New Dark Ages. Michael Hudson has used such terms and he provides the analysis to show that’s where this all ends.
The oligarchs, through effectively creating a global system know they can manipulate the system so that there is no crash just a slow bleeding most people won’t notice. The system is beautiful to behold as a system–which is why I’m always skeptical of disaster scenarios. The advantage of our current situation is that it gives us time to re-focus our lives along very different lines which I’ve expressed elsewhere. The oligarchs will not risk political instability on a massive scale. At any time they can join together to manipulate the markets to wherever they want them to go not yet to total perfection but they’re doing a good job so far.
Banger, think July 1914. Europe had a system in place where they literally physically dominated the globe (forget about culturally and financially). A few miscalculations later and they had done irreparable harm and unleashed the nascent power of the United States on a course to supplant them. Wherever you find human beings, you find hubris.
Not at all the same. 1914 was decades away from systems theory. There are feedback systems to feedback system in the global system. It is incredibly sophisticated and largely “systematized” with the aid of AI. Take a probram from 1950 and compare it to a sophisticated program of today built on generations of prior programs–no comparison. 1914’s leaders were very different and, generally, not in close communication–they were at the head of a vast system beneath them they barely understood–compared to today the governing systems were kind of random and highly chaotic even within tightly run countries like Germany.
However, it is nature that will eventually crash the system at some point–either the Earth System or when human beings become tired of being defined as “units” or both.
I’m glad you brought up AI. People normally think of out of control robots of Asimov’s kind – or maybe the matrix – or Arnie the terminator. Meanwhile Bayes theorem provides those with resources and the AI type programming, skill and ability to spot how to make money by slow skimming of small percentages from lots of transactions based on the advantageous access to information and knowledge of how financial transactions work and the real fluid nature of money.
The system is remarkable. Interestingly I suppose you could argue this is what happens when you let natural selection run wild in a complex entity – like malignant cancer. So maybe the neoclassicals are right. They just a bit economic with the truth that the their beloved system will creatively destroy the 99% of us.
Banger: I don’t think many people appreciate that an important line was crossed starting last Fall when sequestration took hold and legislation passed capping the food stamp (SNAP) program, a move that was repeated less than six months later with another round of cuts —deep, continuous and on-going cuts. That was complemented by terminating unemployment income assistance to the long term unemployed. That’s more than 15% of the US population facing serious hunger, malnutrition and destitution.
The US oligarchs are not tapering killer austerity; they’re doubling down with these policies.
Meanwhile an enormous apparatus has been created to suppress any resistance as killer austerity starts to shift to outright killing, albeit passively, at first through deprivation. For that, the US military has been tasked with suppressing any resistance. Trillions have been spent building up an Orwellian surveillance state behind the weaponry. We saw in Boston how easy it was last year to create a state of martial law.
In foreign policy this kind of dictatorial spectre does not breed level-headed statesmen.
Tensions are rising across the globe and the flames are being flamed by the West, whether funding and arming al Qaeda and affiliated militants in Syria or backing Ukrainian fascists in Kiev or egging on Japanese militarists there. Any one of those hot-spots could spin out of control. Unfortunately, sane voices along the lines of Michael Hudson — there are plenty of such voices— are ignored and gain no political traction.
Hudson evinces a sense of inevitability in this an other talks and I feel the same way.
“as killer austerity shifts to outright killing”
its called Murder by Neglect ….. game in motion
I don’t disagree–the situation, however, for most people is pretty stable. Even if poverty should double, most people are still doing well and people are less compassionate than at any time in my memory. The repressive apparatus is ready and willing to do whatever–but I doubt that will be necessary.
I think there are danger points and a lot of political maneuvering in the shadows. But the Ukraine situaiton will be resolved peacefully based on who can marshal the most power. The Russians are vulnerable but I’ll put my money on Lavrov over Kerry.
As for nobody listening to reasonable people like Hudson and a score of others–we certainly don’t lack for insightful observers, that has nothing to do with the merit of their arguments. Political matters are settle through the application of force. Hudson commands no divisions and can mobilize no media campaigns either thus his words simply do not count in the corridors of power. The left has proven itself inept at understanding as well as using power so why should power players care what Hudson or any other progressive thinks?
Oh please. The elites are simply jerks with a lot of money, and when you have a lot of money, you can make a lot of mistakes. The problem these jerks run into is that because they can make a lot of mistakes, they think their ability to screw up is endless. Then along comes 2008, and they are damn lucky to have Obama, who’ll at least toss a little Keynesian kindling on the fire so that everything doesn’t melt down (as opposed to what McCain would have done). The Euro boys aren’t so lucky. They get stuck with Merkel, and now half the countries are having riots, and all of them are seeing the re-birth of Naziism. This is people not noticing?
Luck had nothing to do with it. Obama didn’t come on the national stage by chance–he was groomed by the oligarchs early on. Anybody whether pol or prominent journalist gets nowhere near power without being carefully brought along by some clique.
Obama was created to be the “black” candidate to neutralize the left during the reactions to the cons of Wall Street and the wars that were always not what they seemed to be–lots of money disappearing into holes no one mentions any more. It’s all Bush’s fault so lets elect Obama! Yea, that’s the ticket….
These guys are well served by a host of lawyers, courtiers who sing for their f—ing supper. Don’t think these fixers and professionals are going to abandon their capos do you? Rich people may often have way too much hubris but they have people to iron out the ruffles.
I think whoever told that to MH was spot on. States have discovered that there will be opposition parties and the way to make sure they go nowhere is to bribe or corrupt them through a whole spectrum of means. These notables are sought out in elite universities and “worked.” Once they come close to power, the ones that don’t play are compromised or their plane crashes or they commit suicide etc. The U.S. intel operatives have had decades to hone their talents and techniques almost completely without oversight. The East Germans were famous for creating, out of whole cloth, a whole opposition movement called the “Stasi-left.” I think some of that is true in the USA.
I want to emphasize here that we ignore “deep politics” to our peril. Nothing can change politically unless we face that reality–Machiavelli and others have provided us with a clear picture of how politics actually works–the usual high-school civics view of the world most leftist have is just stupid.
MH and few others is trying to take economics out of the Dark Ages, I hope he can influence the profession because currently the field is fantasy fiction.
I’m not sure “leftists” have this view, but American liberals do.
What I liked about this interview is that Hudson didn’t bend to the liberal political correctness of his New Deal nostalgic compatriots and minimize the role of the US government itself in the promotion of neoliberal ideology, the murder of political enemies, the promotion of fascist regimes over the past few decades as well as the day before yesterday, etc.
This seems like a good step toward getting more realistic about understanding the full scope of what we’re dealing with here. The la la la chorus of status quo satisfied liberal policy entrepreneurs who seem to think they’re going to turn the US goverment on a dime and implement policy that benefits the public (at least this is they way they spin it) have really lost me.
Ditto with regard to all those very resistant people who somehow think that the police state and the economy are two completely unrelated issues, and that we can address the economy without concern for the police state and our civil rights and liberties.
Who thinks like this?
People who don’t want to be scorned and marginalized think like that. Which is most of us. If you’ve ever taken the time, effort, and act of will to write something professionally, send it out into the world, then have it attacked or dismissed for not conforming to the dominant paradigm you know what I’m talking about. I get it for casting doubt on the “Churchill was an Heroic Genius and a Great Man” meme. My skepticism is viewed by many viscerally as either treacherous or insane. Imagine how much more precarious one is taking aim at the interests and ideology of the 1%.
I’m not saying people shouldn’t speak the truth as best as one can glean it, only that it is a more difficult and agonizing choice than many who are not professional and don’t publish would like to admit.
What you mean is that those opting for academic respectability are simply a toadying class who don’t personally believe the rubbish they are scribbling. I have suspected this for forty or fifty years, beginning when I was treated to Samuelson’s bastardization of Keynes. I graduated with a degree in economics and realized I had learned nothing remotely useful. Veblen and Henry George were ignored; Marx was dismissed. How many economists even understand that value is determined by socially required labor time?
Some of them are toadying, but many are just trying to cultivate their careers and make a splash by using novel (often inapt) methodologies to look at old problems. They have been taken aside and told” “listen, if you want to make it in this profession, you’ve got to be ‘cutting edge’ and you’ve got to churn it out and you’ve got to say something bold or else it’s community college or adjuncting for you.” Salon.com had a fantastic article on the “Walmartization” of Higher Ed just yesterday. It’s a crushing blow to put your time and ego and future earnings on the line and not land a plum job. And very few people today are landing plum jobs. The pressure to meet the needs, even whims, of the people who are going to hire you and give you tenure is extreme, while the pressure to speak the truth and help your society isn’t there.
And this is America: failure is failure. Saying, “I failed because I spoke the truth” counts for jack shit, and nobody will take it seriously or see it as anything but special pleading from a loser. And don’t take their bullshit for anything but–academics are the most status conscious Americans I know. Where you went to school counts infinitely more in academia than it does in business, and 4 times out of 5 trumps the quality of your dissertation research. I was told point-blank that if you didn’t get a PoliSci Ph.D. from one of 15 schools, your chances of getting a good job didn’t exist. I hear the number in Economics may be even lower. That’s the nature of the system we have built. And until it all falls apart, I believe it will endure without significant change or reform. The “winners” have too great a vested interest in keeping it that way.
I will never forget a couple years ago reading a post I found well-written and thought provoking by Terrence McDonough, an economics professor at National University of Ireland Galway. It was on a well-respected Irish economics blog (i.e., many leading Irish economy faculty members post there).
The nastiness of the pile-on that ensued, with incredible venom directed against this professor, was eye-opening. Not long thereafter I stopped reading that blog, realizing it was ideologically limited in ways I (as a non-economist) had not fully realized.
Hudson’s point about using the education system to control thought is important. We need to seek out, celebrate and publicly support those economists and academics who have a strong internal compass and who are able to share insights and perspectives other than the mainstream ideas being foisted on us.
In every forum I’ve participated, online since the mid-90s, both general and academic, attacks on heresy are often vicious and without merit (i.e., using logic or evidence). If someone questions the foundation of an official or an academic’s intellectual foundation verbal violence will ensue. People depend on their unexamined assumption for meaning in their lives and threatening that is threatening their own existence. This is particularly true of those in authority–they suffer from what AE Van Vogt called the “right man” syndrome.
At the same time we try to understand the deeper political dynamics at work (we must do this with care) we also need to understand why people don’t see the elephant in the room. Social science tells us that perceptions vary depending on the prevailing views of the majority or just authorities. Paradigms only change when the current one comes to a tipping point and then the phase change occurs just as in nature. Those of us who share a different view of reality than those around us cannot expect that we can have a discussion with our colleagues or even friends and imagine that they will come over to our view based on either reason of evidence. I’ve talked to incredibly intelligent and literate people who agree with me culturally, share many views but when I cross the line into “unofficial” reality they ignore the evidence and then go into anger or, as is usually the case, find a way to change the subject–even if the person I talk to do not disagree with the evidence of my line of reasoning they still will say something like “even if it is true, I refuse to believe it.”
My more general point is that nearly all people have to accept the current mythological framework. It is not an issue that, say an economist believes in the nonsense today’s economists believe in, the issue is that if they don’t believe in conventional economics then, on an emotional level, everything that they hold sacred from family life, morality, or how the world is arranged is threatened and the awesome chasm that opens up just is not worth going into.
The paradigm will change in economics, in our view of politics, in our view of reality–I see a shift among many people that looks like a general state of confusion and uncertainty that will over the next decade arrange itself in ways we cannot predict. This change seems to be barely perceptible among those who consider themselves on the left (I include liberals and progressives here) due to intellectual pride. An example of this is the popularity of “news” shows on the Comedy Channel which feature “us” hip people making fun of the idiots on the right every single day which is a show of impotence and egotism that neither helps us nor our opponents.
I think you see what I see also. I don’t know what to do about it. What to do? What to do? I believe Lenin asked it. We know how that turned out. Although Stalin did bring enough heavy industry to the Soviet Union so that it could defeat the Germans in WW2. He also destroyed a chance for an alternative to Western capitalism. Mao didn’t do any better – a great revolutionary but a lousy Emperor.
It does appear that the only thing to do is to prepare for the present system to destroy itself. Hopefully there will be a world (an ecology fit for life) left instead of a sucked orange – The BP Gulf catastrophe – the ongoing Fukushima catastrophe poisoning the Pacific with radiation… these are real problems as opposed to an excuse for more control by the elites that the man made climate change paradigm is.
The US republic is broken. The rule of law applies to less and less of the well off and politically connected. The prison industrial complex grows and is becoming more brutal with more weapons. At this point armed resistance is not a viable option.
We can’t make the US dollar work for us unless the US government controls the currency rather than the Federal Reserve – really a private consortium of big banks. That really wouldn’t help unless we had a Congress and the administration dedicated to the public good rather than one bought by the corporations. The Supreme Court ruled corporations have the rights of people so we know whose side they are on. We can’t have a government for the people until there is campaign finance reform – any bets on that happening?
W. B. Yeats (1921) — The Second Coming
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all convictions, while the worst
Are full of passionate intensity…
“I think whoever told that to MH was spot on. States have discovered that there will be opposition parties and the way to make sure they go nowhere is to bribe or corrupt them through a whole spectrum of means. These notables are sought out in elite universities and “worked.” Once they come close to power, the ones that don’t play are compromised or their plane crashes or they commit suicide etc. The U.S. intel operatives have had decades to hone their talents and techniques almost completely without oversight. The East Germans were famous for creating, out of whole cloth, a whole opposition movement called the “Stasi-left.” I think some of that is true in the USA.”
Makes me think of the events that happened in 1984 in Norway. On that day a certain person was arrested and later found guilty of spying on behalf of the Soviet Union. It just so happens that this person was close friend and colleague of one of the two people vying for leadership of the Norwegian Labor Party. A person that would perhaps have taken that party, and by extension the nation, on a more leftward course. Instead the nation got a much more right leaning Labor Party leader, and this may well have affected the party policies ever since.
You might also add the strange case of Aldo Moro.
“Keynesianism for the 1%” only in the sense that all the deficit spending has all gone to them. Keynes would not have liked it, of course. I got confused yesterday about Keynes and gold and so I googled the Bancor. According to the 3 sites I read (one of them was Wiki) the bancor was not an international currency as such, it was an accounting system to balance trade, and keep exchange values stable, whereby any deficit nation was charged a certain interest on its international deficit until it brought it into balance and this prescription was implemented whenever a deficit emerged, and the opposite of this was that any nation that began to run a surplus was also charged an interest on their surplus account (novel idea) until they reinvested (spent) their surplus back into deficit nations. That the Bancor was not a currency, just an accounting mechanism to stabilize trade imbalances eliminated the use of “money.” Harry Dexter White refused this idea outright and kept old fashioned gold-pegged austerity measures as a control for international deficits because it benefited the US which was ultra rich at the time. The interesting thing about these summaries was that the bancor was not a currency: you could not exchange gold to accumulate and/or hoard bancor but you could offer bancor credit for gold (because gold was a commodity/asset). This system sounds so logical because the problem we will always have (now especially with shadow banksters run amok) is profit seeking gone exponential. There is no way to rebalance such a world because the banksters can effectively buy cash (as a store of value) with commodities, accumulate all the cash and either choose to hoard it or blow all stability out of the water by “reinvesting” it for their gain at ever more exponential rates of return. Doesn’t this mean we need to separate national currencies from all other assets like commodities. National currencies should never be allowed to be a store of value, i.e. assets/commodities , but only exchange mechanisms. Otherwise the very idea of “profit” (as in old fashioned industrial capitalism) quickly spirals out of control.
Some years ago I read “The Grip of Death: A study of modern money, debt slavery and destructive economics” by Michael Rowbotham. Among many ideas, he mentioned the option of charging interest on savings, as a way to get money to circulate rather than accumulating. He cited some historical examples where this had been done (one was in Germany), with great success (but then interrupted by some outside events, IIRC). The interest was charged directly to each saver.
The instant refrain is likely that charging interest on saving will hurt Joe on the street.
A core issue is how much the same rules are applied to both someone living paycheck to paycheck, and someone who can feed multiple of the same via dividends on his or her holdings.
I don’t remember the details, but I assume there were methods to avoid injuring those with the least. (E.g., maybe interest charges were tiered depending on the amount of savings, and maybe certain amounts of savings had no fees.) It worked in practice, so they must have had some reasonable guidelines.
So, let’s see: I work for dollars, then put said in financial institution, they then charge me for the privilege, all so funds can swirl around the nation?
Gee, is that you Larry Summers? Hey Larr, let me say on behalf of all readers here at “Naked” we do appreciate you taking time away from destroying the world to let us in on your ‘new’ thinking.
Just a thought though, how about going the old fashioned route; ie banks get funds from the citizens, banks INVEST in companies actually making things.
I’ll have to look at the book. I don’t think the interest was going to banks. The purpose was to avoid the kind of massive money accumulation we see now in the 1%.
Great interview. Michael Hudson really calls it as he sees it. It meshes with what I have seen “on the ground” in Ireland.
A minor quibble: both Greg McInerney and Michael Hudson talk about corporation tax rates, without acknowledging that the real damage (tax haven) is done via private deals regarding interpretation of income / expenses qualifying for R&D tax credits. As long as the discourse is “corporation tax rates” the Irish government can continue its refrain, “But everyone pays the same corporation tax rate, therefore we’re not a tax haven”.
Michael Hudson has 3 recent video interviews on The Real News Network discussing taxes, debt and depression:
http://therealnews.com/t2/index.php?option=com_content&task=view&id=832&Itemid=74&jumival=659
For what it’s worth, David McWilliams has been saying much of what Hudson says here for the last 5 years. Saying it in books, in articles, in TV interviews, in a play, “Outsiders,” that was staged at the Abbey/Peacock in Dublin and then all around the country. He also put on the Kilkenomics, economics festival with guests like Max Keiser, Joseph Stiglitz, etc. He even called TD and Minister for Ed./Social Affairs, Mary Hanafin, a traitor to her country, to her face, on live radio, for supporting the bailout program. The point is, these views have been aired in Ireland, but the people have done jack squat. I know many Irish people her in the US and in Ireland and however upset some of them are, very few of them are willing to do much about it. They just accept it. And 5 years have already been pissed away at this point.
Journalist Damien Kiberd has also expressed similar views, come to think of it. Again, there just hasn’t been enough anger from the people or action. I can’t explain it. I don’t understand it.
This is it precisely. I don’t know exactly what it is about Ireland, but indeed nobody really seems to give a toss about anything to do with economics in general – and do not want to know anything about possible alternatives either, and what is wrong with how things are run economically.
I think this is the same problem all over the world though, except with Ireland the population is so low relative to other countries, that there isn’t even the critical-mass of the few people who do care, to come together and organize, like there can be in other countries.
The economic heterodox community worldwide has a very very big problem, with failing to get through to the public – probably in large part, down to the people spreading FUD in favour of the economic orthodoxy, muddying the debate and ensuring the public pay no attention – and I have no idea where to even begin with resolving this problem.
To be honest, I think the ‘left’ and economic heterodoxy, needs to take a page from the book of the right and the neoliberal think tanks, and pump enormous amounts of money into public awareness and lobbying.
The problem is the Gresham’s Dynamic: The ‘right’/neoliberals have a massive advantage competitively, in economic academia, politics and public awareness, through being willing to shovel money at these issues undemocratically, and exerting corrupt influence in many ways – just like the way dishonest/corrupt business pushes honest/law-abiding business out of a market, dishonest/corrupt politics/economics may stop honest/truthful politics/economics from even being heard.
What do you really do in the face of that? How do you compete, without shovelling huge amounts of money at the problem, and creating the kind of ‘surround sound’ agenda-pushing towards the public, that the right/neoliberals have, so that you can compete with them?
A PR battle this big, isn’t going to be won by a small heterodox community who attract the attention only of genuinely interested and critical thinking people – you need to vie for and grab the wider publics attention, to make them listen/care, and see the alternatives, to motivate them to build the necessary political movements/pressure.
It’s pretty easy to ignore a minority heterodox community – even when their views are completely valid and superior – so in order to actually become relevant politically, and to have attention paid to you (as a community), you have to really dial up the volume a lot and make the public pay attention (which will probably require gobloads of money and investors/backers), so that you can’t be ignored.
Whether that view as a good idea or not, something has to be done, to figure out a way of getting past the barrier the heterodox community faces, of not getting through to the general public – most of the problems we face today, had solutions known way back during the Great Depression, so if this problem isn’t resolved then we’ll soon be looking at having gone through (at least) a century+, of economic corruption and human suffering – and might lose the chance we have now, for resolving this before another century passes, with no reform.
A possibility suggested by David Martin (CEO of M-CAM) is to live in a way that takes steps in the direction of a system that would be better–and to take these steps now, no matter how small, without waiting for the situation to improve. In various talks & conversations he recommends people disconnect from the debt/finance and energy grid entities. In his experience (> 20 years) this can be done by identifying and using existing abundance across 6 categories. This abundance goes unrecognized when one limits oneself to financial-based accounting view of the world. He has developed processes that can lead to unexpected opportunities, with exchanges across a multitude of ways of seeing value. It’s something I’m in the process of learning by doing, so I can’t speak from authoritative personal experience, but the folks at M-CAM have extensive first-hand experience at levels of individuals, businesses, communities, government departments, and other entities.
In a recent conversation he said that applying a resistance or push-back strategy merely feeds into the existing system. His experience indicates one has to utilize a different mindset that seeks to understand the offending entity from the inside, with all its own needs and pressure points. A small change from within can then use that entity’s own energy to create constructive change–with little apparent effort or energy expenditure. He gives practical examples in two classes at UVA on vimeo.
There is a way to explain it, and accurately. Depression, intense fear, fear of job loss, plain old fashioned isolation and suffering kept to oneself while trying to maintain a semblance of a normal life, a cultural turn of sorts whereby everyone can feel and sense the scale of the issues but we realise too late that we’ve kept too much to ourselves. I’m Irish, and for a large number of the population our lived history has been crazy, I don’t use that word lightly. Between the reality of the troubles, miserable poverty, a despotic church that laid claim to social existence whilst abusing children. The horrific power of patriarchal social norms. Huge economic contradictions sat side by side (in a small country). I’m probably rambling but it all adds up to a toxic stew. Oh and a hell of a lot of sadness, that young, healthy, happy people avoid like the plague, the air going out of the room when the bigger picture is hinted at (or the news delivers fresh revelations). All of the above coalescing in a contradictory conservatism that few outwardly believe in or like to admit, ‘consensus reality’. I’ll leave it there for now! There is more, both good and bad…
Ever since I read Michael Hudson series of essays on debt and banking and undoing of 500-years of Liberal and Classical economic progress, I thought he was spot on.
This interview sums up much of his thinking and it’s brilliant, but unfortunately it’s being proven correct
The truth is pretty darn straight-forward. The only way you can accumulate a good deal of wealth is to steal it, and all systems are developed expressly to this end.
Or as a heterodox economist commented recently, “profit is waste”.
Food for thought.
While I’d never thought of it that way before, it reflected my understanding why bodies such as some coops and non-profits could be more efficient than conventional companies if they’re not having to divert funds to dividends. (This assumes transparency and sound democratic governance, hence less likelihood of fat-cat salaries.)
That’s bullshit. Granted, often wealth accumulation is, at least partly, based on some sort of fraudulent dealing, scheme, etc. But there have been people who have accumulated wealth by virtue of inventing something, or just by having incredible financial discipline and investing little-by-little in real estate. Back in the late 70’s/early 80’s I knew a high school teacher who retired early, around his late 40’s, after he had acquired enough single family homes and duplexes as rentals. Of course, he spent twenty years of his teaching career living very frugally as every penny he could afford went into buying more property.
Funny thing is, I saw the same thing happen with another teacher, only this one lived on the same block when I was a kid in grade school. Started out buying two lots side-by-side, building two identical houses. Lived in one, rented the other, which covered the mortgage, taxes, insurance on both. Then he and his wife could use their teacher’s salary money that would have gone for those expenses to buy another property. He died in early 2000 owning 41 properties. He and his wife had quit teaching decades prior and split their time between a home by the beach in CA and one in Hawaii.
I met an old friend in Washington a few years ago. She had done something similar over the years with her husband. Only problem was when I met her again. They had built / invested most of their money and then some in a set of townhouses in the South. Now they couldn’t sell any and they were hanging on for dear life.
Subsequently I met some in law relations in the same part of the world. They also at the height of the boom had invested in an inner city renovators delight – trouble was they bought at the peak when the price had been inflated about 1000% (this from the sales history). By this time the house had deflated in nominal value by a factor of about 3. They are proud and haven’t walked away even though they now have a bunch of young children and the economics makes no sense.
In one way I admire both couples but I also see them as victims of your implicit lie that we can all be winners in the current system that almost sucked me in to when greed and the neoclassical lies like the great moderation were all the rage.
I think Hudson is talking bollox when he goes all Georgist in a debt money system.
Perhaps we had no land tax but people are taxed very very heavily here with respect to a now tiny & artificial cashflow – this extreme tax forces people to speculate so as to get a yield to pay the damn taxes in the first place.
This produces more or less the same outcome as land taxes, land taxes will not prevent land speculation.
Credit banking is the source of land speculation.
A fiat income payed to each person so as to absorb the Industrial surplus would of course prevent this malinvestment and increase the end use energy consumption rather then waste a enormous amount of energy on conduit goods so as to get a yield.
The taxes function today is to spread the loss of credit banking and not as in the past to fight a war.
So its a strangely circular distribution of externalties.
People have nothing to fear from the lazy rich person , its the guys looking for yield who do the damage.
At this hour, not many people will see this, but a famous Irish academic said to me recently that the reason most Irish economists have gone along with The Program is that they are (quote) A bunch of pussies (end quote). This is someone I never could have imagined using the term “pussy,” but he said it. About orthodox economists.
Read and understood. Banger is right about the need for community, but this is a huge part of the cost–conformity and cowardice in the face of the in-group. Western individualism gave men and women the power to challenge orthodoxy and say out loud that the emperor had no clothes. It came with a price. I have told my students that I would bet my bottom dollar that the people of ancient Egypt were, overall and most of the time, much happier than we are today. They lived in an incredibly stable community which answered all their questions. But would any conscious individual today trade their worldview for ours? To put it bluntly–could anyone but a pussy think that ignorance is a good and blissful way to live?