Is China’s Economy Collapsing? Economic War! Michael Hudson & Richard D. Wolff

Yves here. This as a whole is a fine and informative discussion picking apart the regular Western press and pundit bashing of China’s economy. In general, I support the thesis that the scare-mongering is overdone, particularly in light of US chip sanctions looking to have backfired. However, the fact that China is not in too-bad shape does not mean it does not have significant risks to navigate.

I hate to play my usual role of stickler and make sure readers do not treat everything here as gospel. As much as YouTubes and podcasts make for an easy-to-take form of information conveyance, they unfortunately also lend themselves to slips of memory, slips of the tongue, and over-simplification.

To some minor and more significant comments. On the minor side, Michael Hudson says early on that housing prices are up in China. I pinged him and said that Chinese here in Thailand say apartment prices are down and they are worried about their losses. Hudson agreed that was true.

Richard Wolff said China is an explosive period of growth. 6% is not impressive for a developing economy and everyone expects China’s growth to continue to gradually slow down, particularly as its demographics start to bite.

More broadly, China did have a banking crisis in the early 2000s, a bad one, so it is not as if it is invulnerable. China can likely keep the housing debt problem that Hudson explained very clearly from going into the banking sector but it could zombify a big swathe of consumers. That would hurt China’s needed transition to a more consumer-driven economy.

In addition, I have to take issue with Wolff on the North Dakota public bank. It is a niche bank, substantially acting as the depositary/banker for the state, with retail services so restricted as to be close to non-existant. If Wolff had looked at the Bank of North Dakota site, he could have seen what its services are. The first set listed are what amounts to acting as a back office/tech platform, presumably for very small banks. Second is as mentioned acting as the bank to state agencies. Third is services to the public:

Bank of North Dakota (BND) offers basic checking and savings accounts and other retail banking services to North Dakota residents. To prove North Dakota residency, an individual must have a North Dakota driver’s license or North Dakota government-issued photo identification card, and a physical address in North Dakota. A business must have a physical address in North Dakota and at least one signatory on the account must be a North Dakota resident.

Because of our unique structure as a state-owned bank, it is the Bank’s policy not to compete with the private sector for retail deposits. Therefore, convenience products such as debit cards, credit cards or online bill pay are not offered. BND has one location at 1200 Memorial Highway in Bismarck, North Dakota. In order to open a checking or savings account or purchase a CD, you must schedule an appointment to come to the Bank location during lobby hours, 8 a.m. – 5 p.m. CT, Monday – Friday.

I don’t want to belabor this issue, but in previous posts I pointed out that the Bank of North Dakota did, and I assume still does, join with other banks in making commercial loans, as in the private bank is the lead lender and has the customer relationship.

There was a time when there were many state and government banks. They all were shuttered due to corruption scandals and/or crippling loan losses. So this model is fraught with issues. I’d rather see a Post Office bank with somewhat better retail offerings, at least a good old fashioned ATM card.

By Nima Rostami Alkhorshid

Dialogue works (Nima): What’s your opinion on the China’s economy right now? it getting better? It’s getting worse. Is it collapsing? Michael?

Michael Hudson: Well, what they say is getting worse is the financial situation.

China has sort of let a hundred flowers bloom 30 years ago and it has basically left all of the localities to self-finance themselves and they’ve financed themselves by selling real estate. And China has let a real estate market develop largely by bank credit, not the central bank, but by the central bank, lending to local private banks that have essentially lent more and more money for apartments.

And a lot of these apartments by large companies, have not been built. And so the problem is what can China do? It has a choice. It can either write down the debt and say, okay, we’re just not going to charge the companies, or it can dissolve them, or it can restructure the companies, or it can sell them to some another party like it’s happening in the United States.

Somehow and obviously, it must bail out the citizens that have made down payments for the apartments and now there are no apartments to give them after the down payment. China needs something like America’s federal deposit insurance Corporation. Except in this case, it’s an insurance corporation for victims of the mortgage credit system that is run way ahead of the of the building and the construction that’s actually taking place.

Obviously, the China has not done an adequate job of regulating the large construction companies. So, the volume of promises for apartments is way in excess of the actual number of apartments available. That’s pushed up housing prices and it’s put a squeeze on many Chinese citizens. So, I think China now is in the discussion of how do they restructure the tax system between the federal government in the cities, how do they restructure the local land tax system?

China owns all the land, but it doesn’t tax the local land value. And as a result of not taxing this increasing value of land and property is how things go up. The also increasing purchasing power has been turned over to the banks as mortgage credit shift is happening in the United States. So, China’s let itself be sucked into the same financial mortgage problem and tax problem that the United States is in, and it really needs to have a few more Chinese characteristics to go with its socialism, with Chinese characteristics and more Chinese characteristics, less American Chicago school, neo liberal characteristics.

Richard D. Wolff: Yes, I like very much what Michael had to say. I think it captures the specifics of the moment. So let me shift a little bit and talk about your introducing the notion that you get from certain of the coverage that this is a matter of collapse, the speed with which people have looked at the Chinese countryside and concluded that their economy is collapsing is nothing short of breathtaking.

The Chinese economy’s collapse has been predicted at least five times per month for the last 30 years, and you will therefore excuse people like me, or you’ll have to for being deeply skeptical of yet another. This is like the old crying wolf, which I’m very sensitive to since my name is Wolf. But I have to tell you that it is to use another simple language.

It is really bullshit and not much more than that. Having said that, let me go back to Michael. Nothing is more typical in the development of a capitalist economic system, particularly given its unstable, cyclical behavior that various sectors explode using credit or other mechanisms without any correlation with the other systems on which they depend. So, they become overdeveloped in one odd way, then another.

And that requires either that you bring them back down to where everybody else is or you boost everybody else in order to catch up with them, in order that the coordination, the critics of capitalism have always understood that using phrases like capitalism is the anarchy of the of production, because all these decisions are made either by individual enterprises or by industries without the proper coordination, except after the fact, either by collapses or by massive government interventions, to which Michael made reference at the end of what he had to say.

And you know, China is in an explosive period of growth. There are few examples in the history of capitalism where any kind of country has grown that fast over time to that extent. And they’re going to have these kinds of problems because of the way they’ve organized their economy to this point, letting a large number of private enterprises function in the way they normally do with adjustment and correlation happening after the fact, not as part of a plan, not the plans avoid all unexpected events. No planning can do that, but it would be a big step forward. They’ve chosen to allow a large part of their economic activity to happen, either at decentralized levels or in the private sector. In an economy that’s virtually 50/50 private/public. And so, they’re going to have these kinds of experiences. This is not the first one, and this will not be the last one.

They may take the step that Michael advises them and borrow from other countries that have gone through comparable circumstances or they may, you know, develop an FDIC for the buyer of rental property and so forth. My hope is they ask more profound questions. I don’t know well enough whether that’s in the cards but ask about whether the basic structure of the system they’ve put together, even though it has many achievements to point to, also leaves them vulnerable to several dysfunctions of the sort we’re discussing now.

And maybe that ought to be a provocation to ask basic questions about what they’re doing as their socialism with Chinese characteristics.

Michael Hudson: I think asking that question would lead them to have the following discussion. Should we let the private banks go under that have made these bad loans? We tried to say let 100 flowers bloom. Let’s see what the private sector can do.

Well, it’s done exactly what Richard described. It followed the finance capitalist path. Well, bad loans. Let them all go under. We will guarantee the small depositors up to, you know, whatever they figure. A normal family should have let the banks go under and say, I guess that shows that we really need to keep banking as a socialist function.

That’s why we call it socialism with Chinese characteristics, not finance capitalism with the Chinese characteristics. And I think that the big decision, the other question is whether they know what to do with all of these half-built buildings. I don’t know what to do. I don’t know whether there has been overbuilding for the market. I don’t know whether there’s any audience for the buildings that have been built in the places where they’re built up.

There has to be some kind of feedback as to what localities need at what system. But ultimately, what is led to this whole reliance on the private sector is the fiscal relation between the federal government and the localities. I think there has to be a Chinese version of what in America is called revenue sharing. The federal government has to work with the localities so that they do not finance their local budgets of local communities by selling off the real estate to private developers.

This is what’s happening now. As a result of that, there has to be coordination between local and federal fiscal policy, and the government should be able to provide the localities with what they both agree is needed without forcing a sell off and a privatization of land. Otherwise, you’re doing it, you’re just creating the kind of collapse that is occurring today and you don’t want to recreate the same problem.

Richard D. Wolff: Let me add a couple of things. First to what Michael says. There are many examples in in the West, in regular, private, or mostly private capitalism in which comparable breakdowns of the link between finance and one or another industry, a non-financial industry goes screwy, and then the government steps in and tries to do what the private sector couldn’t or wouldn’t do.

And so, if it were to go in the direction that Michael suggests, there actually are plenty of experiments in the West upon which to draw, and I’ll mention only two of them. One was the decision by the Socialist government in France when from Mitterrand came into power, one of the first things he did was take over half a dozen of the major private banks in France and convert them into government operations.

And he did that around the notion, which is consistent with what Michael says, that the government should be the determinant of where credit flows, what industries need to get it so they can grow, what industries need to lose it, so they can consolidate, etc. And that this power that the government will control where investment goes is necessary to stabilize French economics and to make France a real competitor for the leadership of the European economy because it’s in struggle with Britain, which was on the way down, but with Germany which was on the way up, and they had to navigate where they would end up, the French court, as they were between those two, which is an old part of that history. But they might learn very valuable lessons from what was and was not achieved by that. And they might also learn the lesson that the major priority of the of the banking sector and of the capitalist class in France after that was to reverse that action and get rid of Mr. Mitterrand, both of which they did.

The second example is the United States. One of our states, North Dakota, long ago got rid of a lot of the major dependance on banking. Most of which was outside of North Dakota anyway. And they developed their own bank, the Bank of North Dakota. It’s a publicly owned bank. It basically services the people and businesses of North Dakota.

They in turn put their deposits into that bank. The whole thing operates at a low profit level, way below what private banks do. What profit it makes is returned to the budget of the state of North Dakota, and therefore, in a sense, lowers the taxes that would otherwise have to be raised from the people and businesses. It’s a kind of a win-win, which is why Republicans and Democrats alike in the government of North Dakota have never dared interfere with it.

It’s over a hundred years old. It did not collapse in 2008 or nine. It did not need a bailout from the government of the United States the way every private bank, every major private bank did. So, you can see there are precedents all over the place. You don’t even have to call it socialism. And just speaking personally, I’m dubious about doing all of that, although I understand the history behind it.

And obviously it’s the perfect right of the Chinese to call their system whatever they want. Here’s what I meant though when I said ask deeper questions. I agree. The coordination between the center and the D. Centered government is crucial and will be for a long time in China. But there’s this deep question of how you organize the activity we call banking and credit.

Nothing is more social in the capitalist system than money. The reason we have slogans like money makes the world go round than money is because we kind of all understand that money is absolutely crucial all the time everywhere in this system. So why in the world would you leave it in the hands of institutions who tell you that they’re in this business to maximize the private profit of their institution?

Why would you organize something as social as money in that form? I learned what I hoped when they would open the question, why are we doing this? Why are we arranging that? A bank has a core of people at the top, the board of directors, the top executive, whatever you want to call them, a tiny group presiding over a large mass of employees.

You know, loan officers, banking clerks, all of that and run it in this way. It’s full of antagonism between the top and the bottom. The inequality of this situation promotes every kind of violence of cheating, of crooked activity, which we’re catching in all banks all the time. Anyway, maybe you ought to rethink the whole private social divergence.

Is that something you picked out to hold on to capitalism? To some degree, but I love the logic that said you had to do that. I’m not saying that that’s wrong, but I am saying that ought to be interrogated and ought to be debated. We ought to have that kind of and the and at the same time, why are we organizing our enterprises the way we are?

Why, if it’s socialism with Chinese characteristics, might that not question the employer employee relationship? Why are we organizing our business, banking or otherwise? This way, maybe we ought not to. Maybe a compromise would be if society is full of the need to cooperate in order to have any community, maybe that would be good inside the enterprise too, especially if it’s a socially focused enterprise, the way the management of money has to be.

Those are the questions I thought, or I would add to what Michael says that this crisis would provoke. And I do believe that if this crisis provokes that, it will have a good sign. In other words, it’ll be the good part of a crisis, the part that makes you rethink how you got yourself into this crisis, so you don’t do it again.

Michael Hudson: Well, I’ve had professorships at a number of Chinese universities, and I bet exactly the question that Richard just asked why are they doing things the way they’re doing privatization? And I’ve got the same answer everywhere that they send their economics students to the United States to take economics courses to be trained. And they when the Chinese students get back to China, those who studied in the United States are given priority over those who are studied in China.

And what do they study in China? They do study Marxism and socialism, but only volume one of capital. And I find out that very few have read volumes two and three of capital, where Marx discusses finance and rents primarily. And the friends of mine, other professors have made exactly the same. Question now, I think is finally the time that they’re going to ask Richard’s question Why are we doing things the way the United States doesn’t?

They have a golden opportunity, and it’s very hard to change an existing system and all of a sudden take the existing banks and just restructure them. But China has the golden opportunity and the financial crisis right now. It can let these private banks go under and then say, well, of course we’re not going to let the regular depositors suffer.

We’re going to make all of the positive real economic functions of a bank worse, but we’re not going to bail out the big depositors or there’s no reason to give them. We’re not going to bail out of the wealth of the bank owners because they own something that went broke. And so, we’re going to do just what Milton Friedman would say.

We’re going to let the magic of the marketplace cure everything. And that’s going to clean, clear the road for what they can do is socialism. You mentioned public banking in South Dakota. That’s certainly a better idea for governments to keep their money in a government bank. The one thing that the Bank of North Dakota can’t do is create enough money to fund all of the public spending.

Only the federal government is empowered to create money either by the Treasury or by the federal Reserve. The good thing about China is it doesn’t have a Federal Reserve Bank; it doesn’t have a central bank. Basically, it has the Bank of China. But that’s really like the Treasury. It’s an arm of the government. It’s not a central bank that’s run on behalf of the commercial banks to act as lobbyists so China can write down the debts and save the banks and let the public, the banks, to wonder without really having any vested interest to fight back, such as would occur in the United States.

So that’s the good side. It has a free rein right now to do whatever it wants to do. The kind of policies that Richard has explained. France is certainly a wonderful example of doing this. You don’t want to privatize finance. And the one thing that has made Chinese socialism so successful, so different from the capitalist road is its money creation as a public utility.

It is not privatized. Well, now that it’s keeping money creation as a private utility, the logical conclusion that this prejudice to the whole financial system, it makes the whole financial system basically a public utility, certainly in terms of the supply of that supply of credit and the oversight. So, I would hope that they’re asking the same question that Richard has posed and with a wider set of solutions than what would the American economic professors tell our students to do.

Richard D. Wolff: Yeah, but again, I mean, Michael and I are, I don’t know, enriching each other’s presentations and maybe that’s what you were looking for. And I’m enjoying it and I’m learning, so I’m happy with it. But in that vein, let me just suggest that the reason that so many Chinese students and since both Michael and I have been economics professors most of our adult life, I’ve had a whole series of students from China in my classes for years now.

And I have now to teach at the New School University in New York City and Chinese visiting students there, etc. And I’ve always been struck that when I asked, you know, why are you here? You know, what exactly do you think you’re going to learn here in the United States? Since I’m a product, I was about to say victim, but I am a product of American university economics, education.

And what comes out after years is roughly the following. The United States is the great example of capitalist success. China wants to piggyback and learn what it can from that success. And you know, there’s a logic there makes a certain sense. There will be things like that that they can learn. But I find the irony of it to go now the other way.

In the last few years, the rate of growth in China far exceeds that of the United States. Been true for a generation now. No sign of it ending even in this crazy post-pandemic year. The projection of GDP growth in the U.S. is two and a half percent, and the projection in China of five and a half percent. That’s pretty close to the 3 to 1 average that we’ve had on and off for 30, 25, 30 years.

So, my guess is we’re seeing the end of the migration of Chinese students here and we’re seeing the beginning of the migration in exactly the opposite direction. And for the same reasons the world wants to figure out how to do what the Chinese did. Every country of Asia, Africa, Latin America, Eastern Europe, in short, the poorer countries of the world, one of whose top priorities is to stop being one of the poorer countries of the world, are looking at one of the poorest.

Watched what it did to watch what it’s doing. And when you wonder where to send your students, now, we’re going to see. And so I think this is about it was the right comment for Michael to make. But the irony is it’s coming just at the inflection point when things are going to go the other way.

Michael Hudson: Richard put his finger on exactly the problem. What was the period of American success? It was in the 19th century. It was the late 19th century protectionism, high wages, and it was the business schools and the industrialists that said we need government to run basic infrastructure. We need the government to bear the costs of communications, transportation, public health, water and sewer. Because if we don’t have the government, do it, it’ll be run by monopolies, and they’ll charge high prices, and we’ll have to pay our labor higher, higher wages just to pay monopolists.

And they actually did want to pay American higher wages if they made labor more productive. That was the golden age of American success leading up to World War One. But now when they’re there doing what they think is simulating American success, they’re emulating American collapse. That’s what they’re taught in the universities that are the neoliberal collapses. Financialization is the way to go.

You don’t need industry, you don’t need to pay wages, and the solution to any problem is to reduce labors, wages and living standards. That’s what they’re taught in the United States. That’s not success. That’s how American industrialized. So that’s exactly the semantic trap that they’re in. They picked the wrong period for American success, and they’re choosing America’s failure to emulate. I hope they’re disabused of that.

Richard D. Wolff: Well, you know, it’s their Marxism. I say that tongue in cheek. Marx is famous for his concept of uneven development. And what Michael just said is that there is no evenness in the United States in China’s relationship. It is a study in uneven development, which includes the bizarre focusing of a student generation on a period that’s over just when you needed to be helpful for a period that’s just beginning and on and on.

I mean, it doesn’t mean it won’t continue, but it’s Marx himself who taught that these things are going to happen unevenly. And as it is, by the way, with the housing problem inside China, that’s another uneven development. Classically appropriate to what remains, at least in part, a capitalist situation. Well, Richard, you and I have got to bring Marxism to China.

Well, I can tell you, many times I’ve had both from Eastern European students and from Chinese students, they come up to me at the end of classes because I’ve been teaching Marxian economics pretty much my whole adult life. And they say to me very politely and very friendly that they never heard this stuff before. So, whatever it is that that is understood and taught as Marxism over there is, at least in many ways, quite different from what we do here.

And again, that shouldn’t surprise anyone. But it takes you back to Michael’s point. Maybe the Marxism you need to study is Marxism. Now critical of the United States because of the failures here, the mounting failures here, rather than Marxism, Jim, of another period, which was oriented differently because the situation at that time was different.

Michael Hudson: But not only volume one, you have to read volume two and three. And the theory of surplus value.

Richard D. Wolff: Yeah, let me comment on that for a minute. That’s important. And let me make it personal. I used to teach The Graduate course at the University of Massachusetts Amherst, which was an unusual place, just as the university in Kansas City where Michael was, was a similarly unusual place.

And I taught at first volume one because that’s what students wanted and. Students wanted that because they didn’t have any idea what was in volumes two and three. And it became very clear to me that they would never embrace or be able to use the Marxian apparatus if they didn’t know what was in volumes two and three, because they would then be sent out trying to square the a circle that is volume one of capital together with conventional, you know, neoclassical economics when it comes to what Marx called the distributions of the surplus, I mean, to be crude, Volume one is about the production and appropriation of the surplus by the two great classes, workers

and employers. But volumes two and three is how that surplus moves around into whose hands do the appropriators put it? They put it in the hands of what it calls money lending capitalists, or what we would nowadays call your credit systems or bankers or intermediaries like that. And then in volume three, he expands on all of that and talks about the landowning class, the rancher.

You know, Marx talks about joint stock, the capital. You don’t need neoclassical economics to deal with all of those other issues. Marx wasn’t an idiot. He knew about joint stock companies. He knew about bankers. How could you not, given his. So it was always a terrible lapse in America’s education in Marx, in that the few people, relatively speaking, who studied Marx studied one volume, the production of this surplus.

Without understanding that to understand the system, you need to see how this surplus circulates around the economy, how enterprises manage the problems of circulation without which they die. They have to manage production, but they have to manage the circulation. And that brings in these other people’s money lending capitalism, these little gloried capitalists and the merchant capitalists. Marx has a wonderful analysis in Volume three that will help you understand Wal-Mart in a way you never otherwise could.

It’s the capture of a disproportionate amount of surplus if the distributor, the merchant, can grab hold of the production system and squeeze it, and he shows you how that’s done. So, it’s very important for those listening who might be students or thinking about becoming students that if you want to use Marxism as the enormously valuable tubal tool, that it is not the only tool not exclusive of others, but as part of your apparatus, then you really need to read and think about all that is done in volume two and three.

I guarantee you will not think about finance or rent or any joint stock company or anything like that. In the same way, once you see how Marx integrates that with the analysis of the surplus.

 Michael Hudson: Well, that’s my solution to that problem. When I was teaching at the New School in the 1970s was to really to teach Marx in the context of classical political economy, because Marx was the last classical economist until he wrote the whole focus of industrial capitalism as wrote in the Communist Manifesto, Capitalism was revolutionary, and it was revolutionary.

By getting rid of the landlord class, you don’t need a landlord class. They’ve just increased the rents and you get rid of the predatory banking class that he talked about in Volume three. Now, Marx said he didn’t have to write about the economic rent of the writing class. He didn’t have to write about the landlords land rent because Adam Smith and Ricardo and John Stuart Mill had written about them.

He didn’t. There was already a massive criticism of banking. But what Marx added to classical economics was saying We know that landlords and banks are exploitative and rent seekers, but industrial realism is also an exploitation of labor. That’s what Marx added to classical economics. But he assumed that the industrial capitalist class was going to solve the problem of getting rid of the landlords and making banking, socializing, banking, and socializing landownership.

And so, what he wanted to do was after the classical economists have done their work then, now we have to deal with the labor capital relations. And as it turned out, it was much more optimistic than capitalism. That matter is justified. The landlords fought back, the bankers fought back, and they denied the whole concept of economic rent. They reject that.

Adam Smith, they rejected Ricardo. They rejected all of the free market economists. And so now if you take a class that today and it cannot graduate economics, there is no history of economic thought. It’s wiped out because they don’t want to talk about the concept of economic rent. And there’s no exploitation. That’s the basic assumption of neo liberal economics.

Nobody’s exploited. Everybody earns whatever they have their billionaire, they earn it. That and that’s the fallacy that Adam Smith didn’t have. Ricardo didn’t have, John Stuart Mill didn’t have. And if you put Marx in the context of realizing what went before him and what he added to, then you got the big picture. So you can only teach Marx.

When I was teaching Marxism at the school, I had them read the Adam Smith and Ricardo Malthus and the whole discussion that led up to Marx.

Richard D. Wolff: Yeah. You know, this is charming for us to do that. Yeah. Early. No school, later, no school. But again, I’m taken aback at the similarities that Michael experienced and my own experience.

It reminds me of it of a joke. It was called Political economy. And then at the end of the 19th century, terrified by the challenge that Marx’s development and Marxism, particularly in Germany, was having, you had this so-called revolution in France, in the French speaking English speaking and German speaking parts of Europe. Jevons Manga Vollrath all of them, they go backwards.

But they like so often when you go backwards, you want to hide it from yourself. So, they called what they were doing neo classical economics. They wanted to hold on to the classical tradition, but only in name. It’s like the state in which I lived most of my life. The state of Connecticut, the name is is from the native indigenous people, and every remnant of them has been wiped out in the state of Connecticut, with the exception of the casino, you know, which is a kind of a horrific joke.

But you hold on to the name of the people you have exterminated. There’s something deeply sick in all of this. And there is an economics to this bizarre. We are neo classical. No, you’re not. You’re a retreat from what the classical was. Did you really even achieve what they did? You know, at the beginning of Smith and Ricardo’s books, it says, we’re trying to understand the division of the output, the income into the three great classes.

No neo classical book starts like that. They don’t want to understand the relationship between capital, labor and land, which was the problem for them. They Didn’t make clear, as Michael correctly said, that we are here to celebrate one of these three and to really squeeze out the other two.

Michael Hudson: Well, the irony is that it was Thorstein Veblen, I think, that coined the term neoclassical.

And as Richard points out, that led to all this confusion about what Veblen meant to say. And normally he’s a very good writer. What he meant to say is they reject the classical economics and now this junk economics, this stripped down anti classical economics, is the new mainstream economics. But instead of calling it the new mainstream economics, he called it neoclassical economics.

And that’s what led to so much confusion. And but Richard is absolutely right. Neoclassical economics is anti-classical economics because it rejects the value price and rent theory. And all of the British political economy was about value and price and price was the excess of a rent unearned income over and above the actual cost of production. And Marx said the the aim of industrial capitalism is to reduce prices to the cost of production, get rid of the parasitic landlord class, get rid of the parasitic begging.

And the way to do that is industrial capitalism is going to evolve into socialism. Well, that’s why they banned the study of Marx. Because if you understand classical economics, by the 19th century, everybody thought capitalism was evolving into socialism. And that’s exactly what the discussion about before World War One was. What kind of socialism is it going to evolve into?

And that’s exactly the discussion that should take place in China today. But it’s not taking place in American universities or European universities.

Richard D. Wolff: You know, if we had time, Michael and I, I suspect could give you a lecture that one of the greatest of the neoclassical economists not well known in the United States was an Austrian Böhm-Bawerk last name.

And he’s the one who made Michael’s point crystal clear 100 years ago. He explained how and why neoclassical economics is the refutation of Marx. He then made a logical mistake and thought that he could be located in the relationship between values and prices. That’s another conversation that took people into a boring, endless literature on that subject to which I must admit, I have also contributed.

But I understand that it was a diversion. It’s what it’s called it. What? What Veblen did Marx called this stuff vulgar economics. That was his phrase. And if you ever have the chance and I’m speaking here, obviously to the audience, I hope is watching. If you pick up the early chapters of Volume two of Capital, it’s a discussion there of what they call the circuits of capital.

But if you read it properly, it is it Marx shows you how, depending on which of these circuits you focus on, you will get neoclassical economics, you will get ricardian economics, you will you get the that. And he’s literally conducting a critique in those opening chapters of what has happened to the economics profession and why and how they’re different from what he’s trying to do.

And it’ll show you what more what Michael just said. But within the context, it’s like reading the volumes called Theories of Surplus value. The other three volumes of Marx, where he has all his notebooks of when he read Adam Smith and he read Ricardo and the others and the extensive critique, there’s very few economists in the history of the profession, whoever did this kind of detailed work on everybody who came before them.

In fact, other than the famous Harvard professor Schumpeter, I don’t know of anyone who did that, and certainly not on the scale that either Schumpeter or Marx did. The notion that economics is a discipline so that you can entitle your book economics, like most textbooks are, is an attempt to fudge the fundamental difference and hostility of the different traditions, one for the other and you do nobody a favor by fudging all of that.

Dialogue works (Nima): when you look at China’s economy today how much capital is that? Is it getting more socialist? Is it getting more capital? Is

Michael Hudson: Well, what you’re asking is the question that everyone was talking about 100 years ago. What kind of socialism are we going to have? And the essence of socialism, that there was Christian socialism there was Marxian socialism, there was libertarian socialism. But what everybody agreed upon is that basic needs, basic infrastructure should be in the public domain, natural monopolies should be in the public domain.

If you didn’t have health care and education provided freely to the population, then workers would have to pay for them in order to get by. And if they had to pay for them, that would increase the wages that employers would have to pay. And if you want to make a competitive capitalist system, you need a socialized, certainly basic needs like education and health care.

And it was the conservatives that said this in England, it was Israel Disraeli that said Health, health is all evil, their prime minister. And the other thing that needed to be socialized weren’t basic monopolies, like communication is a monopoly. Transportation is a monopoly. Water and sewer for a monopoly, you can’t have competing buildings. And if you leave these in private hands, you end up with Margaret Thatcher’s England, you end up with Ronald Reagan’s America.

You all of a sudden privatize everything and you end up with doing to yourself what the world Bank and the International Monetary Fund had done to wreck third world countries to prevent them from socializing, by privatizing everything mainly in the hands of foreign monopolists and passing an international law saying that if they do socialized these functions to make a competitive economy, they have to pay compensation to the colonizers.

In other words, you’ve made Latin America, Africa and Asia in the position of Haiti when it had the revolution against France. You have to pay for the next two centuries to get your freedom from the financial trammell’s of our financial colonization that we’ve mounted. In order to prevent you from having socialism, you have to realize the dynamic that industrial capitalism has failed in its destiny to become socialism.

It’s reverting to feudalism. It’s created a landlord class. Again. It’s created a predatory banking class. We’re going back to feudalism, not forward to socialism. That’s the failure of industrial capitalism and the job of China and other countries to overcome this failure and say, we realize the West has taken a wrong road and we’re going to pick up where world civilization seemed to be going at the time it was interrupted by World War One.

Afterward, you had the world, the West, so traumatized by the Russian Revolution that it became vehemently anti-socialist and unproductive. And the end of that has been that the industrialized, polarized economy that you see in the United States today.

Richard D. Wolff: Well, you know, again, I agree with what Michael is saying, but I just want to push the argument for me, and this is just, you know, for me, for me, socialism includes beyond the public private issue, very important issue. But beyond that the micro level issue, how do you organize collective labor? How do you organize the workplace places where goods are produced or goods are distributed, services are produced, distributed, and so on. If you organize them in what I take to be the classic capitalist way, and I only give them that label because we call that period in Europe after end, you know, the Renaissance is behind us, feudalism is over, something happens in England and spreads from there to become global.

And for me that something is the organization of the workplace into employer employee. And you can call that making labor power a commodity, you can call it many different names. But that for me, the essence and it’s what distinguishes the preceding period which we capture with Lord and Serve and all that that implies, which distinguishes it from another period which we call master and slave and all that that implies.

For me, then socialism is the rejection of all of those dichotomies, or what Marx called class divided societies, labor, master slave lords serve employer employee. With that, in my mind, I want I think that the solution, the socialism we need is a socialism that undertakes the radical step of saying we are not going to organize workplaces with that dichotomy.

We’re not going to have a small group of people running the show when no masters, no large, no employers. When Marx occasionally uses the phrase classless society, it’s something like that. He’s gesturing toward no classes. I take that literally. I take that as a hard idea. We’re going to organize work. And I want to note that that the desire to do that is as old as human history.

Human beings have collectively formed groups that are equal, one with the other that are egalitarian, that share the decision making. That’s not a new idea. That’s not a product only of capitalism. You have communities that tried to do that in feudalism, in slavery, in ancient villages, which often were organized that way, etc., etc.. I think that is now coming back and becoming in the way Marx foresaw as a commune ism, but now one for modern society, different from but learning from the ancient communes that remember that’s the root of that word community, communism, communal, communitarian.

It’s all about all the efforts human beings did for me. If China is going to be the step next step, which in many ways it already is, it’s different from the Soviet experiment. It’s different from the Scandinavian socialist experiment. It has its own Chinese characteristics, But I want to see it engage with what I’m saying in terms of going that next step.

Michael Hudson: Well, Richard, you’ve talked about this more than anybody else. I know, and you’ve elaborated it. And this is exactly the whole point. Well, why do we want socialism? We want a better a better life. And most people’s lives are connected to their working conditions. And right now, all of the polls show among American workers show people are unsatisfied with their jobs.

They’re not contributing to it. They’re upset by the ambivalent cult industrial sabotage. The workers are just giving as little as they can. And the very resentful and the system is what my friend David Graeber just published book published the book Bullshit Jobs. That’s what people feel their jobs are today. And that’s exactly the point. What’s the point of having socialism for just what Richard’s talking about?

Richard D. Wolff: Yeah, yeah. And I think people wonder. They describe me. I don’t know if it’s accurate or not, but they describe me as quote unquote optimistic. My answer is I look around the society. I’m perfectly willing to be prepared to see the negatives all around me, and there are plenty of them. But for the same reason as what Michael just said, I am optimistic.

I think let’s put it this way, being the product of the universities, I went to here in the United States, my personal friends and associates include people who now run the United States economy, and I, you know, I know them. We have coffee from time to time. And I can assure you, in case you’re wondering, they are very, very worried.

One of the few things we can all agree on as we gather around a table, drinking coffee or drinking wine, we don’t agree on how the U.S. got itself into this situation. We don’t agree on how it should get out of it. But here’s what we amaze ourselves by agreeing on the following sentence. This is the worst condition of the American economy in our lifetime.

And you can see from the color of the hair both Michael and I have that We’ve been around a long time. So that is something to say. They’re not so confident. We’re more confident than they are about the future. And that says as much as any piece of analysis we could offer you. So, we’re optimistic because we’re saying it’s all going to collapse.

That’s our optimism to them, That’s pessimism to us. It’s optimism. Yeah. And that there are some there are some that we can put some hope in. You know, my family is French and so my family participated in a movement over the recent time called the G Legion in French, which stands for Yellow Vest. And I’m sure you all saw that this is a massive outpouring of the people of France who are giving the middle finger to their government with enthusiasm.

Mr. Macron has the level of popularity that Mr. Biden does, or Mr. Trump does, or less than that. The reality is people around the world are looking at the economic system. We call capitalism, and they’re exuding deep displeasure. That’s why they vote for clowns like Trump or clowns like the fellow who won in Natal in Netherlands, or the fellow who won in Argentina.

And I could go on. These are not signs of. A healthy, dynamic, growing system. These are people coming in saying it’s a mess that we have here. Vote for me, I’ll fix it. And people are so desperate that they’ll actually give it to that kind of a clown, knowing in their soul this is going nowhere fast.

Dialogue works (Nima): we are witnessing the United States economic war on China. Xi in the last meeting with Biden tried to solve the situation. He tried to describe to Biden that we can cooperate instead of going to war against each other. How capable is the United States to harm the Chinese economy and bring it down?

Michael Hudson: I don’t think it’s so much a war as a splitting apart of the world in a war, people actually have contact with each other and fight each other. America is not fighting China. It’s going its own way. It’s isolating China and isolating Iran, isolating South America. It’s isolating the entire world against itself. So, it’s ultimately isolating itself. It’s going its own way, and the rest of the world is going its way, not a war. We’re just saying two different paths. The U.S. and its European satellites and you can see what it’s done to England and Germany. You don’t want to be a satellite, but they’re going their way.

And the rest of the world now is going saying, well, how do we restructure world? We don’t just change the market. We need a whole different set of institutions. We need our own World Bank with a different philosophy. We need our own international monetary Fund, with a different financial philosophy. We need our own trade organization. We finally need an International Criminal Court to deal with the American terrorism, where there’s a whole new parallel universe, a socialist universe, that in principle that’s being created and it’s not a war just going to leave the United States isolated. That’s my view.

Richard D. Wolff: Yeah, I think that’s what’s going on. I agree with it. The only thing I would add is that there is a kind of precedence that I would invoke and bit. I understand it’s a bit of a stretch. On the other hand, I think it has something to teach us. Back in the 18th century, the United States, the development of what was then a British colony reached a point where the colonists were prepared and willing to fight a war to break away from the parent colonial power.

Britain. And they fought a war and the British thought it was amusing. George, the third sitting in London, thought this was amusing and sent his military to take care of this problem the way the military had taken care of comparable problems in other parts of the empire for centuries. I’m thinking particularly of the Indian subcontinent, but elsewhere. Do I look at what was done to Ireland?

I mean, and on and on the other? To the amazement, the rag tag George Washington Army defeated the British not content to understand what this meant. The British tried again in 1812 another war. They lost that one too. At which point I think an idea settled into the minds of enough Britons at the top of their society to change their policy.

They could not stop what was going on. They couldn’t. So, they better learn to live with it. They accommodated the United States, which then proceeded to prove that they couldn’t stop it because the United States simply caught up to and eventually surpassed the British. The relationship between big and little was reversed. The little became the big, the big became the little.

And it’s been more and more of that ever since. Okay, so we know. But there’s the precedent. You tried it militarily to stop it. You have failed twice. Maybe the smart thing would not be to go through two lost wars, especially now that there can be nuclear from which we all cannot escape, etc., etc.. I think somewhere, even in the unconscious, that story reverberates in the minds of people now.

And I think the evidence is overwhelming. It is too late if it was ever possible. You cannot put the genie back in the bottle. China has shown it can not only grow faster year in, year out, through crashes through pandemics. Doesn’t seem to matter. Unbelievable record they’ve accomplished. But it takes us all the way to the top of the technology chain.

They have the equivalent of Apple and Intel and Google and all the rest of it. They’ve been able to do that in recent months. They’ve been able to demonstrate, even when you specifically go after semiconductor chips and you squash the company one way and you do this and you do that, it still doesn’t work. And they announced a few weeks ago and they showed the world they have their own chip, and they can manage an Apple telephone or its equivalent.

No need for the all you’ve done is you ironically, in the irony of what Michael just said, you’ve demonstrated that if your enemy is a powerful Communist Party and state able to manage this bizarre hybrid of private and public enterprises to to identify and go get targeted priority industries, if that’s their strength and you blocked them from certain technology in your country, they’re going to take their strength and deal with what you call taking away from them.

And they’re going to show you up because they’re going to do it quicker and faster, which is by now their modus operandi. You should have foreseen that, you idiot. You know, I can see a Biden well, not him, but someone like him calling in the advisors and saying, you know, Jack, what are you telling us here? What you’re proposing is a strategy they’re equipped to defeat.

And as if that weren’t enough, Jinping and others have said this publicly. They’ve said it. That’s where I got it from. You know, this is don’t do this, that this is going to make you more upset. We’re going to beat you. Let this why don’t we work together, share the technology. You will go there. We’ll go there with what you’re doing.

This aggressive, as Michael puts it, isolation. That’s a much more dangerous path in the direction of war because you’re going to become more and more frustrated. That’s already happening, leading to the crazies in this country who want to go to war because they see we’re losing the alternative. You know, wouldn’t that be enough to change your trajectory. Well, my answer is we don’t know.

We don’t know how this is going to play out inside the United States. We don’t know how this experience of slipping. Let me remind you of a statistic. Before the 2020, the GDP of the G7, that’s the U.S. and its major allies was higher. If you add it all up, then the GDP of China and its allies in the BRICS since 2020, it’s reversed now in 2023, total output, the share of total output of the G7 in the world, 29% share of the BRICS before the addition of the six new BRICS company countries.

Before that, in 2023, the original BRICS 33% of world output. It’s over. It’s over. And now getting better. Germany is going into recession as we speak. Britain is already in one, even though its numbers mask that a little bit and the United States expects one, according to JPMorgan Chase. Jamie Dimon testimony yesterday, we’re heading towards a recession again. So, the situation is getting worse and worse.

And there are going to be voices in the United States who can’t possibly admit or recognize what we’re talking about as the reasons for it. They’re going to blame China or that’s what they’re good at and they’re going to want to go bomb something, which is also what they thought they were good at. And in case you do it dubiously, let me be aggressive with you.

The United States has lost the war in Korea, the war in Vietnam the war in Afghanistan, the war in Iraq, and now the war in Ukraine. That’s not a pretty record. They’ve held on to illusions of power through a series of defeats that ought to make you stop and take a deep breath as to the level of self-delusion that this society is capable.

Michael Hudson: Well, there we go, Richard. So, let’s give the Biden administration and the Trump administration credit for doing what they’ve done to help catalyze this. You’re absolutely right. Whenever you impose a sanction on other countries for something they need, whether it’s sanctions on food or sanctions on technology, you leave them no alternative but to create their own industry. But the problem, what is the China and Russia had sent their students to the United States and they believed in free trade.

And the only way that you can make sure that you can nurture their own food production in grain production in Russia or high technology in China is protective tariffs. But they weren’t doing this because they were members of the world organization. And so, Trump and Biden have said, look, we’re going to help you. We’re going to help you do just what the United States did in the 19th century.

We’re going to have protective. And if you won’t do it, you know, we’ll just put sanctions on you and we’ll sort of force you to develop and go your own way, because we really want to nurture a lot. Let 100 countries bloom with their own way of doing things. So, I think we should applaud that.

Richard D. Wolff: Yeah. Yes, absolutely. Yeah. The irony is, you know, you need a Bertolt Brecht or some other great comedy writer to capture because in all this sad and dangerous material, there lies a fantastically funny sequence of mumbo jumbo mistakes. And it’s just amazing. And it’ll provide you with nothing else, at least a little comic relief to what otherwise might be pretty bleak Daily News reports.

Dialogue works (Nima): How do you see the future of Europe?

Michael Hudson: I think that both Richard and I would call ourselves materialists and the one problem with the materialist approach, the history of Marxism and socialism, you expect other countries to act in their own self-interest.

Europe has committed economic suicide. Europe is dead. Your German industry is moving to America or to other countries to China. BASF, the chemical company, and said, Well, now that we can have inexpensive energy, we have to move to China. The European leadership is not European. It’s basically nurtured and protected by Americans, interfered with European politics ever since 1945 through non-governmental organizations, through bribery and American officials, Finance department officials have told me that all they need to do is give the Europeans little white envelopes.

The Europe, they tell me the Europeans are even more corruptible than the Latin Americans. And the Europeans have agreed to commit economic suicide on behalf of the United States. So That’s dead America. And it was smart enough to realize exactly what Richard and I were talking about, that the growth area of the world is the Shanghai Cooperation Organization, the Belt and Road Initiative of China and China, Russia, Iran, the whole group.

And if you believe what Richard now saying, then the problem is how do we keep control? What can we control if the whole world’s getting more productive and we’re so eager to fight against labor, so eager to make the class work, they industrialize by moving our labor abroad, how are we going to get control of Europe? Well, the solution is to blow up the Nord Stream pipeline.

Energy is needed for industry, German industries and in German, because you need energy to make GDP growth. Basically, you need energy for product, labor, productivity, all that is ended. So, the American solar and the Europeans utterly corrupt were bought out except for Hungary. And ironically, it’s the right-wing parties that are explaining all this, the socialist parties, what is called socialism.

There is really the right wing in what’s called the right wing. It seems to be, I think, what we all would have expected the left wing to say. So, if you there’s no way of explaining what’s happening today on the grounds of self-interest in the West, you have basically what would Spangler have called it, the decline of the West and is opposed to the rest.

So, I’m very pessimistic about Europe and. So are the Europeans. That’s why they’re leaving that I see the euro going down and down again against the dollar because the euro was basically Germany’s exports surplus. It doesn’t have an export surplus anymore. It’s it’s broke and breaking. Germany is broken up, the whole European economy. And they’re applauding it, applauding it.

Richard D. Wolff: The again, I would only add, I find it amazing watching what we’re seeing in Europe. I’m a little nervous about the materialist. I understand what Michael is doing, but there is a core of the European capitalist class that has identified with its alliance with the United States for so long that really they can’t think outside of that box.

The United States is their ultimate protector. The United States is the wonderful assistant who keeps the Russians at bay on one hand and their own working class on the other. And that that’s a wonderful assist that capitalist classes don’t normally have, that they have it. They’ve got the United States that saves them from having to spend all the money on military preparedness they might otherwise have to spend.

The United States and they have been fighting about that for literally 50 years. Every American president bemoans that the Europeans don’t do their share of the common defense costs. That’s a real index of some tension, not enough to split them. And so, they each feel we’re getting an advantage. Europe is a buffer for the United States. The United States is a defender for Europe, but the danger of that is what they’re now done.

I mean, the Germans needed two things. Once they accomplished the unification with East Germany and that was already done ten, 15 years ago, they needed they had a problem because they were so successful, because they were the engine of the European economy. They needed more labor. Once the Eastern Europe, Germans were used up and they needed cheap energy and the constant bringing in of immigrants.

I want to remind you the end of Angela Merkel was when she came out publicly and said we could use a million or two immigrants. At that point, the German working class said to her, no, you don’t it. We know what you’re doing. You’re bringing in, you know, labor and we’re not going to let you do that. And okay, as long as the cheap gas and oil came from Russia, they could work their way around it.

When the Ukraine war breaks out and they the war, by the way, is not the problem. It’s the sanctions that are the problem. The war who gives a crap? The war is only horrible for the people of Ukraine and the soldiers that are that are lost in that crazy thing. But this is the end of Germany. If it doesn’t have cheap energy and it can’t get cheap labor, then the so-called zilch after the war.

No how you say it in German, but what’s the trend? The economic miracle, the so-called of Germany dissolves. It’s no miracle at all. Cheap and cheap energy for a country that wants to be an export powerhouse. You know, the first grade learns that little lesson. If you can get yourself in that situation, you’ll be the big powerhouse.

But you are the flipside. If you lose cheap labor and you lose cheap energy, you’re going to be what Germany is now and nobody’s picking up the slack. The British economy, that’s a bad joke. The French economy, the French are genius. They slithered through between the oil and gas they can get from North Africa and the and the tourist goods they produce for the rich of the world.

They muddle through and the rest is chaos. I mean, I don’t mean to be abrupt, but the Italians or the low countries of Spain or Portugal, these are countries that are marginal. So, what we said, what we mean when we talk about Europe. And so, they watch. And I think we all deserve to have a little bit of don’t know sympathy because where the Europeans are, maybe where the Americans will follow.

And here’s what means. They’re watching the new world emerge. The Europeans pick up a newspaper and they read about China and the United States. That’s all they read about. That’s where their economic struggles are. That’s where the new developments are. That’s where the struggle between them is and to all that, the Europeans are secondary marginal footnotes in the technology wars in the military, nothing they are they do what the Americans ask them in Ukraine.

They don’t. Other than that, they have nothing to say and nothing much to do. The disunity there was a killer. They didn’t get their act together. They didn’t become a big place. You notice China’s a big place and America’s a big place. If you’re going to be powerful, you’re going to be a big place or else unify many little ones into something that can pretend it’s a big place.

Europeans haven’t done that, and they are now paying a terrible, terrible price. And I don’t see an end at this point. And they’re going to get desperate and they’re going to do strange things to the electorate in the Netherlands. Gave you an idea two weeks ago of some strange things, the Italian elections a few months earlier gave you some strange things and more of them are coming.

Not all right wing, not at all. But, you know, there’s an immense realignment going on. And notice footnote to what Michael said, in most European countries, the socialist, the Communist Party has disappeared the Socialist Party has shrunk to a tiny remnant. Look in France, look in Italy. Portugal is my favorite exception. The government in Portugal is a coalition of the Portuguese Socialist Party.

The Portuguese Communist party, and the Portuguese Green Party, which is of course another direction. And the Portuguese are very proud of being different, but they’re very proud of being different in scenario of Europe that is as dire as anything I could have imagined at this point. For that part of the world. My mother was born in Germany, my father was born in France.

You know, I carry that European tradition, even though I was born here in the United States. It’s where my folks came from. And so, it’s very present in my mind.

Michael Hudson: I don’t think there’s any way of saying where Europe will go. And as Richard said, there’s something emotional.

When I talk to many Europeans and they’re literally emotional about the fear of Russia, especially in East Germany. They were so traumatized by the Stalinist. The Stalinist did their same thing in Latvia, same thing in the Baltics. It’s almost a trauma type population in England, too. They believe they have to depend on America, even though it’s America that set out to break up the English power in the closing days of World War Two, they still believe that they need America.

It’s a dependency. It’s an emotional dependency. And how on earth, no matter what Richard and I can say economically or logically, we’re dealing with a traumatized nation.

Richard D. Wolff: Yeah, let me you know, I speak French and German fluently. I go there often. I read the newspapers almost every day, etc., etc.. It’s very important what Michael just said, you know, and I think Americans can understand it.

There’s a lot of Americans who will, if you talk to them about history, tell you about the great danger to the United States represented by Soviet Union. There’s a sizable portion of the American population that is not aware today from recent polling that the Soviet Union is not a socialist economy, and it hasn’t been since 1989. Okay. They’re not aware and these are not stupid people.

These are not people who never read the news. That just why Russia is awful. Russia is terrible. Russia always was terrible. What psychology? The field of psychology has a wonderful concept. It’s called the concept of displacement. You have many problems in your society. All of us do. We have many problems in our personal lives, you know, with our spouse, with our children, with our parents, with our neighbor, with our boss, with all the people we interact with.

But under some conditions, human beings will displace a whole network of problems onto one that one will then hold for them. All their hostility, all their antipathy, all their fear. We know it, for example, here in our country, when people are asked, why are you a white supremacist and out of their mouth will come a litany of painful experiences in their lives.

And you will try to say to them that, one, you just mentioned that’s got nothing to do with white or black people and that one has nothing to do. Well, what are you? But not for them. They have displaced onto this issue. Why? Because they couldn’t do anything about a bad boss. They couldn’t do anything about a government that was screwing them.

They couldn’t do anything but take it. They are allowed in their environment to dump on black people or brown people or for that matter, any other kind of people, because this game has been played on people who have a, you know, a left handed as opposed to right handed people who prey to this God rather than that one, etc., etc..

This displacement in Europe goes far back. Napoleon invaded, Russia and was defeated. Hitler invaded Russia and was defeated. The Europeans have this complicated relationship to a backward corner that was awful and powerful at key moments and how to solve all that. And then comes the Soviet revolution and. Now you’re allowed to hate them because they’re evil communists. There’s too much here.

Too much has built up too, to teach an entire continent to display it. Not everybody, of course, but to displace large parts of what they deem to be dangers in life onto this one. You know, when I tell people that the GDP of Russia today is one and a half trillion dollars and the GDP of the United States is $23 trillion, and that this is a conflict between an elephant and a fly.

They look at me, they look at me like the little puppy who has been denied a bone. They’ve been denied. They’ve been denied what by what? By the statistic, the imagination that that this terror that they’re afraid of isn’t there? It’s like trying to tell the two-year let’s go to the closet and turn on the light and you will see there are no monsters in that closet.

They won’t go with you. They have developed in their little two years of life a notion of monsters in the closet that you are not going to talk them out of because it’s what the French call an idea. If you know it is, it has become a support for them. And the Europeans. Look, the Germans know, as Michael said, they lost the cheap energy.

They know what it means. They saw that when there was a chance that they might be able to finagle a way to keep holding on to it, that the United States or somebody like them blew up that pipeline so they weren’t going to get it. They knew it was for them. I mean, German newspapers to this day, there’s speculation that the Russians blew up the pipeline they had just spent billions of dollars building. You know, that’s desperate. That’s desperate.

Michael Hudson: And I think, in the United States, it’s not trauma. Yesterday, Senator Murphy of New Jersey said, I was appalled at the fact that the Republicans were not going to vote for war against Russia in Ukraine. And he said if you don’t stop the Russians in Ukraine, they’re going to march right in into Western Europe.

Now, you can’t say that American senators are traumatize, but they’re part of the whole thing trying to prop up the Americans and to this nonsense as if Russia has any interest in marching into Europe. If you read President Putin’s speeches and Lavrov speeches, what you get from the Russians is a feeling of just disgust with how can the Europeans be committing, not seeing that we were offering them such an economic prosperity.

And there is also a feeling of disgust with themselves, of saying, how could we have been so naive to believe that the Europeans were reasonable there? Just the feeling in Russia, the opposite of the traumatized Europe, is saying, Oh, well, it’s time to turn east. It was of hope, and we have ever hoped to be reasonable with Europe.

We look at what they’re doing. We’re giving up and they’re the last thing they want is to have to spend money on occupying Europe, which already cost a lot of money for the old Soviet Union. They’re never going to go into that again for the Russians. What they remember of the occupation of Europe as Russia was helping the Central Europeans live better than the Russians.

It was doing everything it could to hold them back, that that’s their trauma. That the trauma, of course, was what when they tried to take European and American advice in the 1990s, and as President Putin said, Russia lost more of its population through neoliberal policies than it lost in World War two. So, you’re having matching, if like the opposite ends of the magnet?

Richard D. Wolff: Yeah, it is a very tragic situation. You know, we all know, or we should how much of the culture of the world was shaped by the last four or five, six centuries of Europe? I mean, modern technology, modern philosophy, modern fill in the blank is overwhelmingly shaped by Europe. Not only but Europe had an enormous influence on everything we think.

And in how we do everything. And to watch that place stop being the center of anything is an amazing historical process that we are living through. It is. It is. It’s just like the next general as the next generation of high tech gadgets shapes our lives and they all have Chinese writing on them. That’s going to shape the consciousness of Americans and Europeans and in a way that a lot of these other events won’t, but that daily Chinese writing on the phone you’re staring at is going to make a difference, and they’re going to make sure you see that writing because they understand also what is going on here.

You know, they the old adage beware, if you live in interesting times, be very nervous about where that may take you. We’re living in very interesting times. The world economy is changing, has already changed. Let’s keep in mind, every country in Asia, Africa and Latin America that has as a priority that it doesn’t want to be the poor country that it has been for a long time will recognize that its high priority of becoming not poor, as has been achieved by one of the poorest countries, Earth in China.

And when they think about what they should do and how they should do it, they’re going to look over there and before they undertake any action, at the very least, they will play the G7 off of the BRICS. They have an option now they didn’t have before. And however, the piece is they’re going to be choosing the other.

And the fact of that for the West should be terrifying in terms of where that that’s just everybody’s eating into Europe’s lunch and America’s lunch and they’re watching it and they can’t do anything. The frustration there is building and produces nonsense like the senator from New Jersey or our president, who after losing a war in Ukraine for a year and three quarters, has no better option than to shake his head, admit that the so-called counter offensive of this summer was a complete and total failure and nothing in the future promises to be different.

What I told you before about the relative GDP of the United States and Russia applies again to Russia versus Ukraine. This is another elephant and a fly. And the elephant may be irritated. The elephant may pay a price, but it’s not going to be defeated by the fly. That’s not going to happen. And you’re either going to have to face that at some point or admit that your strategy was the wrong one.

And we have leaders who can do these things. So, it said, look how long it took two extract Americans from Afghanistan. Turn the whole country back over to the Taliban against whom the fight was supposed to be from the beginning. I mean, these are not just failures. They are so abject that on the one hand you can understand the pretense that they didn’t happen.

And yet, on the other hand, you have to understand that a society that can do that and fail at it and not discuss and deal with it, whoa, that’s a society telling you it’s going to do this again and again because it has no option.