The Duran: US Economic Decline and Rise of Greater Eurasia – Michael Hudson, Alexander Mercouris & Glenn Diesen

Yves here. Many are excited by the prospect of overweening US power and economic heft being cut down to size, both by virtue of the rise of other centers of influence, most of all what this interview calls “greater Eurasia.” However, as much as the end-state of multi-polarity certainly sounds more appealing that US hegemony, by virtue of having checks on US influence and having more “distributed” exercise of power, that does not mean getting from here to there won’t be ugly. Remember Gramsci’s warning about morbid symptoms.

Nevertheless, I am sure readers will enjoy hearing some of their favorite experts chew over this meaty topic.

Originally published by The Duran

GLENN DIESEN: Welcome, my name is Glenn Diesen and I’m joined by Alexander Mercouris and Professor Michael Hudson. Welcome to the both of you.

Today, I really wanted to discuss the decoupling or fragmentation of the international economy and also now the alternative economic architecture emerging, I would say primarily in the east, but also in other parts of the world. So I thought we can start off by discussing the defining economic challenges of our time.

For those of us who were studying economics in the 90s and 2000s, the big talk was always economic interdependence. This was supposed to be the recipe for prosperity and peace, but these days the rhetoric obviously has changed. Now the main talk in town will be a new international division of power.

So while in the early 2000s the idea was the United States would invent the iPhone and the Chinese could assemble it, this was the distribution of labor, but now of course China has climbed up these global value chains and it can effectively do both, the invention of it and assembly.

Meanwhile, Biden recently argued that if something is invented in the US, it should also be produced there. So it’s a dismantling or repatriation of the supply chains going on.

We also see economic dependence being weaponized, I would say, hijacking of Iranian oil tankers, seizing the Russian central bank assets or simply trying to cut off or cripple China’s access to technology.

So I guess my first question would be what does all of this mean? What are the main trends and what does it mean not just for the United States and China but also the wider world? Will countries such as Germany, which was very much tied into this very liberal economic system, be crushed under the new political economy or what do you see coming?

MICHAEL HUDSON: Well, the United States was always for free trade after World War II as long as it was the most efficient and strongest industrial producer. But now that it’s not the strongest anymore, it’s gone back to the protectionism that in the 19th century built up its industry to begin with.

The problem is at this time, even though the United States and other countries are going protectionist, the United States can’t reindustrialize like it could then because it’s already overloaded its economy with financialization, corporate debt, personal debt, and privatized medical care, privatized education.

The economic overhead of getting a job here and the pay that workers have to get, not simply to eat and get clothes but for medical insurance, for debt service, prices America out of the market. So it really has no alternative but to be autarkic. But it can’t be autarkic because nobody can see how it can reindustrialize. So there’s a kind of rage going on here among economists.

And just today, the Treasury Secretary Janet Yellen is going to China and said, well, we can’t import the solar panels anymore because China’s government supports them, as if the U.S. government also doesn’t support them and other countries don’t support them. You’re getting a travesty almost of the public statements of why America has to avoid imports from China, impose sanctions on Russia. But the result is there are going to be shortages all throughout economies that are following this withdrawal from international trade.

ALEXANDER MERCOURIS: That is very interesting. When you say that there’s going to be shortages, will these shortages eventually become self-correcting?

Because I was reading actually, again, there’s been a very interesting statement by the governor of the Russian central bank, Nebulina, who is, by the way, somebody who I think personally, emotionally, was very wedded to the neoliberal, open market, unregulated economic model. She is absolutely astonished at what the effect, the actual effect of the push to a kind of enforced protectionism in Russia has been. And in this statement she says that what’s actually happening, and she says, I can’t explain it, this is astonishing to me, is that investment is rising. Consumer spending is rising. Wages are rising. And in conditions of an investment boom, production is expanding. She says, you know, I don’t quite believe this. I worry that the economy, our Russian economy, is growing faster than capacity, that it’s going to burn itself out in some way.

I mean, it’s a very strange statement, both confident in some respects, panicky in others. This can’t be true. But is that actually what is going to happen? Because this system of everybody being linked up in a single economic system actually has been, I think, a relatively recent thing in terms of, you know, post-British Empire time. Will, in fact, the fragmentation actually in the end lead to a more diverse economic landscape and a more balanced one? I’m just wondering, because Nebulina is now perhaps, I think, starting to, to her own astonishment, wonder whether that might happen in Russia itself.

MICHAEL HUDSON: Well, economists love to use the word self-correcting, because if economies are self-correcting, you don’t need a government. You can just have the private sector running the economy. And in practice, that means Wall Street.

But there’s no way that the American economy can be self-correcting without a few decades of new investment. You’d have to reinvent the educational system. You would have to take public health into the, health care into the public domain so that you could lower the cost of living so that employers wouldn’t have to pay such high wages. You’d have to provide freer education so that workers don’t graduate into the labor force with so much debt that they need high enough wages to pay the debt. And even so, can’t afford to buy houses.

America, and also, I think, Western Europe, has painted itself into a corner that is now systemic. The whole trend from 1945 to today, all of these 70 years have built up such rigidities that there’s no way that you can break them down. And the idea that somehow there’s a government policy that can fix things won’t work either, unless it’s so radical a policy that it won’t be the current economy anymore.

Nobody’s talking about the need for structural change. They just avoid talking about the debt problem, talking about what makes America high cost. And then, of course, there’s the war spending.

GLENN DIESEN: Well, you mentioned the rent-seeking as something that makes America very uncompetitive. Obviously, extracting, having all this, well, not necessarily oligarchs, but people extracting money through the way their economy’s been financialized, intellectual property, land rights, technologies. This obviously is a burden for the productivity and competitiveness of the United States. But there’s also a sense of rent-seeking internationally through these monopolistic positions. So again, when you have a monopoly in certain areas, obviously, this has economic influence, well, economic consequences in terms of the high profitability. But you also have the ability to extract political influence when there’s a position of economic monopoly.

But yeah, because I remember back in 2009, I think, Putin called the dollar, he called it a leech or something along those lines, which was also suggesting that there was a similar way of extracting wealth. So in other words, the rent-seeking, not just in America, but for the entire international community.

And I was wondering if this goes into what Alexander was mentioning, because for countries around the world, well, then especially countries who have alternatives, be it Russia, if they’re not through intellectual property rights, or the American tech platforms, or debt banks, the use of the US dollar, if they don’t use all this, would it result in less efficiency? Or would it be essentially saving themselves or liberating themselves from rent-seeking from the United States? Would this have anything to do with it, you think?

MICHAEL HUDSON: You put your finger on it. The official US position recognizes that it can’t be an industrial exporter anymore, though how is it going to balance the international payments to support the dollar’s exchange rate? The solution is rent-seeking.

That’s why the United States says, well, what’s the main new rent-seeking opportunity in world trade? Well, it’s information technology and computer technology. That’s why the United States is fighting China so much, and why President Biden has said again and again that China is the number one enemy. It moved first against Huawei for the 5G communications, and now it’s trying to get Europe and American and Taiwanese exporters not to export a computer chip to China, not for the Dutch to export chip-engraving machinery to China. There’s a belief that somehow the United States, if it can prevent other countries from producing high-technology intellectual property rents, then other countries will be dependent.

Rent-seeking really means dependency of other countries if they don’t have a choice to pay you much more money than the actual cost of production. That’s rent, the price over value. Well, the United States, since it can’t compete on value because of the high cost of living and labor here, it can only monopolize rent.

Well, China has not been deterred. China has leapfrogged over the United States and is producing its own etching machinery, its own computer chips.

The question is, what is the rest of the world going to do? Well, the rest of the world means, on the one hand, the global majority, Eurasia, the BRICS+, and on the other hand, Western Europe. Western Europe is right in the middle of all this. Is it really going to forego the much less expensive Chinese exports at cost, including normal profit, or is it going to let itself be locked into American rent-extraction technology, not only for computer chips but for military arms?

I know that France wants to use the fighting against Russia in Ukraine as an opportunity to say, well, let’s rebuild the European arms industry. But the Germans are not particularly in favor of this, and the Americans certainly said, no, no. When we say you have to spend 2% to 3% of your GDP in arms, that means buy American arms, integrated arms. So it’s all about rent-seeking.

ALEXANDER MERCOURIS: It’s also presumably the reason why we have never succeeded in creating our own social media-type infrastructure in Europe. We have no European equivalents to Google or TikTok, which we’re hearing so much about, the Chinese TikTok, or Facebook, or anything like that. We entirely rely upon the Americans to provide these things for us. And whenever there’s any attempt to produce anything like that in Europe, it always fails, partly because the Americans object to it.

Now, I mean, I know all about this because my brother, I should say, worked for a time at the European Parliament, and he saw the American lobbying systems that operated within the European Parliament at the European level in action, and extremely effective they were.

But this isn’t a mechanism for economic, for technological progress. At least this is how it looks to me. It’s a formula for ultimate stagnation, because you’re locked in to a system which isn’t even, as far as I can see, focused on development. It’s focused on rent, which is a completely different thing.

So you mentioned that the Chinese, you know, you might use the word leapfrog. I understand the Chinese are also thinking of leapfrog. They’re looking at the leapfrog in computer technology. You know, they’re saying that chips are in any way reaching the end of their technological utility. You know, we’ve got to think beyond that. And they are looking to go beyond that and to look for, you know, other systems. I mean, I’m not a technical person, so I’m not going to try and guess what they are.

But I mean, the point I’m making is rent-seeking, it seems to me, what it ultimately causes is technical stagnation. Or am I getting this completely wrong?

MICHAEL HUDSON: There’s also a geopolitical consideration here, and that’s Europe’s role in America’s war against China. Again and again, as I mentioned, President Biden has said China’s the number one enemy, and it’s going to be a 10- or 20-year fight, he says. Well, if it’s a 20-year fight, how do you line yourself up for this? Well, they said the first thing we have to do is to separate Russia from China, because as long as they’re together, they’re a critical mass that can sort of dominate the Eurasian continent and outclass the West.

Well, in order to do this, to sort of prepare for this fight against Russia and China together, and driving Russia apart from China, the U.S. says the first thing we have to do is solidify our control over our satellites, and that is the main satellite is Europe, of course. And that was what the war in Ukraine, the Ukrainian attack on the Russian-speaking Donbas and Luhansk territories was. By starting the war in Ukraine in 2022, the United States could then depict Russia’s protective response, protecting its Russian-speaking population as an attack, and have Germany and Europe impose sanctions.

The sanctions that were imposed in Europe were a windfall for Russia, as I think we’ve talked before. The sanctions were the equivalent of protectionism for Russia. If you don’t export food and manufacturers to Russia, they have to do it themselves, and they’ve done it. The effect of the sanctions all fell on Western Europe, and specifically on Germany. And you have the German de-industrialization there, the chemical industry, the steelmaking industry, and the heavy industry that had been the buttress not only of Germany’s exports and balance of payments, but the whole Eurozone’s balance of payments.

Now this is gone, because not only German industry, but French, Dutch industry, Belgian industry, they’re all forced into a dependence on the United States, not only for liquefied natural gas, talking about rent-seeking, but for arms and for industrial products that can’t be produced at home.

So you have German factories moving to the United States. What’s going to happen to the German labor? Are they going to follow the factories? Unlikely. Are they going to go to China? Because that’s the other alternative. What is going to happen? So you have Europe basically shrinking, although even as it’s shrinking, it’s becoming a larger market for American gas exports, arms exports, and other exports. The squeeze is going to be on Europe industry.

The question is, how long can Europe decide, well, we’d rather be an American satellite than enjoy the mutual investment and trade that we were doing with Russia and China. How long are we going to not make an economic decision? I mean, there goes the materialist approach to economics. The idea is that foreign policy is supposed to be what helps your economy grow. And how do you explain Europe not following this, and how long can an economy follow, a nation follow a policy that is against its economic interests and results in protests?

GLENN DIESEN: This is what I find so strange with the absence of discussions around what’s happening to the economy in Europe. Because a whole, well, not a whole, but a large part of the idea of the European Union after the Cold War was, you know, after the Cold War, you had one central power, and then primarily the United States. But a big part of the idea of the European Union would be for the Europeans to, with collective bargaining power, effectively establishing some symmetry with the United States. So we would have collective hegemony, the dominance of the West, but then with two pillars, the US and Europe.

But to forget that there’s a component there, both competition as well as cooperation. These days, all I hear is, you know, we’re allies, we’re cooperating, as if there’s no, that the Europeans don’t have their interests, which are separate from that of America, often even in conflict.

And I also, a lot of what you’re discussing, it makes me think of Yanis Varoufakis, the former finance minister of Greece, because he, well, he hasn’t only discussed the issue of energy and intellectual property rights, but he’s focused a lot on technologies lately, given the growing role of these digital giants. And his main concern is that, well, effectively, Europe’s finished, because as you see, that these digital giants get a greater and greater role in the international economy. The Europeans, they don’t have any of their own. As Alexander said, there is no equivalent of Google or Facebook or any of these large ones, Amazon for that sake. But the Chinese and Russians, they do have theirs. And I think this has been part of the curse that because the United States is an ally, it is a friend, if you want to use the word friend, it has created less urgency to create our own technological sovereignty.

So I think the acceptance of developing this dependence on the United States, it’s the curse of being allies, if you will. And now we see, as Varoufakis argues, he says, there’s no chance for Europe anymore. We will now be permanent. Well, the US will be a rent seeker, and our economy will become less and less competitive as wealth is extracted out.

MICHAEL HUDSON: Well, Glenn, you begin by talking about symmetry and then you change the word to the more appropriate dependency. Dependency is the kind of symmetry that America wants. It’s not an equal symmetry. It’s an asymmetrical dependency. That’s what dependency is, and that’s the aim of US policy, the rent payer and the rent seeker.

And essentially, America is trying to do to Europe what England did with the sterling area before 1945, locking its colonies and Argentina’s holding of sterling into purchases of sterling exports. Well, that’s what dollarization is coming to mean, certainly for Europe, and that’s why the global majority is trying to de-dollarize. They don’t want that kind of symmetry.

GLENN DIESEN: The reason I use the word symmetry is that Albert Hirschman in the 1940s used this word specifically, because whenever we talk about economic interdependence, it’s treated as an absolute gain. So we might be mutually dependent, but one is always more dependent on the other. And when you have asymmetries, you have greater economic prosperity and also this can be converted into political influence. And this is often where the economic competition finds its place, that you want others to be more dependent on you while you want to reduce your dependence on others, because then the whole dilemma of losing some autonomy versus gaining influence is skewed to your favor. So you maximize autonomy and influence and economic prosperity. So I think the symmetry is an appropriate language often, because you would like one side to be more dependent than the other, then it becomes, well, you don’t want it, but then you get this exploitative relationship almost.

MICHAEL HUDSON: Well, Donald Trump has come right out and said, America has to be the gainer in any kind of exchange, unequal exchanges. That’s explicit policy, no mutual gain.

On the other hand, you have China and Russia saying, well, how do we have an alternative to this dollar standard and this U.S. view of a unipolar world order? The only way that they can really create a critical mass that it takes to create an alternative, the Americans call it a split of civilization, is to get other countries to join voluntarily. And that means that China can only, and Russia, can only [attract] the rest of Asia, not to mention Africa and the global South, South America. They can only attract the other bricks into the system by actually offering a better mutual gain. And that entails really creating a whole new set of international institutions, parallel institutions that are different from the U.S., their own version of an international monetary fund, their own World Bank, their own version of the United Nations, or some kind of grouping among themselves. So that really is a different economic philosophy, ultimately. That’s what makes a civilization different.

And the main distinction, what makes one society different from another society? What makes the U.S. and Europe, the NATO, different from the global majority? It really ultimately comes down to how it’s organized financially. Is the financial institution public or is it privatized? How does it handle debt? These are what distinguishes almost every society from another. And if they begin by a financial restructuring, which is the basis of mutual gain, you’re dealing with a completely different economic system.

ALEXANDER MERCOURIS: I just want to just go back to the Russian economy, because we spoke about protection and how protectionism has been imposed on them, and I think that is certainly a part of what’s happening there. But actually I think there’s an even more important reason.

One of my friends, Russian friend, one of his jobs, in fact he was a treasurer of a big in fact he was a treasurer of a big Russian company. He used to come to Europe and to the United States, speak to banks there about raising loans for his companies in Russia. And I think one of the things that people do not understand is that, especially before the 2008 crisis, but to a very great extent still, right up until 2022, the Russian economy, the entire Russian system, was completely permeated by Western businesses, Western companies, Western providers of funding, of insurance, of various types of services. They were helping in car production, they were involved in all sorts of joint enterprises, things of that kind.

And the money that all of these projects were making was of course flowing back to Europe, principally to Europe, less to the United States. So it was in effect rents. The rents were being paid by the Russians to the Europeans.

2022, that all stops. It stops completely. And suddenly there is a huge amount of more money in Russia because the rents are not moving westwards. And what this is doing is, it’s driving an investment boom because that money, that capital, has to be used.

And not just that, but something else is starting to happen, is that we’re getting reverse engineering happening at an accelerating level. It’s now very common, for example, in the aerospace industry, you know, aircraft, Western Airbus aircraft being taken apart, reverse engineered, the material entering into the Russian industrial system. And of course this is causing a major acceleration.

So we have, I would suggest, the classic case study here of what happens when rent extraction stops. An economy suddenly, at least an economy like the Russian, suddenly surges. And in fact the central bank chair, Nebulina, said that the economy is in the investment phase of growth, which is one of the manifestations of structural transformation. So it is changing completely because suddenly money is staying in Russia instead of going out. Just wanted to say.

MICHAEL HUDSON: That’s exactly what’s happening. I wish they had turned over all of their housing to the occupants in 1991. I made three trips to the Duma urging that they adopt a land tax to prevent the privatization that had occurred.

Because even if you have oil and real estate privatized, you can collect the economic rents by a rent tax and basically make a profit and that’s it. Obviously this was not what the U.S. authorities wanted. And the Duma members who had brought me over had their elections fixed and were de-elected by the U.S. advisors.

And so what Putin has had to do is recreate the equivalent of avoiding rent seeking without an official rent tax. And he’s been able to do it, as you’ve described numerous times, Alexander, just by sort of jawboning, as they say in the United States, by telling them, look, you cannot make exorbitant rents. And I think President Putin made a speech a few days ago for the election on just that very thing.

And somehow they’ve made it work in Russia. They’ve increased employment and they’ve increased living standards. And I wonder what Europe will think as it sees the European living standards and employment rising and their employment falling. How long can this, this is real instability, is a byproduct of the rent seeking. It’s not something that can constrain mutual full employment. It’s inherently unstable. And yet the United States says, well, we’ve got to keep the system in place for 10 or 20 years until we beat China.

ALEXANDER MERCOURIS: Well, this is a very good question because, of course, I think you’re putting a, well, first of all, dealing with the housing thing, I can say absolutely that there were people, that there are people today in Russia who perhaps they don’t remember your advice, but if they were reminded of it, they would be very, very sorry that it wasn’t taken because clearly that was the right thing to do. And I think Putin himself would probably agree with you about this.

I mean, he’s very, very focused on keeping housing costs as low as possible and in getting housing built, mass housing. And the priority there in Russia is mass housing, cheap mass housing, not expensive real estate, which runs up very high prices.

Now, this is something which I think they’ve come to gradually without really understanding and thinking through, but it’s often that way in Russia, to be honest.

But the big event that we might be looking forward to at some point in the next 10 years is the point where it suddenly dawns upon people in Britain, Germany, Russia, that for the first time that anybody can remember that people in Russia are better off than we are in Western Europe.

Now, I mean, I’m not saying that’s necessarily going to happen exactly like that, but that would be a revolution of perception. I mean, it would completely transform the political and social geography in Europe.

If we have a situation where people in the West, in Western Europe, feel that they are growing and getting richer and we are not growing and we’re getting poorer, and that they’re not just achieving our levels of living standards, but actually surpassing our levels of living standards, then it’s very difficult to exactly predict how people will respond. But they will respond in a very profound way.

Bear in mind that that has never happened before at any point in modern European history, in fact, in any part of European history. The East has always been poorer than the West.

MICHAEL HUDSON: Well, you’re right, Alex. It’s been an ad hoc response. They’re reinventing the wheel.

And yet the problem that you’ve described was the problem back in the 19th century. Germany faced this problem. How were they going to overtake the English industry? Well, they had the state playing a major role, especially a link between the state, the Reichspunk, and the military-industrial complex.

Same thing in the United States. The classical economists all described the ideal as reducing prices to the actual value, getting rid of the rent-seeking, getting rid of the landlord class. That’s Adam Smith and John Stuart Mill. Getting rid of the monopolists, getting rid of the private banks and making the—

Central European banking was all based not on paying out dividends to raise share prices, but to reinvest and reinvest and expand.

They’re rediscovering all of these, what to do without any reference to classical economics or to the fact that all of this happened over a century and a half ago.

GLENN DIESEN: No, we spoke before about this, the whole what has happened, how the ideology has changed the ideas of capitalism, because all of this was meant to be common sense. If you want that, yeah, the profits should be invested, or at least you should tax the rent-seekers in order to develop proper infrastructure, provide for proper education, all of these things, which has both enhanced the standard of living, but also makes the companies more competitive internationally.

Alexander and I also discussed before, everything is put on its head these days with rent-seeking not really being seen as the key problem, something one has to diminish, but instead seen as effectively the source of what keeps the economy going to have this system.

I think that’s why it’s so difficult to have real structural change in order to make the economies more competitive again.

Within that area, I wanted to ask you as well, because a huge problem is debt, not just of the countries, but also of individuals. What is the main challenge for debt relief? For example, in the United States, most of the debt is now private versus other countries which have chosen to have the debt public. How is this influenced, if you want to, for example, go down the path of debt relief, in order to have these structural changes which might be necessary?

MICHAEL HUDSON: Well, there are two developments in personal debt that have happened in the last three months. First of all, credit card debt has risen very sharply. The interest rates are now at 20% for the regular interest and over 30 to 35% for the penalty fees.

Now, pawnbroking has gone way, way up. There’s been a huge increase in pawnbroking. People who are not able to get any more leeway on their credit cards, the defaults on credit cards are rising. If you defaulted on your credit card and can’t get more credit, you go to the pawnbrokers.

This is why you have the Democratic economists like Paul Krugman saying, why don’t Americans realize how wonderful an economy President Biden has made for them? Why are they not supporting Biden?

Well, it’s because the economy seems to be doing very well for the campaign contributors to the major political parties. But for the 90% of the population, they’re really being squeezed by the combination of the debt and by the inflation that’s forcing them up, and by the increase in housing costs is the other great squeeze that’s happening.

So how can you get a structural change for that? The only way that you can have a structural change to a debt problem is to wipe out the debt.

Now, President Biden, who was the author of forbidding student debtors to wipe out the debt by bankruptcy, to lock them in and say, there’s no way you can get bankruptcy, we’ll take all of your social security and your parents’ social security for this. There’s no way that you can have a structural solution without writing down the debt.

But how can you write down the debt without hurting the banks? The banks are already suffering from the debt of the commercial property in the United States. There’s a 40% vacancy rate for commercial property.

Imagine if you’re a banker, what do you do? You say, well, we’re going to just postpone it. We’re going to roll it over. We’re going to keep, I guess, lend you enough money to pay the interest.

Well, that’s how Edward III got by in the 14th century, until finally he couldn’t pay and the (unclear) went under, and then the (unclear). We have eight centuries of trying to solve the problem by postponing.

But there’s no one even talking, except us, I guess, about the structural problem that debts can’t be paid.

Just like in 1931, the world realized that German reparation debts and inter-ally debts couldn’t be paid. There was a moratorium.

But how are you going to get a moratorium on personal debts and corporate debts that are going under?

Well, China doesn’t have that problem, because China, the debts are owed to the government. The government can write down the debts to Evergrande and to real estate companies that can’t pay. And they don’t tear down the buildings, the buildings aren’t sold, everything goes ahead.

But when the debts are owed to the private banking system, it’s in trouble. And the banks, you pointed out, Glenn, the banks are the protectors of the rent seekers. They’ve joined as their lobbyists, because the rent seekers borrow money from the banks to buy a rent-yielding operation and pay the rents they’re paying interest.

Well, you have the finance, real estate, insurance, and monopolies all together, pretty much controlling the donor class and controlling the election politics.

You have a quandary. A problem has a solution, a quandary doesn’t. And the only solution to this quandary is so radical a structural change that it’s not even being discussed on the horizon.

ALEXANDER MERCOURIS: I mean, not just a radical change, but perhaps even in some ways a revolutionary one, because what it amounts to is a fundamental change, ultimately, in the structure of power. I mean, you have to get into a situation where the beneficiaries of the system who have an interest in perpetuating as it is essentially lose control, and that those who are in effect exploited by it are able to basically push back and to restructure the system completely in their own interests, which is a revolution, in effect.

I mean, this is language, by the way. I mean, I’ve noticed, by the way, that I don’t know whether this is the case in the United States, but in Britain the word exploitation never appears anywhere today in media. It is not ever used in politics. It is not used at all, as far as I understand it, in discussions amongst economists. I wonder whether this is true in the United States.

But anyway, I mean, it is a revolutionary change.

MICHAEL HUDSON: You said the word. You’re absolutely right.

GLENN DIESEN:I was curious though, what are the possible alternatives? Because the key problem everyone seems to, well, most of the world appears to be waking up to, which is that the current economic system organized almost solely around the United States is beginning to, well, fracture to a large extent because of the debt.

But of course making the matter much worse is also, as the United States’ position in the international economy weakens, it also becomes much, much more likely to use its administrative role in the international economy to prevent the rise of alternative centers of power, so effectively weaponizing all dependence on the United States.

So you have all these countries in other areas of the United States, be it Russia, China, but also friends or allies, India, Turkey, Saudi Arabia, the other Gulf states, they all want to find alternatives. But what are we talking about then? What are the main alternatives?

Is it only, because I’ve spoken to some who argue, you know, BRICS, they wouldn’t be able to come up with a common currency, they would have to do something else. The tech center, if you have new centers of technology, it wouldn’t be centralized in the same way around one country as it was in the past. But again, all of this, is BRICS the main institution to push forward a new economic architecture, or if so, what would it actually look like?

MICHAEL HUDSON: Well, there is no alternative except a revolution, but we’re not in a pre-revolutionary situation.

So what do you do if, when you say is there an alternative, you mean an alternative to revolution, but if what’s called for is a structural change, we’ve, ever since 1945, as I said, there’s been a steady buildup and it cannot be sustained.

What do you do if economies are on the wrong track? How do you change track, especially if you have the vested interests controlling the electoral system so much that they really block any kind of third party from the duopoly that’s developed? How do you solve the political problem that is protecting the economic quandary?

Nobody’s been able to solve that problem short of a revolution, and yet it’s not, people aren’t ready for it. They’re blaming themselves. We’re going to blame the victim, blame the debtors for being impatient, for over-consuming, for not saving enough, while not giving them an opportunity to have a job that enables them to pay the cost of living and build up the savings.

The alternative that the Democrats and Republicans are talking about, well, let’s stop social security. Let’s roll back social security and medical insurance and Medicare. Let’s roll back the social spending.

Well, that’s also going to happen in Europe. How can Europe, the Eurozone, as long as it’s subject to the 3% limit on the amount of a national budget deficit, how can it re-arm? As if Russia’s going to invade, this myth that somehow Russia wants to re-establish the old Soviet Union, where Russia couldn’t possibly afford to, even if it wanted to. There’s no recognition that Russia’s already said, let Europe go its own way. We’re turning east. You don’t want us? Well, we don’t want to go where we’re not that welcome. I think President Putin said those very words. They’re sort of leaving Europe alone. It’s left all by itself with nowhere to turn, either except the United States or to redo the whole geopolitical alignment.

And I don’t see, as long as you have American meddling in German and European political elections, as it does to promote US-oriented politicians, especially ruling through NATO or Brussels, you have too much blockage for a revolution. And you don’t have a popular consciousness that there is an alternative.

They’ve fallen for Margaret Thatcher’s claim that there is no alternative but you to suffer and be impoverished and the economy to polarize. There is no alternative. That’s how evolution works somehow. The rent-seekers and the 1% are the survival of the fittest. They’ve survived and you haven’t. Accept it.

ALEXANDER MERCOURIS: But at least in Britain, I mean, if we cut down further on the kind of welfare spending that you’re talking about in the United States, that would increase debt dependence. It would not reduce it because if people weren’t able to go, for example, to a health service which is state-owned, they would presumably have to pay. Even if they were paying insurance, they would have to pay in some way. And that is a form of rent in the end.

And if you know about the health service in Britain, which is in crisis by the way, deepening crisis, if you know about the various reorganizations it has had for decades, what they have done is that they have fragmented it and made it extremely susceptible to rent-seeking.

There are lots of things that happen within the health service today which previously the health service did itself, which are publicly funded in other words, but which now are contracted out to private contractors. And I think even people of conservative views are now becoming increasingly critical of this. But there is no sense that it can be changed. Changing it would be to break contracts, to infringe property rights, and of course that is conceptually impossible or so we are led to believe. So I mean an awful lot of that.

If we could just come back to the world system. I mean countries need to trade with each other though. Can one have a system of trade, say a BRICS system of trade, which does not ultimately degenerate into a system of trades, a rent-seeking system as well. By the way I don’t think that’s a reason for not trying, but I mean, you know, or trying to set up alternatives to the existing one. But people who we discuss things with, viewers, come back and always tell us well, you know, don’t assume that the BRICS, the Chinese, in the end will be any different from what we have now, because this is a kind of human law that eventually rent-seeking in some form will be re-established.

Is it possible conceptually to think of an alternative trade system that works but which is not vulnerable to sort of rent-seeking, which does not turn into another rent-seeking system like the one that we’ve seen develop since the Second World War?

MICHAEL HUDSON: Well you’re absolutely right. What you’ve just said is what economists deny. Most international trade advantages are rent-seeking. But in the free trade theory, rent doesn’t appear. Everything is supposed to be costs without taking into account rent. It’s as if commodities exchanged on the basis of value, not rents.

Well, the interesting thing about what you’ve just said, Alex, is that the rent-seekers know what rent is, but the rent-payers don’t. They think it’s all value. They think that’s really part of the actual cost of production.

So the answer is that if the leaders of the creators of this new system, let’s say they’re China, Russia, Iran, if they realize that, well, in order for us to remain viable, we have to absorb the whole Eurasian region as an interdependent whole, that means that governments have to take the lead in saying, okay, we’re going to have to have everybody employed. We’re going to have to actually decide on what kind of government is going to subsidize what kind of production. So actually there is a mutual trade.

There were many plans for this way back in the 1950s as an alternative to the World Bank. Land reform, for instance. Land reform would have got rid of the many of the agricultural rents, but the World Bank would only lend toward food exports, not for domestic food independence, self-sufficiency. The idea is to make self-sufficiency on a region-wide basis, and this entails some sort of government agreement.

Obviously, if you have one country, such as China, saying we’re going to get all the gains for ourselves because we’ve got a head start because of our socialism, other countries wouldn’t join. And the United States could then say, well, join the US system instead.

So the alternative to the dollarized system and to the NATO system is you’ve got to create a system to get rid of economic rent, and the main way to get rid of that economic rent is by a rent tax. I mean, that’s what Adam Smith, John Stuart Mill, the Physiocrats, Marx, and the whole 19th century had an objective in this policy. The German industrial takeoff in the late 19th century had it.

Everybody thought that, well, the way to minimize rents is to put natural rent-seeking monopolies in the public domain, because if there’s rent-seeking, it’s an essential published service. It’s the need for such services that enables their owners to extract rent. But if these services are in the public sector, then we can provide their services at subsidized rates or even freely for education, medical care.

So there is a way of having countries that are doing the trade will mainly trade in industrial products that reflect the cost of production, not including rent, without some sort of government support like Keynes had proposed for the bancor way back in 1944, that if some countries are running consistent deficits, say, with China, then at a certain point, the buildup of financial claims of the gaining countries over the paying countries will be wiped out.

That was all proposed, and it could have been workable that way, and it’s the only way that you can maintain a mutuality of trade, but mutuality defined as no country falling into debt dependency on other countries that lead to the whole buildup of dependency and instability and polarization that you’re finding in the Western economies today.

GLENN DIESEN: Well, wouldn’t the emergence of a central, well, many poles of power create more incentives for reducing rents? Because I’m thinking, after the Second World War, obviously it was, you know, the United States were leading the main technologies, all the big businesses had merged in the US, it dominated the industry, it had a very privileged position in terms of, well, in terms of, its position in the World Bank, the IMF making the dollar the main international trading currency and reserve currency. But once you have this monopolistic position, it’s, you know, there’s some ability for rent-seeking in the international realm.

But if you have other centers of power, wouldn’t that create a system for reducing the rent in order to attract, well, the rest of the world, if you will?

MICHAEL HUDSON: In principle, yes. But what is a country? What is a society? It’s not simply a country moving in its general interest, because a society is all sorts of different classes together, the financial interest, the real estate interest, the labor interest, and certainly in the West, the rentier interests, the financial interest, the monopolies control the government. They’ve used all of the rents that they’ve got, all of the wealth that they’ve created, to privatize the election process and the political process. So the country is really run by the rent-seekers in the West.

China has let billionaires develop, and the same thing in Russia. Russia and China have let billionaires develop, but they can still say, well, you can make a given amount of money, but beyond this, you’re going to have to pay it back into the economy one way or another, either through taxes or just we’re going to take over. You’re just too big to become a separate power.

If you have a socialist government like China, or even Russia, and saying, our job today is not to let an oligarchy develop that will destabilize our economy. And I think that’s what Putin has said. We had an oligarchy under Yeltsin. We’re not going to let that happen again. That’s our policy. Same thing with China, saying that when you have President Xi saying houses are to live in, not to make a profit from or rent from, industries produce goods, not to create fortunes for an independent oligarchy, then you prevent a self-interested rent-seeking class from developing in the first place. And that has to be done by increasing the role of the public sector with a very clear economic analysis of what economic rent is, how to calculate it. And it’s not hard to calculate, certainly for real estate. It’s easy to look at a balance sheet and cost and income and expense statement and realize how to stabilize things. But you actually have an economic doctrine underlying this political realignment that you correctly say is the ideal. And it’s the ideal because it’s the only way of creating long-term stability.

GLENN DIESEN: Well, I was wondering what advice you would have for Europe, because obviously Europe can’t develop the same strategic autonomy as the US or China. And I think in this situation, Europe has made itself extra vulnerable because in a conflict like this, the Europeans become even more dependent on the United States, having sent a lot of its arms to Ukraine as well, and having these now tensions with Russia. Europe is even more dependent on the US before, which allows the US to wield more influence in terms of asking the Europeans not just to cut themselves off Russian energy, but also now more pressure on cutting themselves off from the Chinese.

Now, if you don’t have strategic autonomy, the second best thing would be at least to diversify your partnership to make sure you don’t become excessively dependent on one state, such as the United States, as then, as you would say, it can take advantage of this. But at the moment, as Europe goes down this rabbit hole, we see now relations with China going from bad to worse. And the Europeans are just making themselves more and more dependent on the US. And obviously, the economy will continue to falter. But we have very little discussions about it. As I said before, it’s all ideology. It’s, well, we’re all democracies on the same side fighting for freedom. So none of this rivalry between the Europeans and Americans actually pop up in the discourse.

So I wanted to ask you, do you have any advice for the European economies how they should navigate themselves out of this? Because any goals of having parity with the United States is, yeah, long gone now, I think.

MICHAEL HUDSON: Well, who would have thought 10 years ago that it was the right wing parties that are advocating along the lines that you’ve just described, and that it’s the so called left wing parties, and ostensibly, the Green Party, the environmental parties, that are the war parties, and all for dependency against this kind of independence.

You do have Sarah Wagenknecht leaving the Linke Party to join with our alternative for Deutschland to create an alternative. But the response by the German government is, let’s ban these parties. These parties are opposing what we’re doing. So yes, of course, there’s a solution.

And it would somehow, the right wing parties that are trying to play the populist card and saying, Europe has to be economically independent of the United States. We can all get full employment again if we’re independent. But they can’t get independent without restoring the investment and trade opportunities with Russia, China, and Eurasia. But they’ve already cut them off.

And on what terms would Russia, China, Iran, and other countries accept Europe into the kind of BRICS plus set of institutions that they are trying to create? How can they trust Europe not to have a retrogression and a counterrevolution and be pulled back with yet another US-sponsored regime change in the European countries that’s going to block all of this? So there has to be a consciousness in Europe that they’ve lost control of their politics and that they have become essentially politically colonized by the United States via NATO and by the war spending.

Europeans would have to, number one, realize Russia has no economic advantage by invading us. It would have to bear all the costs of bailing us out. Russia’s going to instead say, you have to bail yourself out. We’re not going to pay for you. We did that after World War II. And many of the Russian western satellites live better than the Russians. They’re not going to do it again. So if Russia’s not going to invade Europe, you don’t need a military expense except for the Denmark solution back in the 60s. You have a telephone with an automatic answering service saying, we surrender. That’s all you need for your military expense. You free yourself from the military overhead.

You remake an economics curriculum that revives the concept of rent-seeking. This is not something that’s taught in neoliberal academic universities today, either in Europe or the United States, except in the business schools telling new business people how to extract more economic rent from the rest of the society.

So it’s a combination of re-education, of political realignment, and recognizing that the terms right and left no longer have any meaning for the financial sector. What we’re talking about economically goes beyond the 21st century’s idea of right and left and is much more like the 19th century’s concept of this. Europe has to rediscover the mid-19th century for this to happen.

ALEXANDER MERCOURIS: A very challenging thing for the Europeans to do. I mean, I speak for Britain, to some extent for Germany, which I know. In Britain, I think a very widespread sense of demoralization, a great sense of depression, a sense that options are being closed down, and you know, a sense that we don’t quite know what to do in a situation which is going downhill.

But the political system is still strong enough to prevent the kind of discussion that you are talking about.

I’m going to just finish on an optimistic note, which is I don’t think this is sustainable, actually. At least, I mean, in Britain, I don’t think it is. If you spend any time talking to people in Britain, I speak to lots of people in Britain, there is a great widespread sense that things have to change. It’s just that people don’t quite know how to change. And that’s actually a hopeful thing, because when people start thinking that things have to change, then they do start to say to themselves, well, let’s actually look for alternatives, alternatives which the current system is not providing.

So that’s, you know, I’m slightly more optimistic, but at the moment things look very bleak. I think in Germany, where this has come on much more suddenly, there’s still quite a distance from that point. And I think for the moment the political class there is very much in control, despite whatever Sarah Wagenknecht and the IFD are trying to do. This is my own view. Anyway, there we go. Those are my last thoughts.

Just one last thing to Michael Hudson. I know you’re interested in ancient history. I’ve always felt myself, as somebody who knows classical history, that the fall of the Roman Republic was principally a debt crisis. It was precisely the kind of debt crisis that we’ve been talking about: rent-seeking, getting out of control, causing enormous problems within Roman society.

And, of course, the classic book about the fall of the Republic, which we all used to read, by Ronald Syme, is entitled The Roman Revolution. So a kind of revolution did happen there. So, revolutions are not impossible.

MICHAEL HUDSON: So we’re both optimistic there’s going to be a revolution.

ALEXANDER MERCOURIS:  Yeah. Yes. Yes.

MICHAEL HUDSON: There is a solution.

ALEXANDER MERCOURIS: There is a solution. There always is. I mean, human history isn’t going to end in a complete stop. It doesn’t happen like that. I mean, there might be all kinds of problems and bumps along the way, probably pretty horrible bumps, but things don’t just come to a stop. If something is unsustainable, it won’t be sustained.

The challenge is to make sure that when the change does come, it is not as chaotic and as dangerous as it might be. And the way to do that is to prepare in advance and to think through, understand what the problems are, and how to address those problems, and then what to do beyond the point where those problems have been reached.

GLENN DIESEN: I think what makes it so challenging to get out from is because economics is so deeply tied to the political. And for so many years now, since the end of the Cold War, we effectively re-divided Europe. We re-militarized the dividing lines in Europe. And the problem of doing this in Europe is eventually you would have a crisis, and then divided, militarized Europe would then become a chessboard, if you will, the object of great power politics, in which it would be severely weakened in this way.

So again, this is why I find it so frustrating, because if Europe really wanted to get out of this, we would seek immediately to negotiate an end to this war, so we would reduce the dependence on the US, allow us to diversify our economic connectivity to greater extent, and begin to restore something resembling to political autonomy. But there is none yet.

But again, I have some optimism as well that if we can just get this horrific war to an end, there might be some opportunities to rethink some of the policies and some of the wrong paths we’ve chosen.

Anyways, before we go, Michael Hudson, any last words, Professor?

MICHAEL HUDSON: Well, just to comment on what you just said, that there’s a new Cold War underway, and the United States has started it against China, and again, because it’s against China, it’s against Russia, and because it’s against Russia, it’s against Europe.

So there has to be a recognition that does Europe really want to be a part of this new Cold War, or does it want to have a different direction? That’s really what we’re talking about.

ALEXANDER MERCOURIS:  Absolutely.

GLENN DIESEN:  So yeah, thank you so much, Professor Hudson, for your time. Alexander?

ALEXANDER MERCOURIS:  Well, and thank you very much, Professor Hudson, for coming and giving us this very wonderful talk, very educational, extraordinarily interesting.

GLENN DIESEN:  Well, thanks, Alex. Thank you.