The Shocking Truth Behind the End of Financial Colonialism

Yves here. I hate to be a pedant, but I am bothered when experts making a generally valid point cite misleading information to do so.

Below in this interview with Michael Hudson and Richard Wolff, Wolff cites the price of gas in Iran at retail pumps being ten cents a dollar versus over $7 in France and Germany because Europe is not competitive.

This is a bogus example. The crude oil cost in a gallon of gasoline ALONE is crude cost is $1.39 per gallon when oil is $58.26 per barrel. Iran’s heavy sour crude is regarded as uneconomical to produce when oil is less than $100 a barrel (the same has been said re Venezuela’s heavy sour crude, so I regard this factoid as directionally correct). So Iran is not going to be a low cost producer. And you have refining and distribution costs on top of that.

So the price of retail gas in Iran is clearly and heavily subsidized. Now one might very well applaud that choice, but the gas price in Iran clearly has nada to do with costs or efficiencies.

In Europe, one has to assume that gas is even more heavily taxed than in the US to promote climate change goals. So the raw price at the pump again does not reflect the underlying production and distribution economics.

Originally published at Dialogue Works

NIMA: Let’s start with the conflict right now in the Middle East. How do you find it right now? What’s going on, Michael, in your opinion, in the Middle East?

MICHAEL HUDSON: I think the Middle East is becoming a catalyst for what we’ve been talking about for the last two times we’ve got together, the world splitting into two halves, the US, NATO, West against the rest of the world.

And I think the United States, the Near East, is a kind of demonstration to the global majority that what America and Israel are doing there with their assassination of individuals, their regime change, and the violence with which the right wing Likud party, supported by the right wing Democrats in the United States, are trying to impose in the rest of the world.

And the message, I think, that Eurasia gets is what they’re doing to the Palestinians, and what Europe is doing to the Ukrainians, they can do it to us unless we really break away.

I think this gives a note of urgency. I think countries have been talking ever since 1955 in Bandung about how do we go away and make a kind of a world trade and investment regime that is not so exploitative. But when they see what’s happening in Ukraine and the Near East, I think this gives a note of urgency saying, you know, we really have to get together and get allies to join our system by offering every country that joins enough that it will make them worth joining the China, Russia, Iran, SCO [Shanghai Cooperation Organisation] orbit, instead of keeping their links to the West. All the West has to offer is bribery and the threat of violence.

NIMA: Richard?

RICHARD WOLFF:  Yeah, I would like to pick up on what Michael says. And the thing that has really impressed itself on me is the signs of the rise of China, the rise of the BRICS, the rise of so much of what we used to call the third world, or the underdeveloped world, or the newly emerging, all those euphemisms.

That rise is now clear. It’s obvious. The statistics that Michael has put forward, that I’ve put forward, that I know you’ve discussed with us and with others on your programs, all attest to that.

I mean, to give you a small example, I read this morning that the Uber corporation, and listen to this story, that the Uber corporation, which earlier this year was in negotiations with Tesla, and the reason it was in negotiation with Tesla is they want to provide cheap electric vehicles to about 100,000 Uber drivers around the world.

And they explain in the financial press their purpose. It is to introduce the public, to make the public more interested in, more comfortable with electric vehicles, which is a standard kind of deal.

Then the deal falls apart, and this morning they announced they have now made the deal, but not with Tesla, with the BYD corporation, which is China’s leading producer of electric vehicles.

Okay, why? Because they couldn’t reach a deal with Tesla, because of whatever it is Elon Musk did or didn’t do in his, how shall I put it, ups and downs as a business person, and with the West and so on.

You can’t keep doing this now that you can see basically a Western corporation, Uber, making a deal, advantaging China over and against another Western corporation.

It’s the very competition of the capitalists that is driving the transition into the hands of what they call their enemy. It’s the old joke about, you know, capitalists competing to see who gets to sell the hangman’s noose to the people who want to hang capitalism. You know, it’s just a strange self-destruction that’s beginning to take place.

Let me give you a second example. According to the international records, the price of a [gallon] of gasoline at the retail gas station in Iran is 10 cents a gallon. That’s U.S. cents, U.S. gallon. The average price in France and Germany for the same gallon of gas is over seven dollars.

Okay, that’s an unsustainable difference in the cost of energy. I mean, it may take longer, shorter, may go this way, that way, but the competition there is done. Any production that requires oil is able to do that in Iran, and it can’t possibly compete if it costs seven dollars in France and Germany, and it’s more than seven in both of them, to get a gallon of gasoline for the truck that goes back and forth and for everything else.

I think what you’re seeing now, and this is where I would come in to support the last point Michael was making, what strikes me is not all of that which has been going on for a while and is now accelerating, as in Uber and BYD and so forth, but that the West has chosen as its way of dealing with this, not sitting down working out a deal while you’re still strong, while your dollar, while weaker, is still the number one currency in the world, and so on.

No, they’re not doing that. They’ve decided they’re going to somehow either stop or reverse or slow this very process, which they cannot do. There’s no historical precedent to see such a thing. They’re not going to be able to do it, and their frustration and their failure is driving them to levels of violence that are stunning.

Now, my last example to try to drive this home, the violence in the Middle East, Michael is absolutely right. It’s off the chart. There was a debate in Israel over the last few days about the legitimacy of sodomizing Palestinian prisoners in jail. There was a debate, pro and con, with lots of pro.

You know, what has happened to the Israeli people that they are at this point? It’s like the questions that used to be asked of the German people in regard to the victims of the Holocaust. It was rightly asked of the Germans. It’s rightly asked now of the Israelis.

And Michael is also right that the horror visited upon the Ukrainian people is really extraordinary. And if you know the history, and I don’t mean to absolve Mr. Putin and the Russians. They invaded. They violated a border. I understand that’s a serious problem. But we all know what NATO did after 1989. We all do. And nobody who pays any attention and isn’t lost in the propaganda war would not understand that this was a crisis being built by the plans of NATO on the one hand and the refusal of Russia on the other.

The Russians said so enough times. It’s their red line. It’s there. You can’t do this. You can’t do this. And then you had those meetings in February, and again a little bit later in Istanbul, and so on. Nothing came of it. It could have been avoided, the misery of Ukraine. It will take them decades to crawl out of the disaster they’re in, no matter who wins or loses in this war.

This level of violence shows you how desperate the people in the West now are, what they are willing to do, what they are willing to preside over others doing. They’re not ready yet.

And the issue isn’t when do you sit down with the Russians. Everybody knows eventually there’ll be a meeting and they will work something out. That’s how every other war like this ends. That’s how this one will end. And everybody knows that who pays any attention.

And the Israelis are going to have to come to terms with the Palestinians unless they literally mean to exterminate them, which they can’t do anyway.

So, what you’re watching is a sign of such a level of desperation that the only thing more bizarre is watching leaders like Mr. Biden, or for that matter Mr. Trump, talk as if they had the power maybe the U.S. had in the 1960s and 70s. But that’s all gone. But they seem to think that the political necessity is to humor the American people in the naive imagination that they still are where they were.

And I notice when I give this simple statistic, which I’ve given you too on our discussions, that the aggregate GDP of G7 is now significantly less than the aggregate GDP of the BRICS. But there it is.

And I notice that when I explain that to my audience, they look at me with a kind of sad eye, like I had just uttered something about their intimate life that they had really hoped to keep secret. And there I am releasing this unpleasant reality. And they won’t remember it 10 minutes from now because it’s so unpleasant.

And now it’s going with this level of violence. You really have a sense, which I pick up in our culture everywhere, that we are at some very scary inflection point in American history. And no one knows quite what or where it’s going. But a sense of ominousness, I see it, I feel it, I hear about it everywhere.

MICHAEL HUDSON: I want to pick up on the point that Richard just made about desperation and frustration. We know what the US has been doing for frustration. It’s been imposing sanctions on China and Russia.

The interesting thing about this is almost every sanction they have imposed has backfired. The effect of sanctions on something that is necessary for another country is you force that country to produce these goods itself. We’ve spoken on this program before about how the US started with agricultural food sanctions against Russia. So Russia could no longer import dairy products and food from the Baltic states. What happened? Russia simply shifted the production to itself. Now it’s independent.

And once you become independent of something and realize, well, we never want countries to try to interrupt our supply chain again by sanctions, you lose that market forever.

So what the United States is doing in its desperation to try to stop the independence of the global majority, the 85% from the NATO West, is they’re forcing these countries to become independent so that they no longer need the US. Everything they’re doing trying to stop it has the exact opposite effect.

And that’s because the Western mentality is to bully, to think if you don’t do what we want, we’re going to hurt you. And they think that sanctions are going to hurt without thinking, what are the other countries going to do in response? They’re not thinking of that.

And if they’re thinking, well, we’re going to kill the chickens to frighten the monkeys by what they’re doing in Ukraine and in Palestine, that is likewise driving other countries to accelerate the fact that we’d better move quickly in this year’s BRICS meeting under Russia and next year’s BRICS conferences under China’s leadership. We’d better be able to make deals with all of our Eurasian neighbors that we will help us create a critical mass so that we no longer have to depend on the NATO West.

And what can the NATO West do? It can only accelerate its violence. And the more it accelerates it, the more it will speed the parting guests.

All they want to do is to be left alone. And the United States is trying to prevent them from this by forcing them to make the choice between either they go it alone, or they’re going to end up looking like Germany and other US protectorates.

RICHARD WOLFF: Let me pick up, if I can, on Michael doing this back and forth. Michael’s insight, interestingly and unusually, gets an enormous support from an article. If you have not encountered it, let me urge you and everyone listening and watching.

On the 25th of July, that’s a few days ago, the Washington Post carried an absolutely extraordinary article. It was about how the last four presidents of the United States initiated and organized a massive acceleration of what it calls economic warfare.

But what it really means is sanctions, and it says so. And it makes it crystal clear that the United States is the sanction master. It mentions Biden, and Trump, and Obama, and Bush.

Now, of course, sanctions go way back. One example in the article is Cuba. We sanctioned Cuba for over half a century. The whole point and purpose was to get rid of Fidel Castro. What a failure that was.

And then, here’s two things that sort of expand on Michael’s point. This article, everything I’m telling you, comes from that article, the 25th of July Washington Post. Cannot miss it.

First statistic. The United States currently has, outstanding, 15,000 sanctioned objects. Individuals, corporations, whole countries. 15,000. And in that position, the United States ranks number one, says the Washington Post.

And the number two is less, is around 5,000. So, about one-third of what the United States is, the number two, and you might be surprised, the number two country imposing sanctions in the world is Switzerland. Right? In other words, it’s the United States. Russia and China don’t appear on the list in the Washington Post. They don’t do this. Right?

So, you ask yourself, you know, a question a five-year-old would figure out. If one side in the so-called great struggle, namely the West, the United States, is imposing sanctions everywhere, and the other side in this great struggle is imposing sanctions nowhere, what might explain this odd, you know, they have drones, we have drones, they have missiles, we have missiles, they have sanctions, we don’t. We have sanctions, they don’t.

Well, the answer is Michael’s point, which I want to bring out. When you sanction a country, the leadership in that country, the people who run the society, are almost always immune. They’re not going to change their clothes, they’re not going to eat a different diet, they’re not going to stop driving their car. The pain that sanctions can and do impose is on the mass of people who suffer, you know, poverty, or Cuba didn’t have access to medical, you know, drugs and medicines and so forth.

Well then, of course, what does every leader of a sanctioned society do? Make crystal clear, as your number one priority, that it’s not your fault as the leader of that country, it’s not your political party’s fault, it’s the fault of the United States. Sanctions are a way of mobilizing global public opinion against the United States as the great sanctioner of our time.

This is a program in which you line up the howitzer so it is aimed directly into your own feet. This is nuts as a policy.

Forget all the other horrors of it and the real suffering it causes. It is a self-defeating program and a sure sign that the people who pursue it may get a temporary advantage in the local political theater, maybe, but they’re paying an unbelievable price in the society’s future and its very survivability in a world where it is becoming more and more isolated every day.

MICHAEL HUDSON: I want to put a sense of perspective on what Richard just said. He’s talked about the fact that the sanctions are mobilizing other countries to support themselves, but there’s been a backlash effect.

The major effect of sanctions, especially against China, have been on the United States itself, the producers. Now, Richard and I both believe in the materialist approach of history, and most of our approach has always been, well, pretty much what countries do reflects the interest of their business community or the financial community or the elites.

But let’s look at what’s happened in America with the sanctions that they’ve put on against selling computer chips and information technology to China. Intel and other countries have said if they obey the sanctions that the Biden administration has put on, and especially if they follow the sanctions that Trump is going to put on, there goes their profits.

The profits of the business community in the United States have largely been exporting to these countries that are now subject to the sanctions that the American government itself has been putting on.

Now, how do you reconcile the fact that the American sanctions that are imposed by the neocons and the neoliberals are against the profit search by the leading American sectors, the information technology sectors, the car manufacturers, all the others?

You could say that the sanctions end up penalizing the U.S. economy much more than other countries, because while other countries have a short-term interruption of their supply, they have long-term independence.

And for America, this long-term effect, and even the short-term effect, is to take away from the American exporters, the leading industrial sectors, certainly on the stock exchange, to take away this market. It’s lost.

So what the Americans are doing is self-isolating themselves. We all thought for years that somehow the global majority was going to get together and draft a means of becoming independent and helping their own economic interests.

But it’s the United States that is driving this, ironically, not China, not Russia, not these other countries. They’re reacting to the U.S. that is essentially committing policies that are economically suicidal.

RICHARD WOLFF: Yeah, well, I’ve noticed that too. If you read, for example, the statements periodically put out by the United States Chamber of Commerce, you get what Michael is talking about.

They’re very nervous. They don’t want this fighting with China. They represent a large number of corporations who have put large amounts of investment inside China. They don’t want to lose those. China is the biggest, fastest-growing market in the world. Nobody wants to be excluded. Every business school teaches you want to make a lot of money. You go to where the wages are cheap and the market is growing. Hello, that’s these other parts of the world. That’s where all that is going on. And that’s going to out-compete the West sooner or later.

They say all of that, so Michael’s question stands. What’s going on? And here’s the best that I can do. I’m guessing and I’m hoping you or your audience sets me straight if I’m making a mistake.

They really don’t see what we’re talking about. In other words, when I said earlier, a bit mockingly, they live in the 1960s and 70s when the dominance of the United States was real. Maybe there’s more truth to that than my mockery would leave anyone to understand.

That they really do believe that this is a temporary, momentary challenge, which they are capable, willing, and able to squash. And that they go to these companies and say, yes, yes, we understand, you know, this kind of tariff is bad for you, this way, that way, and the next way. However, bear with us because we are really going to succeed. And when we do, and it’s just around the corner, we will defeat them.

And then we will carve up Russia, which will become 20 little countries like the rest of Eastern Europe, easily manipulable by all of us. And when we’re done with Russia, we’ll do the same with China. And then, wow, will we have a world? Because we will have integrated Russia and China into our subordination arrangement. It’s the dream of colonialism and imperialism for a long, long time. It’s a unified world economy under the West.

And for them, who are brought up in this, believe in this, had that special time after World War II, it’s not so surprising that they think that that project is still achievable. It’s a little harder than maybe they thought. But that’s what they’re going to do. That’s what they’re going to do. And we are all here, you know, wasting our time, Michael, you, me, and all the others like us, because we don’t see the larger picture.

And that’s what they tell the corporate executives. Yeah, you’ll have a year or two or three, but when we’re done, will you be happy? And by the way, while we’re waiting, we’ll make it easier for you. You chip people, you’re losing your market, we’ll give you a subsidy, the likes of which you had never dreamed of. We’ll give you this break and that. In other words, we’ll give you supports for your profits the way we do when there’s an economic downturn or when there’s a pandemic or anything else. This is an adjustment process.

I watched the speeches of my fellow graduate student, Janet Yellen. We went to Yale at the same time, we had the same teachers, we got the same PhD, we read the same articles, all from people that Michael knows all too well. You know, our teacher for macro was James Tobin, and our teacher for international was Triffin, and on and on.

She knows, and yet she is an enthusiastic manager for this difficult time as we reorganize the world for the next great phase of capital accumulation.

NIMA: Michael, do you want to add something? Okay, let’s go with the conflict, with the situation in Venezuela. How did you find it in the United States? They tried to do everything to interfere the situation in Venezuela. Even Elon Musk, he was putting out right and left in order to help the position in Venezuela.

RICHARD WOLFF: Yeah, can I say something? Because for me there is a humor here, and I do try in these dark times to find some humor.

The same people who here in the United States respond to Donald Trump when he questions the election, when he denies the outcome. He is thereby threatening democracy.

The people in Venezuela who challenge and threaten the election and deny the outcome are upholding democracy. You need a magician to appreciate this kind of switcheroo, right? The election here in our country, presumably, we know it all about.

The election thousands of miles away in a different country, with a different culture, and a different language, we could all be excused for not knowing exactly what’s going on.

No, no, no. We know it’s a threat to democracy when you question what happens here, and it’s an upholding of democracy when you reject an election there. And the comfort and the ease with which this is said.

You know, when no one notes the irony I’ve just told you, when no one catches that, it’s very obvious. If no one catches it, you know how desperate the ideological nonsense must be, because it’s occluding the brains and the vision of people who obviously could and should know better.

MICHAEL HUDSON: What Richard mentioned before about sanctions reinforcing the voter support of the government because they realize that the problems the economy is facing are caused by the United States, Venezuela provides an object lesson.

The problem that is caused for Venezuela is really because one of the dictators that America imposed on that country before, I don’t remember if it was Pérez or someone else, they did two things.

They collateralized their foreign dollar borrowings by the Venezuelan oil industry, including the oil industry had reached out and used its profits to buy the American distribution network for sale of its oil and gas.

Well, the Americans first of all grabbed all of Venezuela’s holdings in the United States. In other words, it grabbed its international reserves. That’s what you could say what is now called a national savings fund.

And secondly, the United States directed Britain to grab Venezuela’s gold supply and give it to a president that the United States described. The United States says, look, we have two models of democracy for the world, Ukraine and Israel. Those are the two democracies. And Venezuela, we want to add it to it. We get to nominate who’s going to be head of the democracies or deploy regime change opposition.

So the Venezuelan foreign agreements all have a clause just like Argentina had. If there’s a dispute, it’s held in the U.S. courts. Other countries are looking at Venezuela and they’re thinking, no matter what, we will never have any international clause that is settled by the United States courts.

In fact, we need a BRICS court. We need an alternative court to the IMF, the World Bank, and the international court. And it’ll be a BRICS court among ourselves. And instead of the rules-based order, it’ll be the real rule of law. So you’re having that function.

And it’s also, I think, showing that if a country like Venezuela is the object of sanctions, such as the African countries and the Latin American countries, the Global South debtor countries are sanctioned, that is an action by the dollar bloc to prevent them from earning the money to pay their foreign dollar debts. This becomes a legal, logical, and moral excuse for repudiating the debts. That is really what is going to be the ultimate break. The de-dollarization break is what’s going to be the sign of this global fracture between the global maturity and the NATO U.S. West.

RICHARD WOLFF: I can’t miss the opportunity. And again, I hope folks enjoy the irony. Many of the world’s religions — I’m no expert, so I can’t say all of them — but many of the world’s religions have in them a proposition very close to what Michael just said.

In the Christian religion, it’s called the Jubilee. It’s a very old idea, been around for thousands of years, that when a society begins to become so bitterly divided, that the glue holding the community together dissolves, and the life of the community is threatened by inequality in the old days, by having a large piece of land when your fellow citizens had no land at all, etc., etc.

What was periodically done was that all debts were erased. All debts were erased, and you kind of start over. If it was land, then the land was taken away from whoever had it, and re-divided, perhaps using a random system of you get this piece, and you get that piece, and the other one gets the other piece, and then we see how that goes. And if it produces too great an inequality, well then, in 10 years or 20 years, we’re going to do it again.

And it was a way of holding on to what, in modern language, would be the way the United States used to enjoy describing itself as a vast middle class. You know, nobody very rich, nobody very poor, everybody in the middle.

Well, Jubilee was aimed at doing that. What Michael is telling us is that Jubilee can also be not a voluntarily, religiously sanctioned, regular activity, but Jubilee can be the explosive end when there’s no other alternative to resolve the absurdity of a system that concentrates vast amounts of wealth in the hands of the creditor, and desperate life in the hands of the debtor.

At that point, the overwhelming majority, who are debtors, will see in the Jubilee a very happy outcome, and that the creditors will be unable to stop it. They won’t have the resources, and at that point, it’s over. It’s not a question of courts anymore. It’s just a recognition that the social contract requires the end of this inequality, and debt forgiveness is a simple, direct stroke to deal with most of it.

MICHAEL HUDSON: What Richard has described is really the distinction between Eurasian civilization and Western civilization. My book, “… and Forgive Them Their Debts”, and all of the books that I’ve done with my Harvard group on the Ancient Near East, shows that from 2500 BC in Sumer, down through Babylonia, to their Near Eastern neighbors, all societies, all the way to Judea, cancel the debts regularly.

They all had a king— The textbooks call them divine kingship, meaning a king that had certain promises to the gods to maintain stability. All the rest of the world has an economic view that is the opposite of what Americans are taught in school.

We have the Babylonian mathematical models that they had in 1800 BC. They are more sophisticated than any model used by the National Bureau of Economic Research here. The Babylonians saw that every society, the natural effect of debt is to polarize society between creditors and debtors.

They were very aware that if you do not cancel the debts, then you’re going to have a financial oligarchy emerge. The role of the ruler, whether it’s Hammurabi or other Near Eastern rulers, was to prevent a financial oligarchy from developing.

As the biblical prophets Isaiah and the others all pointed out, the oligarchy is going to use its financial power to get the population in debt, to take over its land, and you’ll end up with a few people owning all of the land, who set plot to plot and house to house until there’s no room for the free population in the land anymore.

Well, classical Greece and Italy were the first countries in the West to found Western civilization. They didn’t have divine rulers, and they didn’t cancel debts. They had a financial oligarchy.

We all know what happened to Rome over a period of 500 years. There were revolutions, and you ended up with the collapse. You ended up with serfdom and the feudalism.

While the West was going Roman Christian, not the orthodox Christianity in Constantinople, you had Islam. And Islam, normally, when there was a crop failure, they would cancel, annul all of the debts.

So, for instance, this is what happened in India for hundreds of years under Islam, until the English came over. When the English took over India, they stopped the whole idea of debt cancellation, and you had an economic polarization that has gone down to India today, making it one of the most unequal countries in the world.

So, you could say the defining characteristic of Western civilization is, from the beginning, to let a financial oligarchy develop.

And all of the rest of the non-Western world, from the Babylonian Sumer, through Iran, through Islam, all the way, even in Japan, you had it. In China, you had it. This used to be the distinguishing feature between Eurasian and Western civilization, and I would expect that the BRICS groups that are negotiating de-dollarization are going to reinvent the wheel and reinvent the same idea of no country should put paying a creditor class to create an oligarchy above the idea of social balance that is enabling the entire economy to grow and become more productive and survive.

In order to survive and avoid falling into a dark age and serfdom, you have to have a higher authority than the oligarchy who is going to cancel the debts.

And Western civilization doesn’t have a higher authority. We have, as Aristotle said, many countries’ constitutions call themselves democracy. They’re really oligarchies. Every Western civilization economy for the last 2,000 years has been an oligarchy.

Asia has an entirely different historical background. And just as President Putin in Russia is pushing to say, look, Russia has a distinct civilizational characteristic, I’m waiting for China and other Asian countries and for the Islamic countries to say, yes, we have a background too, and it’s not that of Roman Christianity. We’re going to put the overall interests before the class interest of a financial class. I’m sort of waiting for that to be a distinguishing feature of what we’re really seeing as a civilizational break.

If I could, let me translate that into very recent American history. The wisdom of it extends very, very far.

Up until around the 1970s, roughly, you could see the productivity of the United States rising slowly and steadily, and the wages rising slowly and steadily, more or less. No one should be mystified by this. Productivity is what the worker gives the employer, and the wage is what the employer gives the worker. And they were going up nicely together. The employers were making more profits, the workers were making higher wages. It went on for a long time and gave the United States its remarkable growth, helped to develop the idea every generation lives better than the one before, and all of that.

Then in the 1970s, for a whole host of reasons, the real wages flattened out. They don’t go up anymore. The productivity keeps going up. Well, in English, simple, that means what workers give employers kept going up and up and up, but what employers gave workers didn’t.

And that’s why we’ve had a profit boom for the last 40 or 50 years, and a stock market boom. But now comes the other side of the coin. If you hammer the working class with the American dream, this is what makes you a successful worker. You must have a car and a home. You must send your kid to college. You must have a vacation for several weeks.

If you’re demanding of the self-esteem of people wrapped up, but you’re not giving them the rising wage to afford it, what are you going to do? You’re going to throw them into debt, because that’s the only way they can have the American dream, by borrowing and going into the debt disaster.

And here’s the double irony. Where are the lenders coming from? The lenders are the employers, because their profits have been rising since productivity rises and wages don’t. So they have the growing productivity to lend to the workers, because for them it’s a no-brainer. Would I rather give my worker a rising wage or a flat wage and a loan, which he has to pay back? Well, that’s easy. We know what we’re going to do. So that’s what we have.

And over the last 40 years, we have plunged the American people into a level of debt that nobody else has ever seen. Mortgage debt, student debt, credit card debt, I mean auto debt. You add it all up and we’re talking more and more families have a bigger debt than they have an annual income. I mean, this is impossible.

Meanwhile, the wealth at the top is a wealth not only of getting the surplus out of the worker in production, but getting the interest payment when you’ve lent them the money instead of paying them a wage. I mean, this is a system guaranteed to produce grotesque inequality.

And that’s exactly the story that Michael has been telling you. Whether you go back to ancient Sumer or you’re right here in the United States in the last 50 years, what you’re watching are different systems, but they have in common that unless you do something fundamental about them, they will produce an inequality deepening and getting worse and worse.

Thomas Piketty, a few years ago, documents it for Capitalism in his book, and then it blows up. And then the question is, are we at the blow-up point? Are we getting near the blow-up point?

And my suspicion is, to go back to how we began, that the level of violence that you see in Ukraine, in Palestine, is a sign of really desperate holding on to something whose rationale has long gone.

MICHAEL HUDSON: Well, what Richard has described is how much Capitalism has been transformed. He just mentioned how Industrial Capitalism made America rich, and they realized that highly paid, well-fed, well-educated, well-clothed labor was more productive for its employers than pauper labor. And this was essentially what the whole economic philosophy of Industrial Capitalism was.

Well, then we learned from Marx that what distinguishes Industrial Capitalism is the employers will hire labor, and they will then sell the products that labor produces at a profit over and above what they have to pay for the cost of labor.

But now, look at what Richard’s described, and what I’ve described, in debt that the American wage earners—I don’t want to call them a middle class, because there really wasn’t a middle class, they’re wage earners—and the major exploitation of them is no longer primarily just by having industrial employers keep the profits on what the wage earners create, because after all, we’re de-industrializing.

The major exploitation that is occurring is largely in debt service. The wealthiest 1%, maybe you could say 10%, of the population hold the 90% majority in debt, and the income that’s paid to the top 10% is sucked out of the 90% in the form of debt service.

And even more important, what do these 10% do with the money? They don’t spend all of this economic rent, interest, and financial gains on goods and services. They buy stocks, and bonds, and real estate, or they lend yet more money to families to buy real estate, or to corporate raters to take over companies.

And so, what you have is the economic elite not making their money by employing labor to make profits and get wealthy out of saving the profits, but by financial engineering, by capital gains.

And Richard just pointed out the immense rise in the stock market, bond market, real estate market. You have a whole focus on asset price inflation, on ownership rights, and creditor rights to turn the rest of the economy into a citizenry of debtors and renters instead.

Well, that’s just what happened under feudalism, basically. Somehow, the industrial revolution of Europe and the United States had this idea that they were going to evolve into something very close to socialism. And we talked before about everybody in the 19th century was in favor of socialism of one kind or another, many different kinds of socialism.

But all of that changed after World War I, and the landlords, and the bankers, and the monopolists fought back, and they fought against government regulation. They said, there’s no such thing as unearned income, no such thing as economic rent. Everything is earned just like profits. The banks earned money by charging interest and even more than interest, the penalty fees for late fees. All of that is earned income.

And so you have a whole transformation in the idea of what wealth is all about and what the economy is all about. And it’s no longer the idea that industrial capitalism had two centuries ago. It’s something entirely different. It’s finance capitalism that many people now are calling neo-feudalism. It’s a transformation.

That’s what is driving other countries apart because what has made China get rich? Of course, it’s socialism, but it’s also socialism that is following exactly the same pattern that made America, Germany, and France get rich in the 19th century. It’s industrial capitalism and socialism together because the industrialists wanted an active public sector. They wanted active public infrastructure in order to keep the cost of living and doing business low, to subsidize their production.

All of this subsidy has now been broken up by the fight against government, by libertarianism. If you disable government action, government regulation, and government capital investment, since every economy is planned, the planning shifts to Wall Street. And today, you have Wall Street capitalism, not industrial capitalism. That’s the real transformation that is on the deepest level separating the NATO West now from, I think, what we’re seeing evolve in Eurasia.

RICHARD WOLFF: Precisely because of this concentration of wealth, you have the reaction which concentrated wealth has always exhibited. The people at the top that are gathering all this wealth through production, and then when that fades through financial manipulation and reorganization, they realize as they become richer and richer relative to the mass of the population, that their wealth is at stake, that they are in a vulnerable position.

They probably can’t get over the irony. They’ve done everything to become rich and powerful and feel less secure in that position than they ever have. And in a society which values, as we still do, universal suffrage or something close to it, that puts you in a genuinely vulnerable position.

The number of employers is very small, and the number of employees is very large. Universal suffrage, you know where that can go. The workers could at any time vote to undo the inequality created by the capitalist economy.

You can hear it when there’s discussion, however repressed, of progressive taxation. When you hear the complaints, gee we tax capital gains at a lower rate than we tax labor income, and so forth and so on.

So what have they done? They’ve done the one thing that obviously they had to do. They have to neutralize the political system, which they do by buying it. Why buying it? Because that’s the one resource they have. And the politicians can be made to need money. That was easy. And now you lend them the money, or you give them the money, and they give you back even more privileges than you had before.

So the industrial military have their monopoly, and the medical people have their monopoly. Now the chip makers are quickly working to get their monopoly organized. So it becomes then the old, again, feudal joke of a handful of monopolists being able to sit on top by the requisite politicians, have the politicians develop the verbiage to make all of this seem natural, normal, having to do with technology, anything other than the real question of how have you organized the workplace.

And when people say, well why is it going in this direction? Let me, you know, let me be a teacher for a moment. The capitalist system organizes in the way the feudal system did, and the slave system did, in a very odd way. It takes a very small group of people and puts them in a very high position. The masters, the lords, and the employers.

That’s why we’ve been so disappointed that the revolution to get rid of slavery did it. It achieved it. But it welcomed in feudalism, which while being better than slavery, didn’t make people objects like cattle. Nonetheless, it had the lord and the serf.

And then we had the French and American revolutions with all their great hopes for liberty, equality, fraternity, and all the rest. But what we did was we built capitalism, which has the employer and the employee, which is a replication of the tiny group at the top.

So why are we surprised that our financial system, and indeed our political system, replicates a small group of people who make the decision? We all know that a small group makes the decisions everywhere. We bemoan it, we criticize it, but it’s built in to the way capitalism organizes at the base, in every factory, office, and store. That’s how it’s done.

It’s only the odd exception of a group of people who have a worker co-op, or some other kind of. And those are people who don’t want the capitalism, but yet can often not even say those words because of the way our ideology and our education system works.

But if anything that Michael and I have been saying has validity, then it is grounded in an economic system that imposes that odd, totally undemocratic arrangement as if it were the normal necessary.

I’m reminded that before we got rid of kings, we lived in societies where most people thought it was absolutely appropriate that the grandson of somebody who’s long dead should be in ruling over me because he or she discusses with God every third Thursday, if it doesn’t rain, how to run everything.

You know, what? We got rid of the kings and discovered we didn’t need them. Guess what? You can get rid of the CEO and you will discover we never needed them.

But that’s too much at this point in American development and in much of the world. We still have to push to open this space to even think such thoughts, let alone rationally evaluate alternative systems.

MICHAEL HUDSON: So, what keeps all this going is the illusion, as Margaret Thatcher said, there is no alternative (TINA).

Now, Richard and I, and in fact all of the guests you’ve been having, Nima, on your show, have a common denominator. We’re all saying there is an alternative, and that’s why the guests you have on your show are not featured in the New York Times and the Washington Post, and we’re not on the television talk shows. We’re saying there is an alternative, and that is the nightmare, the horror that the ruling class in the West has, and it’s that nightmare that gets back to what Richard said earlier, the panic.

It’s the thought that the BRICS can actually have a different economic system that is on a completely different basis of mutual gain and economic growth.

You can’t call this a Thucydides trap. China, Russia, and the BRICS are not trying to out-compete the United States and England and Europe at their own game. They don’t want to play that game. They’re saying, we’re not going to go down that road. We’re not competing with you. We want you to go your way. We’ll go our way. We’re creating an alternative civilization. It doesn’t have to be this way. That’s their alternative to TINA, and that’s what I guess all the guests on your shows have been talking about for quite a while now.

RICHARD WOLFF: They’ve been meeting the resistance. I agree with Michael. They meet the resistance that it is very difficult for the people in charge, who have been in charge for the last century or more, to admit that this could exist.

The irony, they are convinced that Russia and China want to dominate them in what psychologists call pure projection. It’s European colonialism and imperialism that looks upon anybody else’s emergence as a challenge because they can’t imagine anybody not wanting to do to them what they know somewhere they’ve been doing to the rest of the world.

I think you can see it. I think you’re seeing it in Ukraine and Israel and again in Palestine. You’re seeing there the capability of people who have otherwise been civilized in all kinds of ways, descending into levels of behavior that we had hoped to the middle of the 20th century would make us never do again. As in the slogan, never again, and yet here it is with only the roles reversed rather than the problem solved.

NIMA: Just to wrap up this session, Michael and Richard, there is an article in Economist. It says that China is building up huge secret reserves of food, raw materials and energy resources in preparation for possible future problems. Do you think that China is preparing for a big war with the West or they’re talking this way because they want to picture this in the mind of Westerners?

RICHARD WOLFF: Well, I must tell you, I can’t speak for obviously for the Chinese and I don’t understand their motivation in this situation. I have no inside information, but I would tell you this.

If I were a Chinese citizen and if I were involved in these discussions, I would say to myself, given the sanctions of the United States from Mr. Trump’s tariff wars and trade wars on through Mr. Biden’s continuation of most of them, given the absurdity of the whole Taiwan nonsense, given the presence of the fleet in the South China Sea, you have to make preparations. Otherwise, you are an incompetent leader. You have to protect yourself.

Might they have aggressive intentions? I’m not aware of those, but I don’t know. I’m not claiming to know. But you don’t need an aggressive intention to justify what you just said.

The United States, and that goes back to something Michael said, the United States is giving not just China the reason to do it, but here’s more important. The whole rest of the world reasons the way I just did. The observers, the other countries, they look at the news you just gave that they are storing food and whatever. And they ask themselves, is that for aggressive? And they’re going to come up with the same answer I am. They can certainly see in every day’s headline what’s going on in every session of the UN, in every debate over whether it’s Ukraine or anybody else.

The United States is busily sanctioning 15,000 sanctions to try to get the world to behave the way it wants. That’s what the sanctions are for. Nobody else has the sheer audacity to think like that.

And what the United States is discovering with great rage is that it can think it all at once. It just can’t do it. The sanctions, as the article in the Washington Post admits, do not work. And as Michael added, worse than that they don’t work, they make matters for the US worse.

So again, that’s a sign of a society in very deep trouble.

MICHAEL HUDSON: Well, as Richard and I say, we don’t believe in getting information from the New York Times and the Washington Post, but there’s one thing you do get. And if you’re Chinese, it’s the only thing worth reading about in the Times and the Post, and that day after day, China is our enemy. The American diplomats go to China and say, we don’t want you to give any support for Russia, because if you give them food, that can feed soldiers. If you give them cloth, they can weave that into uniforms. You can’t help Russia because we want Russia to lose, so then we can fight you and do to you what we did to Russia and Ukraine and do to you what Israel’s done to the Palestinians.

Well, they read this every day. They can read the American speeches. I don’t believe that the Americans read the speeches of President Putin or Secretary of State Lavrov, and the Chinese are not quite as explicit as the Russians are, but they can read the U.S. press and they think the whole U.S. economy is aimed, if not at war, at least for making high profits for the military-industrial complex. Even if their weapons don’t work, at least they’re huge cost-plus profits under Pentagon capitalism, yet another form of capitalism we haven’t talked about. And so, yes, they’re preparing to go it alone.

I don’t think they’re necessarily stockpiling these raw materials such as rare earths and so many other products, helium, other products they’re having for themselves, but they’re trying to use the possession of these to talk to the other Eurasian neighbors that they have and saying, look, we can help you become independent and part of a growing civilization in Eurasia. We have the material to support you. You don’t need to depend on what the United States, England, and Germany can give you anymore.

I think they have a region-wide idea, not simply a military defense, but an economic alternative. Their defense is going to be, we don’t want to go to war. We want an economic alternative. And maybe someday, in a generation or two, the West will think, gee, Eurasia’s going ahead and we’re not. Maybe we should adopt Eurasian civilization and realize that Western civilization has not been as successful as we’ve been taught.

RICHARD WOLFF: You know, it’s not that many years ago that Europeans gathered themselves together and got some support from governments and sent expeditions to China and discovered that they knew how to do textiles better than Europeans, that their diet was much better than, you know. It’s not the first time.

I mean, there’s a level of self-delusion on the West that is yet another part of a declining situation when you can’t open yourself even to your own history.

NIMA: Thank you so much for being with us today, Richard and Michael. Great pleasure as always.

RICHARD WOLFF: Yes, and it’s becoming a very interesting, at least for me, a very interesting trio that we are accomplishing here.

MICHAEL HUDSON: Yeah, I love it.

NIMA: Thank you so much. See you soon.