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Yves here. Michael Hudson and Richard Wolff provide another fine deep dive on economics and geopolitics. A key theme is that advanced economies, particularly the US, have had financial capitalism become ascendant. Financial capitalism is short-term oriented. That fixation (and terribly weak people in leadership positions) has led the US and Europe to take the sort of self destructive measures we see playing out with Russia and China.
Originally published at Dialogue Works
NIMA: So nice to have you back, Michael, on this podcast. We’re waiting for Richard to join us. Let’s get started with the debate between Donald Trump and Kamala Harris. What’s your understanding of the outcome of the foreign policy of the United States when it comes to the economic war between the United States and China?
MICHAEL HUDSON: Well, I don’t think there was any outcome at all. The questioners were obviously supporters of the Democratic Party, and they wanted to make it all about personality, mostly Trump’s personality. They kept trying to goad him about things like how many people attended his rallies. When Trump would try to raise an economic issue, like asking if people are better off today than they were four years ago under his administration, Kamala would just say, “Well, I’m a member of the middle class, I’m all for the middle class,” and then go into a stump speech. But that’s not about policy.
They very carefully avoided talking about policy. It’s obvious that if you’re supporting the re-election of Biden and Trump and the Democrats, how on earth can you permit economic policy to be discussed without acknowledging why Americans are in a worse economic position today? And it’s not simply because of inflation. ABC’s questioners kept trying to say, “Well, inflation is down, so why are people complaining?” People are complaining because they can’t afford to live without going deeper into debt. They can’t afford to buy or even rent housing without accumulating debt, and if they buy a house, they’ll need mortgage debt. These are taboo subjects.
Whenever Trump tried to bring up topics like that, they would divert the issue. Trump didn’t point out that, if Kamala is middle class, when she was Attorney General of California, why didn’t she help Hispanic and Black homeowners being evicted by Mnuchin for his vast mortgage fraud? But Trump couldn’t say that because he later appointed Mnuchin as his own Treasury Secretary. So, there’s this kind of compact between both Republicans and Democrats not to acknowledge the actual economic policies at play.
The questioners also tried to goad Trump into talking about the war in Ukraine, asking him if he wanted Ukraine to lose to Putin. It was more of the same Putin derangement syndrome. Trump didn’t fall for it. He simply said, “I want peace. There has to be a peace agreement.” That was the closest they came to discussing anything economic. He didn’t talk about the cost of the military-industrial complex or the money Biden and his son received from Ukraine. So, there really wasn’t much of a foreign policy debate, just flag-waving nationalism.
NIMA: Michael, how did you find the policy toward Gaza and what’s going on there? Did you see any difference between what Kamala was saying and what Trump pointed out?
Toward Israel and Palestine? Neither of them could make any criticisms because they both receive so much money from the Zionist lobby, from AIPAC. I was amazed at how Kamala was just outright saying, “We are absolutely behind Israel. It has a right to defend itself.” The fact is, Israel has killed so many Palestinians and assassinated them that it’s afraid they’ll fight back. Because it’s hurt them so much, of course, it’s afraid of retaliation. So, they justify bombing the Palestinians because as long as any are left, they’ll be resentful. I think she lost the Palestinian vote in Michigan and Minnesota with that extreme statement.
NIMA: Richard, welcome.
RICHARD WOLFF: Yes, my apologies. Thank you. I got stuck in the New York City subway system.
MICHAEL HUDSON: That’s what I told him. I said, New York is not very good at maintaining internet access compared to more developed countries.
RICHARD WOLFF: Yes, exactly.
NIMA: Richard, we’re discussing the Trump-Harris debate. What’s your take on their foreign policy positions, especially regarding Ukraine and Israel?
RICHARD WOLFF: Mr. Trump didn’t offer anything concrete, other than saying he would have done a wonderful job. The level of discourse in that debate tells you something about a society that has lost all connection to its political processes. Are we really talking about societal problems and looking for solutions, or at least directions? I don’t think so. It’s not just the lunacy, like the absurd comments about Haitian immigrants eating pets. The real sadness lies in what wasn’t addressed.
Let me give you an example that really struck me. We are living through a massive reorganization of the world economy. The near-monopolistic position of the United States, which lasted most of the last century, is over. There’s another player now, China, which is catching up or has surpassed the U.S. in high-tech and other areas. The BRICS group is already a larger economic bloc than the G7. The U.S.’s global position is radically shifting, and the direction is now clear.
The question is, what will the U.S. do? Will it continue imposing tariffs and provocations around Taiwan, trying to hold back China? Or will it sit down and work out a way to share the planet, respecting each other’s frameworks while addressing ecological concerns? This would open up questions about the Monroe Doctrine and other long-standing policies. But we didn’t hear anything about that.
Is the U.S. going to accommodate the decline of its empire, or fight tooth and nail? What do the Republicans propose, and what do the Democrats propose? These are the dominant questions, within which issues like Taiwan, Israel, or Ukraine are symptoms, specifics within a larger framework. But we get nothing. This is what some of my friends call a “nothing burger”—you open it up, and there’s nothing inside.
NIMA: Michael?
MICHAEL HUDSON: Well, Richard points out that the American decline and what to do about it should be discussed. But it can’t be, because the decline is a direct result of the policies both Democrats and Republicans are following. How can they discuss these policies without confronting the fact that they’re leading to de-industrialization and shifting global power toward East Asia?
RICHARD WOLFF: Exactly. They can’t discuss it because they can’t admit what the problem is in the first place. It reminds me of the rule in Alcoholics Anonymous: before you speak at a meeting, you have to admit you have a problem. That’s the first step. But our politicians can’t take that step. They want to be cheerleaders—rah, rah, rah for what we have. They admit a problem here and there, and promise to fix it, but they won’t admit that we have a systemic issue.
We never talk about capitalism as a problem. It’s as if we don’t have a specific economic system, and nothing about that system is up for debate. Critics joke that we have two pro-capitalist parties, and they’re right. There’s no criticism or discussion of the economic system itself.
You know what that is? It’s a hysterical refusal to even ask questions, to admit that there might be something within the capitalist system—whether it’s the profit maximization rule in investment or the structure where a tiny group in every workplace makes all the decisions on production and profits.
This hysteria doesn’t show up as yelling or screaming, though we’re getting closer to that. Instead, it manifests in an unspoken agreement to treat certain topics as taboo—whether it’s sex, religion, or capitalism—and never discuss them.
The closest the debate got to mentioning these taboos was when Trump called Kamala a Marxist and referred to her father’s Marxism. I thought she handled it well, rolling her eyes and brushing it off, as did everyone else. The comment was inappropriate and garnered no interest. Honestly, I’m glad it didn’t go further. It would have led nowhere productive, but it was a clear signal: discussions about capitalism and Marxism are out of bounds—just as inconceivable as someone taking their clothes off during the debate.
NIMA: Now, Michael, what are the proposed solutions from these two candidates? It seems like Trump’s plan is more tariffs—particularly targeting countries not trading in U.S. dollars. Do you think Trump can convince these countries with tariffs?
MICHAEL HUDSON: The Biden administration is already convinced. It’s not just Trump talking about tariffs. Congress has passed a law set to take effect on January 5, 2025, doubling tariffs to 25%-50% on Chinese imports like semiconductors, solar cells, needles, and syringes. Plans are also in place for a 100% tariff on Chinese-made electric vehicles. Trump is just going along with this pre-existing U.S. policy.
The 100% vehicle tariff was scheduled for August 1st but was delayed to allow for public review, likely to avoid backlash before the election. Meanwhile, Canada has already announced its own 100% tariff on Chinese electric vehicles starting October 1st, along with 25% tariffs on aluminum and steel.
What Trump has focused on most is steel, and it’s worth discussing because it highlights how self-destructive American foreign policy can be. U.S. strategists seem to operate under the assumption that they can impose aggressive economic or military policies, such as tariffs, without expecting other countries to retaliate. It’s as if they believe that countries will simply accept U.S. actions, just as Germany did when the U.S. destroyed the Nord Stream pipeline, which had been supplying the gas essential for Germany’s chemical, fertilizer, and steel industries.
Now, when the U.S. imposes tariffs on China, what can China do? It’s not likely to complain to the World Trade Organization (WTO) because, for years, the U.S. has effectively paralyzed the WTO by refusing to appoint referees, leaving it without the quorum needed to make decisions. Even though China might win damages in such a case, it knows the WTO operates under U.S. influence and functions like a kangaroo court. So China will likely respond in other ways.
If the U.S. imposes a 100% tariff on vehicles or steel, China can retaliate with something much stronger—let’s call it triple damages. China could impose a 300% export fee on materials critical to the U.S. economy, like aluminum, germanium, gallium, and rare earths. Or China could simply refuse to continue trade under such conditions. A 100% tariff would mean that the entire value of Chinese exports to the U.S. would go to the U.S. Treasury to finance military operations that encircle China and other East Asian countries. Essentially, the more China exports, the more the U.S. strengthens its military presence against China. At some point, China—and other countries—may just say, “We’re fed up,” and cut off trade altogether.
The bigger issue here is that the steel tariffs themselves have been around for a long time and remain a problem.
About ten years ago, I discussed the problems with steel tariffs on Democracy Now! with Lori Wallach, and those concerns are still relevant today. In the 19th century, American protectionists developed a strategy to strengthen the nation’s industrial base, a policy known as the American School of political economy. The logic was simple: import raw materials, and use those materials to produce high-value finished goods, because that’s where the real economic value lies—both in technology and in higher-wage jobs.
America’s strategy, like Britain’s before it, should have been to convince other countries to produce the raw materials and send them to us, allowing American industries to thrive by creating finished products. This concept, based on the comparative advantage theory developed by David Ricardo, assumes everyone benefits from such a division of labor. But instead, raising tariffs on steel increases costs for industries that use steel to manufacture complex, high-value goods like machinery, airplanes, and vehicles, ultimately making American products less competitive on the global market.
Trump’s attempt to raise steel tariffs to court labor union votes in the steel industry might help him politically, but it’s one of the most anti-industrial policies imaginable. And it’s not just anti-China; it’s anti-Japan, too. Just last week, we saw the Biden administration block Nippon Steel from purchasing and modernizing the rundown U.S. Steel company, despite Nippon Steel’s plan to invest $15 billion to upgrade its production facilities and make it competitive again.
Meanwhile, Cleveland Cliffs, an American steel company, is pushing for a merger with U.S. Steel, not to reduce costs, but to create a monopoly. This monopoly would allow them to raise prices and control the U.S. steel market, even though their steel remains high-cost. The Biden administration supports this because higher-cost steel means higher wages, which secures the union vote. The goal is to win over the unions before Trump can, and that’s why both parties are committed to raising raw material prices, even if it means squeezing industrial producers out of global markets.
This is the essence of a self-destructive policy. As Richard pointed out, nobody wants to raise these issues because they expose how U.S. electoral politics are damaging the economy. American foreign policy doesn’t consider the full effects of these decisions, nor the inevitable blowback on U.S. industry.
RICHARD WOLFF: Nima, let me expand on this because it’s crucial. For nearly a decade, tariffs have been a central part of Trump’s approach, as if he discovered them like a child playing with a new toy in a sandbox. He throws tariffs around without understanding them. He continues to claim that tariffs are paid for by China, but in reality, the tariff is a tax paid by American importers—the businesses that bring foreign goods into the U.S.
This is a key point: a tariff is essentially a tax, and yet Republicans, the self-proclaimed party of low taxes, have made tariffs a cornerstone of their economic strategy. In earlier days, tariffs were called import duties, but the effect is the same. The business bringing in French wine, Japanese electronics, or Chinese-made products has to pay the cost of the goods, and then pay the tariff to the U.S. government.
Let’s take the example of a Chinese electric vehicle that costs $30,000. Companies like BYD, which have outpaced Tesla in producing high-quality electric vehicles at competitive prices, would try to sell this car in the U.S. for $30,000. But under a 100% tariff, that price would double to $60,000—$30,000 for the vehicle, and another $30,000 in taxes. This puts the American businesses which are purchasing electric vehicles for transportation, at a severe disadvantage compared to their global competitors, who can purchase the same vehicle for $30,000.
Meanwhile, Elon Musk can benefit from these tariffs. With a “friend in the White House,” he can sell his Tesla truck for $55,000, still more expensive than the Chinese vehicle, but cheaper than the tariffed version. Americans will be forced to buy his truck for $55,000, while their competitors abroad pay $30,000 for an equivalent vehicle. This scenario destroys U.S. competitiveness because American businesses are burdened with higher costs.
What’s happening to Americans now is similar to what’s going on in Europe—they can’t get cheap energy, and we can’t get cheap Chinese goods. If the U.S. wanted to avoid this situation, it would have had to stop China’s development 35 years ago. But now, it’s too late. Yet, none of this gets discussed—not in the debate last night, nor in the press. The focus is simply on tariffs.
As an economic historian, I want to point out the “infant industry” argument. This old argument is based on the idea that, if you’re developing a new industry—one that’s just getting started and surrounded by tough competitors—tariffs might be necessary for a while. They give the industry time to get up to speed, grow production, and eventually compete in the market. But this is understood to be a short-term solution, only valid under specific conditions. The problem we face now is that the U.S. isn’t dealing with an infant industry; it’s dealing with a dying one, at the end of its life cycle.
These policies—justified by isolating China—are actually isolating the United States. We’re cutting ourselves off. Michael just scratched the surface of the potential retaliation. The rest of the world is hoping that this is a temporary phase for the U.S., but the longer it persists, the more it becomes clear that both parties, including the Democrats, are doubling down on it. Biden has continued most of Trump’s tariffs, and the world is beginning to realize that this represents a fundamental shift. Now, they’re considering how to respond.
We might think Europe is stable, but it isn’t. Below the surface, European politics, which have aligned with the U.S. for half a century, are undergoing a shift. Leaders like Macron, Scholz in Germany, and the Tories in the UK, have built their careers around supporting the U.S. But beneath them is a vast group of Germans, French, British, and Italians who don’t support what’s happening. The biggest topic of discussion in Europe is de-industrialization. There’s real anxiety about Europe being caught between two global powers—China and the BRICS on one side, and the U.S. and the G7 on the other. Europe is becoming the sacrificial lamb, as the superpowers negotiate their dominance by exploiting a disintegrating Europe.
These voters don’t want to be sidelined, and it’s starting to show. You can already see the rise of the far right, taking advantage of the working class’s frustration. But you can also see it in the shift of votes toward left-wing coalitions. In the recent French elections, Macron’s party came in third. His political career is essentially over. What emerged is a new coalition called the New Popular Front, composed of the French Socialist Party, the Communist Party, the Green Party, and the largest group, La France Insoumise (France Unbowed), led by Jean Mélenchon. Mélenchon is a Marxist, and unlike Kamala Harris, he always has been.
Yet, if you watched last night’s debate, you wouldn’t have a clue that any of this is happening.
NIMA: Michael, do you want to add anything to what Richard said?
MICHAEL HUDSON: Yes, it’s not just the European population talking about de-industrialization—it’s the leadership, too. Mario Draghi, the former president of the European Central Bank, recently released a report for the EU Commission recommending an investment of 800 billion euros in industrial projects, hoping to position Europe as a rival to the U.S. and China. But how can a U.S. colony compete with the U.S. when its leadership is essentially on the U.S. payroll? It’s a fantasy.
The bigger question is, where will that 800 billion euros go? Even if Europe built new chemical plants or steel mills, who would operate them? Europe is paying four to five times more for gas than the U.S. or China, as well as higher prices for oil and other inputs that the U.S. has sanctioned from Russia and China. Europe simply can’t cope with the corner it’s painted itself into.
MICHAEL HUDSON: That’s why, as Richard mentioned, in the recent elections in Thuringia and Saxony, the parties opposing the anti-Russia war and Cold War policies came out on top. Of course, Germany’s response was to label the leading party in Thuringia, the Alternative für Deutschland, as a “terrorist” party.
Well, who are they terrorizing? They’re “terrorizing” Jake Sullivan, Antony Blinken, the U.S. military, and the neocons. The rest of the Europeans, having listened to your show and to what Richard and I have been saying, realize they can’t even be a rival or a third wheel in this Cold War as long as they have to go along with U.S. sanctions. NATO has gone as far as saying, “We’re an Asian power now; we belong in the North China Sea to defend Europe.”
Kamala Harris reinforced this last night, telling Americans that if we don’t support Zelensky, Russia will march right through Poland on its way to Germany. The idea that any country, including Russia, could field an army capable of invading a modern nation while facing resistance, without being utterly destroyed, is absurd. Yet Kamala keeps pushing this “Russia, Russia, Russia” narrative. Meanwhile, Blinken and U.S. generals are meeting in Ukraine to figure out how to wind down the war and shift focus—much like how the U.S. walked away from Afghanistan when it became clear it was in their interest to do so.
The bigger problem is that, after two years of framing Russia as the invader, what do they do when it’s clear they’ve lost? NATO’s arms have been decimated by the Russians, nearly a million Ukrainians have been killed or wounded, and Ukraine’s skilled population has fled. Ukraine is effectively finished, serving as a grim example for Asia, Africa, and Latin America of what happens when you fight on behalf of the U.S.
Germany and the rest of Europe aren’t going to fight to the last person, but will they be willing to be unemployed to the last German worker? The U.S. has sacrificed them economically, claiming that the GDP decline isn’t severe. But what’s more important—GDP or actual employment and industry? The problem is, Europe has abolished political freedom and is attempting to silence any parties that oppose the U.S. Cold War, which is polarizing the population.
Putin has already stated that it would be nice if Europe stopped trying to fight Russia and stopped supplying Ukraine with bombs. But he admits that it will be at least a generation before Russia can trust Europe again. European countries would need to demonstrate their independence from the U.S., but just like AIPAC’s influence on U.S. elections, the U.S. National Endowment for Democracy plays a similar role in Europe by funding non-governmental organizations that undermine governments there. Countries like Georgia have recognized this and are banning these NGOs because they are essentially agents of U.S. influence.
NIMA: I want to pick up on something Michael said regarding Kamala’s comment about Russia marching across Europe if they aren’t stopped in Ukraine. This argument is reminiscent of the Vietnam War, when the U.S. justified its intervention by claiming that if they didn’t stop communism in Vietnam, it would spread across Asia. Yet after the U.S. was defeated in 1975, none of the dire predictions about communism came true. No country was taken over by communists in the way that was feared.
A similar argument was made about Afghanistan: if the U.S. didn’t stop the Taliban, radical Islam would spread everywhere. Yet after the Taliban won and the U.S. left, where is the global Islamic takeover? How many times will Americans and Europeans believe these arguments that never come to pass?
This is what any elementary school psychologist would call projection. It’s when you project your own motives or actions onto someone else because you can’t admit to them yourself. Who’s really trying to hold on here? It’s the United States. Every conflict and failure—from Vietnam to Afghanistan—represents a loss of U.S. control. Look at the problems Putin is having with Ukraine. The idea that he could move on to invade another country is absurd. No matter what happens, it will take Russia a generation to recover from this war. Yet, the same neocons who failed to predict the consequences of Vietnam and Afghanistan claim to know what Putin’s next move will be. It’s childish.
Even more childish is being upset when reasonable people don’t buy into these simplistic narratives. The world is far more complicated than these stories of inevitable conflict. But when you can’t admit the reality of what’s happening, you start creating wild, fanciful alternatives.
Take NATO’s expansion, for example. Russia’s anxiety about NATO forces moving closer to its borders is entirely understandable, especially given the history of the Cold War. It’s a terrible risk. They waited a long time before acting, and whether or not it was the right decision, it’s clear that the situation is complex. But instead of acknowledging this, instead of admitting that maybe NATO shouldn’t have expanded and broken its commitment, you get another narrative: demonizing Putin. He’s portrayed as a new Stalin—minus the Soviet Union, minus communism.
Now, let’s draw a parallel from the debate last night. If you can’t acknowledge that the U.S. is grappling with the decline of its empire, which poses entirely different challenges than during its rise, you turn to simple-minded alternatives. In the U.S. and Europe, that alternative is to demonize immigrants. It’s a childish and silly distraction.
I sit with people I admire, people who are my friends, but they seriously believe that a country of 330 million people is somehow endangered by 10 to 15 million undocumented Central Americans—among the poorest people in the world—arriving and asking for one thing: a job. That’s it. They’re not here to take over or eat your pets. But this avoidance of reality is what happens when people can’t confront the actual issues.
So, to answer the question you posed to Michael earlier: What’s going to happen? My answer is, nothing. Nothing much is going to change.
Is it better to have Kamala Harris in office? In my judgment, yes. I agree with her on abortion and on many other issues. But I can’t agree with the man she debated—he’s frightening in what he represents, regardless of what he says. Take his response when she confronted him about his call for the execution of five young Black men who were later proven innocent. The issue isn’t just that they were innocent; he wanted them executed before they even had a trial. That’s it—that’s the core of his stance. He even spent his own money on a full-page ad in The New York Times to promote this, making sure everyone knew where he stood.
Yes, there’s a clear difference between Harris and him. But if neither of them addresses the fundamental issues we’ve been discussing, then the decline of Western capitalism will continue. What they’re doing has little to do with addressing those deeper problems. And you can’t have a sustained policy when you refuse to have a real conversation about the root issues.
It’s like someone struggling with alcoholism who goes to an AA meeting and asks, “Which arm should I scratch?” The group would be confused, saying, “What are you talking about?” You insist, “I need to know which arm to scratch to fix my alcoholism.” Eventually, someone would explain that scratching your arm won’t solve your addiction. It won’t make the problem go away. It’ll be just as bad next week because you’re avoiding the real issue.
As an economist, that’s how I see the United States. There’s a denial so profound that it’s genuinely frightening. And last night’s debate was just another chapter in that ongoing denial.
MICHAEL HUDSON: We’re talking so far about the problems with U.S. policy, and Richard is quite right. This poses a question: why don’t China, Russia, and other countries understand what the U.S. is doing to threaten them? Why don’t they anticipate these sudden, self-destructive moves? For example, why didn’t Russia anticipate the Ukrainian surprise invasion of Kursk?
Putin, like Stalin, expected other countries to act in their own self-interest. Stalin didn’t expect Germany to attack Russia, because it would be suicidal for Germany. Likewise, Putin didn’t expect Ukraine to sacrifice so much for a PR stunt.
Why would Ukraine throw all its elite troops and NATO-supplied arms into Kursk, a rural and undeveloped part of Russia? Putin and his generals likely thought it was a waste of resources for Ukraine, one that would essentially destroy the remaining core of its military. And it was a waste – a militarily suicidal one. This invasion seems to have been planned by British intelligence, with U.S. support, which aligns with their historically questionable decision-making.
That brings up the question of why more countries do not act more decisively against U.S. interests. President Biden and the Democrats repeatedly declare that China is the America’s number one enemy. So, why doesn’t China react more defensively? President Xi continues to talk about “win-win” policies, thinking that if he convinces other countries, they’ll follow. This is reminiscent of what Gorbachev and Yeltsin thought when the Soviet Union dissolved and when Russia wanted to join NATO.
NIMA: Both Yeltsin and Putin wanted Russia to be part of NATO
MICHAEL HUDSON: Imagine if the U.S. had treated Russia like an ally instead of an enemy. It could have imposed neoliberal policies on Russia just as it did on Germany and the rest of Europe. But instead, the U.S.’s ham-fisted, self-destructive approach has led to the current tensions. While China continues to grow by linking its economy with East Asia, the U.S. persists with a lose-lose strategy: countries that don’t agree to the Cold War agenda face military intervention, sanctions, and U.S.-backed color revolutions.
U.S. foreign policy relies on threatening or harming other countries, while China offers cooperation and economic growth. This fundamental difference is what’s splitting the world into two different blocs with different social philosophies. U.S. diplomats fail to see this because they’re locked into a mindset where coercion is the only way to influence others. At some point Russia, China and other countries will realize that the U.S. isn’t seeking mutual benefit, but rather is willing to destroy its own economy by pursuing Cold War strategies that have already alienated its NATO partners in Europe.
NIMA: Richard, let me bring up this article I sent to both of you. It’s by former European Central Bank President Mario Draghi, addressing the economic problems in the European Union. He says the era of open global trade, governed by multilateral institutions, is coming to an end.
— “Growth in Europe has been slowing down for a long time in Europe. But we’ve ignored it. I would say until two years ago, we would never have such a conversation as the one we’re having today, because things were sort of going well. We were doing well out of globalization. Unemployment was steadily falling. And now we cannot ignore it any longer. We’ve lost our main supplier of cheap energy, Russia. And now we have to start for our defense again for the first time since the Second World War. At the same time, this is the first year when Europe cannot count on population growth for its increase. And population is set to decline steadily, so much that by 2040, there will be 2 million workers disappearing from the labor market every year. Productivity is weak. It’s very weak. So if we were to maintain our current average productivity of the last five, of the last 10 years, say, it would only be enough to keep GDP constant until 2050. The investment share will have to rise by around 5 percentage points of GDP to levels last seen in the 60s and the 70s. And if Europe can no longer provide them to its people, it will have lost its reason for being.”
MICHAEL HUDSON: It’s amazing that the left, especially in the U.S. and Britain, hasn’t picked up on this. Instead, it’s the right-wing parties like Alternative für Deutschland,making these points, aside from some leftists like Sarah Wagenknecht.
RICHARD WOLFF: Yes, and I think this underscores the growing tension beneath the surface of European politics. Draghi’s report brings to light conversations that have been ongoing for years about how Europe’s policies are destroying its future. Europe faces a choice: confront these issues or become an irrelevant, aging region that no longer plays a central role in the global economy. This is a consequence of the way capitalism has shifted, moving from Europe to the U.S., then to Asia.
Now, some African leaders are preparing for the next wave of capitalist investment.
The question is how to deal with a system that constantly moves in search of new opportunities, leaving destruction in its wake. But to even have that conversation, you must admit that capitalism operates this way. It’s been 50 years since Rachel Carson’s Silent Spring warned that capitalism would destroy the environment if left unchecked, yet many still refuse to listen. They also refuse to acknowledge the reality of U.S. imperialism. The American empire rose by mimicking Europe’s colonial model, and now it’s struggling to adapt as the global center of capitalism moves elsewhere.
The last ten years have repeatedly proven it, but they still don’t want to see it. Notice the strange return to tariff policies, which were used early on when the U.S. was emerging from its colonial status to compete with Britain. They’re trying it again now, but the situation is completely different. You can’t use the same policy forever. One of the key lessons from Hegel and Marx is that if you keep doing the same thing over and over, you’ll make mistakes. Just because something worked at the beginning doesn’t mean it will work in the end. You have to be as inventive in knowing when to stop using a theory or strategy as you were when you started it. It’s a mistake to think you can stick with a discovery or strategy for the rest of your life. That misunderstands how the world works—and what contradiction means.
The fact is, Americans don’t study Hegel, and that’s their loss. If they did, they’d be aware of the need to constantly question their approach, to understand how changing circumstances affect their chances of success. Otherwise, they’re bound to make terrible mistakes. Yes, Putin made his share of mistakes, but the West thinking it could arm and fund Ukraine to fight Russia? That was a bigger mistake. Thinking they could cripple Russia by refusing to buy its oil and gas? They didn’t understand what the BRICS was. Russia simply turned to the BRICS—problem solved. The U.S. failed to foresee this, and it stands as a glaring example of their inability to understand how the world really works.
That The Washington Post and The New York Times could watch the debate, listen to the nonsense said about tariffs, and then discuss it seriously as though it wasn’t idiotic, tells you something. It’s not just a moment of crisis for the U.S., but a clear example of a profound incapacity to understand what’s going on. It makes programs like yours, Nima, very important, but also a bit unusual. I don’t want people to think that Michael and I are anomalies. In American economics, maybe we are. But we’re trying to help people see perspectives that are otherwise met with blindness or denial.
MICHAEL HUDSON: I think one thing that clarifies the discussion is realizing there are different kinds of capitalism. We’ve said on many of our shows that we’re no longer in industrial capitalism—we’re in finance capitalism. Industrial capitalism took a long-term perspective because it required time to invest in factories, develop markets, and build supply chains. That’s why it doesn’t happen in America anymore. Finance capitalism lives in the short term. As I mentioned earlier, the tariff policies of the 19th century worked because America imported raw materials and exported finished products. Now, it’s the opposite: we’re trying to maximize the price of raw materials, and it’s killing the manufacturing market. This is because finance capitalism makes quick money by breaking up economies and grabbing assets.
In Russia in the 1990s, they called this “grabitization” during privatization. You could say the logic of American finance capitalism today is similar—it’s about grabbing as much as possible. That’s what de-industrialization is. You’re not just running down your industrial plants; you’re also running down infrastructure—your bridges, roads, and even your internet systems, which is why Richard had trouble connecting earlier.
This isn’t the capitalism of 150 or 200 years ago. It’s not the capitalism Marx described, where there was at least a collective understanding of how to make industrial capitalism succeed. Back then, capitalists wanted the government to cover basic needs—education, transportation, healthcare—so that employers didn’t have to. As we’ve said before, if you were an industrial capitalist in the 19th century, whether in America or Britain, you wanted the government to pay for public services, like schools and sewers. Today, everything is privatized by the financial sector.
This is the difference between long-term capitalism and short-term capitalism. Long-term capitalism was evolving into socialism—and back then, socialism wasn’t a dirty word. Everyone was talking about it. The debate was about what kind of socialism the world would develop. Now, instead of having that conversation, finance capitalism is leading to a new Cold War, where other countries are forced to hand over their economic surplus to the U.S., which then uses it to fund massive military expenditures, bases, submarines, battleships, and NGOs to surround them.
This is not the capitalism anyone envisioned in the 19th century. So the question becomes: where did capitalism go wrong? Is this really the kind of capitalism people expected? If not, maybe we’re dealing with a whole different capitalist dynamic than the classical economists described.
Under the old system, profits were made by paying workers less than the value of what they produced, but those profits were reinvested into expanding production. Marx called profits an element of value, while rent was empty—monopoly rent, land rent, or, most significantly, financial rent, as we see today.
We’re dealing with something systemic and evolutionary, but heading in two different directions. Short-term finance capitalism is going down because it’s short-term, negative, and punitive. Long-term industrial capitalism was about expanding markets and building diplomatic relations—what President Xi calls “win-win”—while today’s finance capitalism, driven by neoliberalism and the neocons, is all about “lose-lose.”
NIMA: Richard, do you want to add anything?
RICHARD WOLFF: No, I think we’ve opened up a lot of issues we’ve discussed before. The only thing I’d suggest is that we haven’t fully touched on the danger here. The leaders of the U.S. are frustrated because they don’t understand, and they refuse to listen to alternatives. As Michael said, until the mid-20th century, socialism was considered a legitimate option. Working-class people discussed it regularly. Political parties committed to socialism grew steadily from 1850 to 1950. But the Cold War shut all that down, turning every discussion into a simplistic battle of good versus evil. Rational debate became nearly impossible.
That’s why last night’s debate felt so empty. It was political theater, but barely even that. My hope is that we can return to talking seriously about capitalism—about its different forms, industrial and financial. We should also be discussing socialism, which has evolved in various ways, and maybe even talking about new forms of socialism that we haven’t yet considered.
I’ve spent my life wondering if anything I’ve said has had an impact. Is it because of what I said, or simply because I went to the “right” schools and earned the “right” degrees? Both Michael and I understand how the American academic world works, how the pecking orders are maintained. I really wonder—if I didn’t have those credentials, would I even have a voice?
That’s why I’m so grateful to you, Nima, for organizing these conversations. They’re crucial, and they shouldn’t be constrained by anything. A lot of people could do this work, perhaps even better, but they aren’t. That leaves it to us. Michael does it his way, I do it mine, and you’ve created this platform to keep it going, which is so important.
NIMA: Thank you, Richard and Michael, for joining me today.
RICHARD WOLFF: Same here—and again, my apologies for being late. I’ll try to avoid that next time.
