Yves here. You are getting an extra portion of Michael Hudson due to his having allowed us to post his intriguing and extremely informative introduction to Giorgio Buccellati’s At the Origins of Politics. Below is his latest interview with Nima of Dialogue Works, which covers a very wide range of topics, from the war in Ukraine and the US’ bleeding of its European allies, to the unresolved issued facing BRICS, particularly looming debt crises across the Global South. This is a topic Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development, has been discussing frequently over the past few years in articles he has graciously allowed us to post on this site. The high level of the dollar is only making this problem worse.
Forgive me if I make a point that may rub some readers the wrong way. I know many of you appreciate the opportunity to see a favorite writer interviewed, in that you get a sense of their personality and the views they offer in a more freewheeling format. However, it’s too easy to toss out factoids based on less than perfect memory and then extrapolate from them, or simply be seduced by an interviewer’s question into discussing topics beyond one’s core expertise.
With Hudson, who pens very carefully argued and well-substantiated pieces and has made many pathbreaking observations over his long career, I find I am often in the uncomfortable position of having to take issue with some of the things he says in these talks. For instance, here, early on, he opines that Trump would have to fight with Congress to end the war in Ukraine. In fact, Biden was unable to get additional funding for this misadventure in a more Democrat-heavy legislature. There’s no reason to think Team R will have changed its stance, particularly given that there are ample other US pet enemies, above all China, to justify continued military pork outlays.
I also have to take issue with his description of the early Industrial Revolution in England, which was effectively my major in college. He depicts the success of the UK in becoming the first industrial power as coming from checking the privileges of the landlord class and ending or limiting land rent. Huh? Much of London is still owned by the Church of England, the Crown, the Earl of Grosvenor, and other owners from before the Industrial Revolution. Admittedly, newer owners have been acquiring land as some of the long-standing landlords seek some liquidity. It is true that the Industrial Revolution did feature the erosion of power and status of traditional aristocratic property-owners.
But the biggest feature spurring the Industrial Revolution, aside from critical inventions like the cotton gin, was the enclosure movement, as in the further extension of private landholding to the detriment of small yeoman farmers. They depended on both access to common land to farm livestock and to being able to hunt. The latter story is complicated but the short version is hunting had been legal but poaching was not, but as more and more formerly forested land was turned to farmland, the amount of “huntable” land fell. The fact that transportation (to Australia) had become a preferred option for punishment of crimes against property meant there was a fair bit of enforcement. Formerly subsistence farmers left the countryside en masse for large and midsized cities, providing the labor pool for Blake’s dark satanic mills.
Originally published at Dialogue Works
NIMA ALKHORSHID: Hi, everybody. Today’s Thursday, January 2nd, 2025, and our friend Michael Hudson is back with us. Welcome back, Michael.
MICHAEL HUDSON: Good to be back.
NIMA ALKHORSHID: Michael, let’s get started with the economic key to 2025. What would that be, in your opinion?
MICHAEL HUDSON: Well, I’ve been thinking what a good title for the show should be, and I think it should be, “Today’s world economy is as good as it gets.” I think the United States, Europe, and the Near Eastern economic and political situation is, obviously, it’s unstable. And almost any specific forecast we make is likely to be wrong because there are so many variables at work and competing interests at play. But actually, this is what mathematicians call an optimum position. That may sound optimistic, and I’m never one to be optimistic, but an optimum position is technically one that, wherever you move, it’s going to be worse.
This is mathematically as good as it is. And that’s pretty much the situation you have today. You could say we’re now in the best of all possible worlds, given the policies that have led to the conflicts that we’re seeing: the conflict of national interest, the conflict of domestic interest, the conflict between the United States and Europe, and the United States against all the rest of the world. And I think that this year is going to be more than just change. I think that chaos is now official US policy. And that’s what you do when you’re trying to stop the world from moving in a direction that’s not in your interest.
All that the America can do is have chaos from the Near East to Europe and to the rest of the economy to stop the BRICS countries from trying to pursue their own national self-interest. So I think there’s going to be a number of clashes, and I can tell you what the clashes will be, but there’s no way of telling you now how they’re going to be resolved. First of all, you have Trump’s war against Europe is going to collapse the European economy further. There’s a clash between Turkey and the Near East. Who’s going to control the Near East? Is it going to be a new Ottoman Empire? And what’s the relationship between Turkey and Israel going to be? And at home here, right now, all of the newspapers are about the clash between President Trump and Congress regarding America’s military policy against the rest of the world.
Congress is dead set on continuing the war against Russia, and not letting President Trump make any kind of a deal that will slow the antagonism that is driving U.S. interests against Europe, against the global South countries, debtors that are affecting the dollar’s exchange rate and the domestic inflation here. So that’s what optimum means. And the basic aim of the U.S. policy is to keep an optimum position from changing by creating such chaos that there’s not going to be an alternative. So we’re back with what Margaret Thatcher said, “there is no alternative” as far as the U.S. policy is concerned. And the attempt not to create an alternative is driving other countries to force some kind of an alternative that really doesn’t have a roadmap at present. So I think there are two areas that we have to concentrate on.
One is gas, and the other is debt. And the most immediate problem is gas right now, because that’s the political key as well as the economic key. The United States foreign policy for the last century has been to try to control Near Eastern oil and gas production, because energy is the key to economic production. And the reason the U.S. wants to control it is to prevent other countries from having it if these countries act in a way that the United States opposes.
So the whole purpose of controlling Near Eastern gas, people are saying, why is it in America’s interest to be in the Near East? What do Iraq and Syria and even Iran have to do with affecting U.S. interests? Well, the reason is the U.S. interest wants to block off the Near East from other countries being able to get gas, just as the United States now is trying to block other countries from getting Russian gas. And that’s why oil has been the center of U.S. foreign policy and its attempt to dominate the world. And I think that’s the only reason why the U.S. has such an interest in the Near East. Well, the big problem, of course, even more immediate, is the new sanctions that are planned against Russian oil. Poland’s President Sikorski just said that, “What’s been happening is wonderful. The European Union has succeeded in preventing Russia from using its oil and gas exports to blackmail European economies by threatening to cut off energy exports.” Those are his words. And it’s as if selling oil and gas to Europe has been a form of Russian warfare by threatening to stop exporting it. Well, why on earth would Russia want to stop exporting its oil and gas? That’s been the mainstay of Russia’s balance of payments. Well, it’s the oil and gas exports that have enabled Russia to have the foreign exchange, to buy U.S. technology, Chinese technology, and to buy the manufactured goods and until now the food that Western economies were selling to Russia before the sanctions forced Russia to produce its food and manufacturers and consumer goods itself. So it’s the United States that’s using sanctions as blackmail against the European Union.
It’s using sanctions saying, well, it hurts Russia, and even if the cost of hurting Russia to the United States is worth destroying the core of German industry, destroying the European cost structure, forcing higher prices for energy, oil and gas, fertilizer, steel, and anything that’s made with energy. All of that is worth it. It’s very much like when Madeleine Albright was asked, “Is it really worth killing those millions of babies just to support U.S. policy against Iraq?” She said, “Yes, it’s worth it.” That’s basically the policy that the American Congress says when it comes to U.S. sanctions against Russia destroying the European economy.
Yes, it’s worth it. That’s collateral damage. There is no attempt to have any sense of mathematical proportion in the gains to the U.S. in hurting Russia, and by hurting Russia, presumably hurting China as Russia’s ally, hurting Iran. All of this is part of a kind of crazy U.S. attempt to block the whole world’s access to energy. Well, you can just imagine what’s going to happen. You’re seeing the rise in nationalistic parties in Europe. You’ve seen a backlash occurring, and the Czech Republic, Moldova, Romania, and Austria have just been cut off by Ukraine. It’s Ukraine that’s cut off Russian gas, not Russia, and yet today’s Wall Street Journal headline says Russia stops exporting gas to Europe. The whole mass media in the United States are so anti-Russian that it’s as if Russia is causing Europe’s problem of gas, not Ukraine, which isn’t even an EU member. So the amazing thing is that the European Union’s leaders, not the elected leaders, but the EU leaders, Von Der Leyen and the crazy Estonian NATO lady, are saying, “Well, it doesn’t matter what the European voters want. Our key is to protect Europe from Russia having the power to just march right through Poland and Germany right to the Atlantic Ocean.”
This is crazy. And, of course, there’s a backlash. And in the United States, you even have Elon Musk here come out and say, well, he supports the alternative for Deutschland, the nationalistic party there, because it just makes sense. So nobody really has an idea of how the Trump administration is really going to continue all this, and whether it is going to pursue such an anti-Russian policy that Europe is going to have to decide. Is it worth having the United States block Russian, Chinese, and Iranian economic development at the cost of our having to roll back our economies and impoverish ourselves? The politicians say, yes, it is. The voters say, no, it isn’t.
Something’s going to give, and you’re going to have an election, I guess, later this month in Germany that’s going to begin to show this. Of course, you just had an election in Romania, and the Romanian party says, “If you vote to not have war in Russia, we’re going to cancel the elections because we found that on YouTube and TikTok and other media, there are a lot of articles saying Europe shouldn’t fight with Russia. These are Putin’s puppets who are writing these things. This is Russian disinformation, that the idea of peace and not cutting off Russian exports of oil and gas is disinformation of such magnitude that it’s worth annulling democratic elections to prevent it.” And that’s the craziness that we’ve seen this way. And what’s making the situation even more explosive is the fact that within the United States, there’s a crisis over what are we going to do about our LNG gas exports? It looks now like the fracking is going down.
The fracking oil wells are sort of running dry. The best wells have already been taken. It’s much more expensive after you’ve siphoned off the rich oil that is there just to get all of the smaller amounts of oil. It’s very hard. So the United States strategists are, on the one hand, they’re saying, well, we’re going to insist in exporting more to Europe. President Trump is insisting that Europe buys more American LNG, liquefied natural gas, at four times the price it was paying Russia. But if it does this, then that’s going to create shortages in the US and US gas prices will go up. And if US gas prices go up, then the US consumer price index is going to go up. And that’s what the Republicans are in Congress opposing.
So solving the problem of how to hurt Russia by selling more gas to Europe is going to create a new problem within the US of what to do about the fact that American homeowners and other gas users are going to be experiencing the same problem that the Europeans are experiencing, having to pay more for the gas. And how long can the European Union hold together with all of this before individual nations begin to oppose taking orders from the EU top? The Bruegel think tank in Europe estimates that when Ukraine last week cut off Russian gas exports, that’s going to cost Russia 6.5 billion in sales this year.
Ukraine will lose a billion dollars, but President Biden has just made this up by giving Ukraine a large enough new gift to enable it to afford the gas sell off. So the United States is paying Ukraine basically to forego transporting Russian gas, even though it has its own critical budget squeeze, just in order to hurt Europe. And Slovakia’s Prime Minister, Robert Fico has threatened retaliation against Ukraine. He said, well, now that if we can’t get the gas and the oil from Russia to produce electricity, then we’re going to have to cut off our electrical exports to you, Ukraine.
We know that the Russians have concentrated on blowing up your own energy generation, but we need all of the electricity we have at home or our prices are going to go up because of what you just did in cutting off Russia’s oil exports. So it looks like the United States will marginally hurt Russia, but ending up losing Europe’s pro-US policies to the right-wing policies that are emerging. And that seems to be a trade off that the United States is willing to do, but it can’t help but backfire. And the effect is not only on the US and Europe.
You’re having gas prices now going up for the whole rest of the world. And that includes the global South countries. So something has to give because Africa, Latin America, other very heavily indebted countries can’t afford both to pay more for their gas these days and still keep up with their foreign debt service in hard currency, in US dollars. So the US selling more gas to Europe at high prices is going to create a rise in the dollar.
Europeans are going to pay more euros to buy high-priced dollar gas. That’s going to push up the dollar’s exchange rate against Europe. And pushing up the dollar’s exchange rate is going to have a double whammy effect on global South countries. Because not only will prices in dollars go up, but the cost of buying dollars in pesos or any other local currency is going to go up.
And so you’re going to have a very intensive budget squeeze that’s destabilizing the BRICS countries, destabilizing the debtor countries, and the major countries dependent on oil imports and gas imports and energy. So you’re having this domino financial and price effect go right through the spectrum throughout the whole economy. And the US foreign policy doesn’t think of the world economy as a whole system. It’s tunnel vision. How do we hurt Russia? Let’s do that first. And then we’ll think of the rest of the world. So this is why the US policy is creating chaos in the rest of the world.
NIMA ALKHORSHID: And you’ve mentioned what has happened in Ukraine, and the way Ukraine is just not letting the gas flowing to Slovakia and other countries. So, Michael, in your opinion, French President Emmanuel Macron stated that Europe can no longer rely on other powers for its security. And with the rise of the AfD that you mentioned in Germany, do you think that this new attitude on the part of Europeans can help? Because at the end of the day, they don’t have any sort of alternative for their energy. It has to be Russia. Do they have any other alternative for energy?
MICHAEL HUDSON: What Macron has said is we cannot depend on any of our own politicians to make our policy. We can only depend on the United States for our policy. That’s what every action of him has said. He would like to get votes. Of course, the voters want their politicians to support policies for the United States. Those are not Macron’s policies. Macron’s policies are diametrically opposed to European self-sufficiency. Macron has talked about let’s send the French army. Let’s send troops to Ukraine to help fight Russia. The single-minded focus of Macron is to fight Russia and sacrifice the rest of Europe.
That’s why he’s so unpopular. That’s why the government has fallen. That’s why French finances are in a disaster. So I’m not sure. I would certainly not want to take Macron as if he’s representing European interests. He’s not. He’s basically a U.S. puppet. The second part of your question is, does Europe have another source of energy? Well, thanks to the Green Party, the environmental policy party, yes, it has two sources of energy. It has coal That’s the number one fuel of the future for the Greens. It’s vastly increasing Russia’s coal consumption, and it can cut down the forests. It can use wood.
And there’s a big market. The Germans are now buying local space heaters. You put wood stoves. They’re using wood stoves. If you walk down a countryside in Germany, you see whole wood piles of logs to be fed into the heaters. So, yes, Europe can burn down its forests and coal. It takes time to make an atomic energy plant. And Europe has decided it doesn’t want atomic energy. It wants solar energy. And so throughout the German countryside, and I’ve driven there, you have enormously loud windmills going that are not only driving people crazy, they’re driving the cattle crazy or whatever animals you may have on the countryside.
So they’re making an attempt at wind power, an attempt on solar power. But the United States says, no, you can’t have solar or wind power because who’s making the windmills? China. Who’s making the solar panels that generate solar power? China. So you really can’t do that. You’ve really got to starve in the dark. And that’s, again, the quandary for Europe. And I don’t see anyone except the right-wing parties opposing this. The left is completely on board with the U.S. Cold War because the left-wing parties, as I think we’ve discussed before, have been staffed by politicians who have been dependent on very heavy subsidy and grants from non-governmental organizations such as the National Endowment for Democracy to build up. So you really don’t have a domestic formulation of what would a rational European economic policy be to restore prosperity, and in fact, is there a way to restore the dismantling of heavy industry, steel industry, automobile industry, manufacturing industry, even fertilizers and chemicals that have already been dismantled? Or does Europe have to go the way that the Baltics have gone? You’re already having plunging population fertility rates throughout Europe, but you’re also beginning to have the same kind of immigration, not only of people, but also of industrial companies out of Europe to other places.
So I really don’t see in the short term any way that Europe can have an alternative to Russian energy as long as its political system is governed not by elected local national leaders, but by the EU bureaucracy, which is solidly NATO. And the whole European Constitution, the Eurozone, as we’ve discussed before, is basically dominated by NATO and by the United States indirectly. I don’t see much of a solution except poverty for Europe.
Something’s got to give, obviously. When is it going to give? And how will it give if there’s not a bipartisan support across the political spectrum to understand what’s happening? And as long as the European mainstream press keeps saying that, well, any advocacy of not fighting Russia in Ukraine is basically serving Russian national interests and anything that serves Russian national interest is disinformation. It’s wrong-think. It’s not the kind of thinking that we’re going to support.
This is Orwellian 1984 world that we’re seeing in Europe. And I don’t see… it is obviously worse of all in England under Starmer and the Labour Party. But what’s happening to the Labour Party is the same thing that’s happened to the German Social Democratic Party that’s now fallen behind the Alternative for Deutschland in the polls and is going to be pretty much wiped out in this month’s election. And you’re going to have one European country after another going the way of Romania. What are you going to do when people do not vote for the United States, but vote for their own national welfare? To the United States that means you’re not a friend anymore.
NIMA ALKHORSHID: As you mentioned, the situation of the economy of Germany is so dire right now. Do you think AFD is capable? Considering the economy of Germany right now and how weak it is, do you think that they’re going to stand against the US policies in Germany, or they’re going to get along with them, and they’re trying to do some political moves and maybe convincing the Trump administration to accept that Germany reconnects the line between Russia and Germany?
MICHAEL HUDSON: I don’t think in the short term there’s any chance of reconnecting. There’s such a legacy of fear and anti-Russian feeling in Europe, in Germany, especially because of the trauma that the East Germans had under the Soviet Union that certainly affects the older people, although not the younger generation that didn’t have to go through that. But there’s still the same feeling that the United States has been financing and sponsoring in the Ukraine of hating Russia. The same thing that you have in England for the last 150 years, this hatred of Russia, as if it’s the enemy of Western civilization.
The United States is trying to depict the NATO countries, the Atlantic countries as civilization itself. And the alternative is not really a new civilization, it’s as if it’s anarchy, it’s the jungle, as Borrell has said. There’s that feeling there, and I don’t see even if the German and other European populations vote in nationalist parties, no party is going to get an absolute majority in Congress. Look at what’s happened in Latvia, one third of the Latvian population, the largest party of all, is the Harmony Center Party. That is the party basically of the Russian speakers for the last 30 years.
Despite the fact that they’re the largest party in Latvia, they’ve had no representation among the leadership of Latvia. That’s because they’ve been isolated by the right-wing neoliberal parties. So I think that the Latvian model of the largest party can be cut out of power and will put in the pro-US, anti-Russian parties. This is going to be the model that the European nations are going to take.
Yes, the nationalist Alternative for Deutschland may be the largest power, may even get more than the Christian Democratic Party, but the alliance between the Christian Democrats, the social Democrats, the Greens and other parties, we can keep out all of these pro-Russian nationalist parties. And we can do it until the European population just empties out. This can go on for a very long time. The willingness of Germans to sacrifice their own interests for some abstract ideal seems to be part of their national character.
NIMA ALKHORSHID: Michael, do you see Donald Trump capable of changing the policies toward Russia, or we’re going to have the same sort of policy that we’ve seen in the Biden administration?
MICHAEL HUDSON: Nobody is capable of changing the policies of Russia. The President Putin’s speeches, and those of the Foreign Secretary Lavrov have been very clear. They’ve stated exactly what they’re going to do. Trump has talked about, can’t we just have peace and stop? Let’s just freeze the conflict and have a truce. Well, Russia negotiators, I’m not sure that Putin is even going to meet with Trump under those conditions, say, well, you know, we tried that years ago in the agreements that we made. And when we stopped fighting, NATO immediately began to rebuild all of its armaments in Western Ukraine to make a new attack on it.
We’re not going to go down that road again. And anyway, we’re going very, very rapidly. Look at how fast the Russian army now is going westward. You’re having the leaders of Luhansk and Donetsk come out and saying, we’re the ones doing the fighting here. We want to end this whole fight this year. It would be nice to end it before spring comes, because certainly Ukraine is going through a hellish winter, cold winter, without much oil and gas, without electricity, without heating. And this is the point at which Russia can say, oh, we’ve told you exactly what we want. And the solution is not simply a peace in Ukraine.
It’s going back to the peace that should have been signed way back in 1921. When we talk about peace, we’re talking about rolling back NATO to its original borders. We’re talking about what you promised. So, Mr. Trump, when you’re saying you’re proposing an agreement for us, first of all, how are you ever going to get your agreement through Congress? Congress is pushed by politicians that have made their whole career on fighting Russia. How can you control Congress? Secondly, even if Congress supported you, how are you going to have the army obey you? You tried to have the army stop fighting in Afghanistan.
They kept fighting. They just ignored you. How are you going to control the CIA and the National Security Agency and the State Department and the military without cleaning out the leadership? You promised to do that, Mr. Trump, when you’re running. You wanted to get all of your enemies out of the deep state. Why don’t we talk after you get your enemies out of the military, the State Department and the FBI and the National Security Agencies? When you actually can consolidate your power, then we’ll realize you have an ability to make a deal with this. But until now, let us talk to your leader, whoever your leader is.
It’s the deep state. Get somebody in authority that right now looks stronger than yours for us to talk to. But all we’re talking to you is something that would be nice in principle, but we’re not going to change our policy that we’ve announced steadily for the last three years. We’re not going to change that just on a promise that you make that we don’t think you can carry out. You’re very much like President Biden. Presidents in America have become figureheads, frontmen for the deep state. And until you regain control of the deep state by the presidency, I don’t see how America can make any deal with any country over anything. What do you say to that?
NIMA ALKHORSHID: When you see these two conflicts, one in the Middle East and the other one in Ukraine, and at the same time, Trump talking about Greenland, talking about Canada, Mexico, all of this. Is that related to the war that he has in his mind toward China or is something else?
MICHAEL HUDSON: I think it’s just something else. I remember way back in the 1970s, there was talk about Canada breaking up. In World War II, almost all of Canadian industry and government support was focused on one province, Ontario. And that was the center of, I think, C.D. Howe was one of the people in that. The Prairie provinces were frozen out of this Ontario center. And there was rising opposition in French Canada to Ontario because there was so much anti-French feeling that was papered over by finally making Canada a dual language. But unfortunately, the language didn’t include what the French population spoke.
The language was French and they speak Occitanian in Canada. And it was very funny. One time I was having a lunch at the stock exchange in Montreal and ordering the food was all in French. And I could very clearly understand and talk with the waiter in French. And then the stockbrokers began to talk to me. And I said, you know, it’s very funny. I can understand the waiter, but I can’t understand you. And the stockbrokers, well, but he’s an Anglo. And the Anglo-French wasn’t their French. They were all ready to break away. But most of all, the central Canada provinces were going to break away.
So I think what Trump, when he says Canada is a state, he said, well, you know, we can’t let Canada in as just one state. But, you know, I could say let’s begin with Alberta and the with all of its oil sands there, the tar sands, not oil really. And let’s then go on to the other provinces. And certainly Western Canada has just sort of been turned into a corrupt sink of the liberal party there, British Columbia. So you can see a lot of Canadians wanting to say, well, let’s just join America. There’s a lot of Canadians are sort of down on Canada. I don’t know if you’ve noticed Hollywood actors and comedians. Most of the comedians in American entertainment have been Canadian for the last 50 years. And that’s because if you grew up in Canada, that’s the only way you can really keep your sanity and coping with the world. So I think Trump sees a chance to begin grabbing Alberta and other provinces there. Same thing with Greenland.
He’s looking at it as a real estate deal, sort of like. And I think his model is William Seward buying Alaska. And the reason Seward bought Alaska, and I’ve read his correspondence on this, was he wanted to get the United States in debt. The United States didn’t have an income tax when Seward bought Alaska. There was only one way of making up the revenue to pay for Alaska. And that was to raise tariffs. And Seward was the leader of the Republican Party, which was the protectionist tariff supporting party. So I can see Trump wanting to say, well, let’s buy Greenland. That’s going to cost a lot of money.
We’ll have to balance the budget. And how are we going to balance the budget? Let’s raise tariff revenue. Not realizing that, as we’ve discussed before in this show, if you raise tariffs, that’s going to raise American prices, make American industry and labor even less competitive with other countries and destabilizing the entire domestic economy. But that’s Trump’s fantasy. He doesn’t realize how the U.S. economy is part of a world system and the effects that it’s going to have throughout this entire system. That’s the problem with American foreign policy.
It’s based on junk economics without any idea of history. And what makes a tariff policy today different from what it was in the 1880s and 1890s before there was an income tax, and when there was still a use of tariffs to create an industrial base in the United States that now I don’t think is recoverable here any more than it’s recoverable in Germany.
NIMA ALKHORSHID: Michael, we had nine countries joining BRICS as BRICS partners. We have Indonesia, Malaysia, Cuba, Bolivia and other countries. And what are the leading aims of the BRICS countries in your opinion?
MICHAEL HUDSON: The leading aims?
NIMA ALKHORSHID: The leading aims of BRICS countries?
MICHAEL HUDSON: Well, you’ve put your finger on the problem. They haven’t spelled out the aims at all. They haven’t spelled out what is a policy? And how are you going to have a policy for BRICS just by saying we want prosperity? Okay. We want our economic independence and sovereignty. But what are the aims going to be specifically? And how are you going to get a widely politically diverse set of countries to have a common set of aims? Well, it’s pretty obvious to see just empirically what the aims logically would be. The first aim is you need to cope with the foreign debt problem. There is no way that the BRICS countries can grow and at the same time pay the foreign debts that they’ve been saddled with for the last 100 years and especially since 1945 by the neoliberal philosophy that’s been pushed by the United States and the International Monetary Fund and the World Bank.
The policies that have been imposed on the BRICS countries have forced them into a chronic balance of payments and trade deficit as a result of their dependency on the United States and its allies that have made them not viable countries. That means that the loans that were made to these countries have no chance of being paid. And this is something that I’ve worked on since the mid-1960s when I was a balance of payments economist, first for now Chase Manhattan Bank, then for the United Nations at UNITAR, and then for various… when I organized the first sovereign debt fund in 1989 through Scudder Stevens to invest in Argentinian and Brazilian debts. It was when the United States and other bondholders began to buy Latin American debts after the 1982 default of Mexico led to the Latin American debt crisis. Nobody would really buy these bonds, and Scudder Stevens was unable to sell any bonds to American buyers or to European buyers, because they all thought that, well, there’s no way that they can pay these debts. And they hired me as an advisor for the fund saying, “Well, Dr. Hudson, you’re known as Dr. Doom. We know that you say that debts can’t be paid. Do you think they can be paid maybe for five years? Suppose we know that the economies can’t pay, but is there an interim that we can still get these high interest rates that they have to pay? And I found out who was buying these bonds that Merrill Lynch, the underwriter, was selling.
They were all bought in Argentina, Buenos Aires, and Brazil by the client elite of these countries, the central bankers, the president’s administrations, all the elites. And the fact is that the people that hold these dollar bonds are client oligarchies who don’t want to hold their own currencies because the global south countries and their oligarchies realize the debts can’t be paid. The European investors realize the debts can’t be paid. They’re selling to the vulture funds, basically. And this is a problem for the BRICS countries. On the one hand, the BRICS countries, in order to grow, have to write down their debts.
But on the other hand, the money of the holders of the debts and supporting of the dollar and opposing de-dollarization are their own vested interests. So the vested interests in many of the BRICS countries are not favoring the national interests. That’s the big conflict you have between the fact that these countries are bifurcated between a U.S.-centered elite and the country as a whole. Well, that’s one of the two issues that the BRICS will have. The second is what are you going to do about the fact that as a result of the debt crisis, these countries have been driven by the World Bank and the International Monetary Fund and U.S. policy to sell off their oil, mineral rights, their natural resources, their natural monopolies of public infrastructure to foreign investors.
How on earth can they grow if all of their national patrimony and all of the revenue, the land rent, the raw materials rents, the monopoly rents from this national patrimony is paid to foreigners? Well, you could look at the BRICS countries in very much the same way as Russia under the kleptocrats. Russia did have a solution to the kleptocrats. And that solution was a rent tax. Suppose that you take the kleptocrats who bought the nickel, Noros nickel, or Gazprom, Russia could have recovered all the revenue from nickel, oil and the other raw materials, diamonds, the other raw materials being sold off to say, well, we’re going to let you make profits on your capital investment. I think their capital investment was maybe 100 rubles, maybe a couple of dollars, and you’ve got billions.
So you can make profit on that, but all of the natural resource rent, that’s going to be taxed away. This was exactly how Britain became the workshop of the world, and then the United States. And Germany followed it. The whole logic of industrial capitalism was to free economies from the landlord class and its land rent, to free economies from economic rent. And that was what classical value theory from Adam Smith, John Stuart Mill, Marx, the American economists all said, “we want to prevent rent seeking to make a low to bring prices in line with actual cost of production.” That’s what enabled England first to become the workshop of the world, and then enabled the United States and Germany to replace England by creating a mixed public-private economy with its own national control of money.
The BRICS countries could follow this policy that made first England and then America and Germany able to organize their industrial takeoff. But in order to do that, you have to have a concept of freeing economies from economic rent. You have to have a concept that basically goes back to Adam Smith. His idea of a free market was a market free of economic rent. All throughout the wealth of nations, he said, the landlords should be taxed. If you tax away the landlords, then you won’t have this alien external power over the economy extracting its revenue in the form of rent. All of that was the great fight over value and price theory that occurred at the end of the Napoleonic Wars in 1815 when the landlord class of England wanted to impose the corn laws to prevent low-priced food exports so that the landlords could keep their agricultural rents high. That was the great fight that shaped England’s political conflict for 30 years until the Corn Laws were finally repealed in 1846.
So, if the BRICS economies said, we’re going to recover our natural patrimony from the kleptocrats, not our own kleptocrats only, but the foreign companies that have bought our oil and glass, we’re going to use that as our natural, our fiscal base. And that we’re going to use that fiscal base to finance our own economic development. Well, then you’re going to essentially be able to do in this century what the late 19th century European countries did. The problem is you need an economic theory for that. And most of the BRICS country economists, like Chinese economists, have been trained in the United States, and there is no history of economic thought taught in the United States anymore. There’s no economic history that’s being taught, and so the BRICS countries aren’t even aware that their natural economic interest is to get rich in the way that the United States did. And what they do see is China’s remarkable economic takeoff.
And China calls this socialism with Chinese characteristics, but it could be called the American economics takeoff with Chinese characteristics, because that’s the American economic takeoff. Oh, it was considered socialist because it relied so heavily on the public sector.
And there’s a third aim that the BRICS countries should have, and that has to be to raise living standards and raise labor productivity. Because you can’t have a class war against labor and expect labor to be highly educated, well-fed, well housed, and productive. If you want productive labor, you’re going to have to raise living standards. And the vested interests in most of these BRICS countries want to keep wages low. If they have factories or whatever their business is, they look at labor’s wages as being antithetical to themselves. And the way that the United States solved this problem was to say, okay, we know that you industrialists don’t want to pay high wages to labor.
But what we’ll do is have the government pick up many of the costs of living for labor. The cost of education, the cost of health care, the cost of low-priced transportation, communications. And so that you don’t have to pay labor high enough wages to pay for its own health care, education, and all of that. Well, obviously that’s not what the United States is doing today. You’re having just the opposite. You’re having American employers having to pay enormously high wages because the government is no longer providing these services. The BRICS countries can realize we’re not going to follow the neoliberal U.S. economic advice to privatize everything and build rent-seeking into the price of breaking even and earning a living wage in our countries.
Again, you need an economic theory and economic doctrine for this. The doctrine was what 19th century classical economics was all about. And I don’t see any sign of the discussion of this doctrine emanating from the BRICS countries. I’ve done my best to go to Russia, China, and Cuba, and other countries. I’ve tried to explain to Cuba how it could apply a rent tax. And I’ve gotten sort of blank stares from Castro’s cabinet and the people who followed them. So the whole problem is that the BRICS countries know that they want to get rich, but they don’t know that they don’t have to reinvent the wheel.
The way to create a prosperous economic growth is to avoid private debt. Keep debt and money creation domestic. The debts you owe are in your own currency and you control your own currency in the same way China does, through a public bank, not through private commercial banks. You want a tax and economic rent and unearned income to encourage earned income by actually being part of the production process, not part of the rent-seeking whole superstructure just as extracted from this. And you want to create a prosperous domestic labor force so that it can become high productivity.
That’s how the United States developed so high productivity labor force itself. The way in which the BRICS countries can follow their national interest is clear, but you need a doctrine for that and an economic philosophy. That’s the missing element that I see right now.
NIMA ALKHORSHID: I hope the BRICS countries listen to you. That was amazing.
MICHAEL HUDSON: That means listening to your show.
NIMA ALKHORSHID: Exactly Thank you so much, Michael, for being with us today. Great pleasure, as always.
MICHAEL HUDSON: That’s the first time I’ve talked as long as Richard usually talks.
NIMA ALKHORSHID: Happy New Year, Michael.
MICHAEL HUDSON: You too, Nima.
I once again see Michael Hudson not talking much about consumption wrt Germany and BRICS. Always about manufacturing and production as something independent of consumption. Ultimately these countries don’t do enough to consume and have to ultimately rely on the US as a consumer of last resort.
No consumption in the EU?
Just walk through a German supermarket.
Since 2022 (my private estimates)
Cocoa, chocolate – up 50-80%
Bahlsen biscuits (the Hannover family business in part owned by Von der Leyen’s clan) – up 150% ( very extreme case which is why I bring it up as brand)
oatmeal – up 80%
oil – after record highs around 50% now
juice – up 50%
sugar – up 40%
eggs – up 30%
fish – up 50% – 200%
meat- up 30%
wine – up 30%
coffee allegedly will jump up 100% 2025 (FT was already correct with cocoa predictions)
A German Christmas specialty – gingerbread (nuts + energy) – has become so expensive families are making jokes “Gingerbread for Christmas? I already got the gifts”. Since usually they are part of everyday sweets for the kids. But now one package (200 gr) 3 or 4 Euros and more. Who can pay for that?
Not to mention: health care! 40+% increases. (I got 35%)
The German governing elites have NO CLUE what is happening and how people are coping.
And slowly people realize – this will be new permanent reality – constant price jumps for the rest of their lives.
So, selling cars? Building tanks? Developing hypersonics? Are you fucking kidding me?
Oh no, I will have to boycott Bahlsen now you have told me that about VDL!
There’s a substantial appetite in the Global South for infrastructure and production equipment, which China can provide at a quarter of the price. In any case production serves as a ramp to a world of sufficiency and adequate distribution of material well-being to all, and should not be an end to itself.
Yes, as long as basic needs are covered, consumption can be very long delayed for infrastructure.
I’ts why I went to college for a PhD for 15 years after the regular school years – so about 30 years of personal infrastructure and suppressed consumption and it worked out fine.
“Yes, as long as basic needs are covered…”
Nice and necessary analogy. There is a reason the Chinese are spending about $150 billion yearly now just on water conservancy. There will be no lessening of infrastructure development. However, the Chinese are indeed faring well right now.
“Ultimately these countries don’t do enough to consume and have to ultimately rely on the US as a consumer of last resort.”
Please explain this, since I do not understand the reasoning and the data indicate this assertion is incorrect. For instance, the G7 nations consume just as much as the United States.
This statement is correct. The US runs sustained and large trade deficits. The EU does not.
https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?c=223,924,132,134,534,536,136,158,922,186,112,111,&s=NID_NGDP,&sy=1980&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
October 15, 2024
Investment as a percent of GDP, 2024
Brazil ( 15.9)
China ( 42.0)
France ( 22.3)
Germany ( 20.6)
India ( 33.7)
Indonesia ( 30.5)
Italy ( 22.1)
Japan ( 26.6)
Russia ( 25.0)
Turkey ( 25.6)
United Kingdom ( 17.1)
United States ( 21.8)
European Union ( 21.9)
Major Advanced Economies – G7 ( 21.4)
Consumption for the United States, European Union and G7 nations is just about the same. Actually the only nation that stands apart is China, and that is because China is working at continually increasing thenational potential growth level and that means a high investment level.
The point is the data show that countries such as Germany or Japan are not relying on the US as a consumer of last resort.
I always appreciate your data CA but how do these relative investmentdata show that the US is not the (marginal) consumer of last resort?
My understanding is the US is running a huge deficit, which Michael Hudson’s work shows is mainly the costs of securing their Empire, much of which is paid abroad to either third countries or US non resident entities keeping their profits abroad.
Yes, I have no idea what CA is saying. He’s simply wrong.
re: Congress and UKR funding/intro by Yves –
but was the behaviour not merely part of the usual deal-breaking negotiations – where the eventual outcome, continued support of UKR by Congress, is just a foregone conclusion?
Why should Congress want to end this?
Sorry if I misunderstood something here.
p.s. German BERLINER ZEITUNG today has a mostly dumb article about 6th generation Chinese fighters (6th gen. don’t exist, see Martyanov 2 weeks ago on this).
“China’s new fighter jet: Deutsche Bank warns of “deplorable state” of the US Air Force
The Chinese military has presented a sixth-generation fighter jet. This could thwart the US military plans in the Indo-Pacific.”
https://archive.is/qW82F
However via this item in Germany at least it is being reported that Deutsche Bank allegedly downgraded Lockheed’s value. They argue that the US Air Force is in the behind, including F-22 and 23 (!).
And then this beauty of course in the final paragraph:
““Capability gap”: USA should provide more money for armaments
The US could face significantly higher defense spending. “One of the reasons for increased defense spending during the Cold War was the perception that there was a ‘bomber gap’ and later a ‘missile gap’ between the US and the Soviet Union ,” says the Deutsche Bank analysis. “These perceived capability deficits were used at the time to justify increased defense spending. We believe this revelation could lead to greater concern in Congress that the US military is falling behind, which in turn could lead to increased congressional support for increased defense spending.”
I do not understand your confusion.
Biden was unable to more funding for Ukraine approved. That was due to R opposition and waning support among Dems, including Rs who were not Trump aligned. The Rs will have more seats in the new Congress, which means even more solidified opposition to further handouts to Ukraine. In addition, the Western press is increasingly admitting that Ukraine is a lost cause, and no one with an operating brain cell should want to throw good money after bad.
In fairness, and perhaps the German media has been amplifying it, the Biden Administration has been trying to keep up appearances regarding Ukraine despite Congress having turned off the money spigot. It is making a great show of dribbling out the last bit of weapons and dough from previous allocations. Read the detail here: https://www.reuters.com/world/biden-announces-25-billion-fresh-military-aid-ukraine-2024-12-30/
Given that the US and NATO have vastly depleted their weapons stocks, the China hawks now have the upper hand, that China is the bigger threat to US hegemony, and spending more to fight Russia will make the US less able to take on China.
The US officialdom does not need Russia to justify more arms spending. On top of China, it has Iran as a pet enemy.
I’ll add: Lockheed being a loser, doesn’t preclude an overall increase in military spending. Just some different snouts in the trough.
‘Capability chasm‘ is likely more appropriate. From commentator TP Hang on Substack.
“J-36 is China’s answer to DoD making Guam the cornerstone of its WestPac strategy. At current time, it’s widely believed that China has too much firepower in its vicinity in the shape of DF-17s, cruise missiles, H-6Ks and fighter aircraft. It made a lot of sense to strengthen Guam and nearby dispersed air bases. The latter do not have the air defense, runway or support personnel of Guam, but they are slightly further out than Guam and would make it harder for DF-26s to take them out. Guam to Fujian is 3000 km. Now, if J-36 has 3000 km combat radius, then it can lead attack drones like GJ-11 that not only attack military bases, ships and runways in Guam (and surrounding areas), but also increase the hit probably of H-6K and ship launched cruise missiles as well as DF-26 missiles through improved targeting and EW pressure. If we extend this beyond Guam, J-36’s 3000 km range effectively allows China to extend its air superiority out to 3000 km away from China’s borders. That means all the way to Guam, Palau, Indonesia, Bay of Bengal and Persian Gulf….”
https://tphuang.substack.com/p/the-secondary-and-tertiary-effects
“Forgive me if I make a point…”
Boy, is this ever true! With the recent trend away from blogs (like the esteemed Nakedcap) and towards interviews/podcasts, I’ve had to get more discriminating in the content that I select to listen to when talking walks. For awhile, I enjoyed Nima’s willingness to let his guests talk at length. But, he’s got his regulars on with such frequency that I find the interviews have gotten a bit repetitive and guests like Larry Johnson and Scott Ritter (both very fine analysts) are given to going on long soliloquys on various topics. When I hear Doug MacGregor or Larry Wilkerson or even the Duran guys go on about expecting some kind of fiscal/financial crisis because they’re hoping for a moral comeuppance for the bad behavior in the west, I realize they’re way outside their wheelhouse.
The last couple of years have served as a reminder that just because someone is really smart about SOEMTHING, doesn’t mean they’re smart about EVERYTHING.
The tail risks of COVID and climate change are daunting to me. Not so much for the bevy of guests on Judging Freedom and Dialogue Works.
Those two rolling crises are slow-burners compared to the excitement of war, conventional and nuclear.
Re the intro and as a sidebar–weren’t the King’s Forests also cut down to build the Royal Navy? So there too ordinary people suffered for the ambitions of the mighty.
Clearly “all about the oil” has always been the excuse but the result, as Hudson says, is a “crazy” foreign policy if it’s about anything other than power and the need to dominate. And whose need is that?
I’ve been reading The Plantagenets about the Middle Ages kings and their incessant quarrels with France over land and access to trade. There was certainly a strategic side to this but also a hammer looking for a nail side in a aristocratic culture obsessed with fighting. But at least back then royalty was “agreement capable” when reverses on the battlefield became facts on the ground. In the age of Biden crazy has gone into overdrive. A Peasants’ Revolution is way overdue.
Perhaps Michael Hudson was referencing sanctions removal else Russia continues destroying the Ukrainian military. I also am uncertain if the stolen central bank reserves can be returned by fiat or if Congress had passed some claws on it in the vast text of its myriad “We-Hate-Russia-the-Most” sanction bills.
My take is that only Russia can end the war – the awesome might* of the US military was a bluff that should not have been called, leaving the US with nada to deter Russian resolve. Ukraine can sue for peace, and Russia can say no.
*as 26/7 trumpeted by the MSM, Hollywood, and politician’s narratives.
My main point was the final section on the need for BRICS countries to explicitly commit to the three policies I find necessary: First, a debt cancellation. that’s why I spoke about rising energy prices aggravating the debt problem. Second, a tax on land rent. That’s why I gave my “quick” comments on land rent as a principle to be taxed. And third was to use classical value and rent theory to tax away rent and recover the seemingly irreversible alienation of their natural resources. I guess Yves’s point is that making a quick verbal argument leads to one over-simplifying, given the time and space constraints. This oversimplification obviously distracts from the basic point that I’m making. BRICS economists are trained in the United States that don’t prepare governments for dealing with the problems that I’m emphasizing.
Globally, the rightward political shift is to make sure that people in government and other institutions don’t start listening to you.
It will always be a kind of populism that never actually “goes there”…attacking the darlings of neoliberal economics.
Perhaps the kind of populism which never “goes there” should be called plopulism.
And maybe a populism which “goes there” could be called populeftism.
One might call it the “Brooklyn School” of economic theory – Fuggedaboudit!!
Thank you, Dr. Hudson, for this article which I find fascinating. I really think you have put your finger on the root of the problem for the BRICS: they need to find a way out of debt traps.
Would a reasonable first step be to kick out the World Bank and IMF, and stop any further debt issued in dollars? That would be a step short of outright cancellation or sovereign default.
Unfortunately, as we saw with Argentina and the “buitres” (vultures) the US has weaponized the legal system to claw back defaulting countries who issue debt denominated in US dollars. Not surprising that a decade or so later, Argentina has become a vassal state dependent on the US with no more ability to act in its own self-interest.
Thank you, Dr. Hudson for you input.
The way we understood you seemed simple and direct.
Simple because the US Financial/Political Power is firmly intact in Western/parts of Eastern Europe and the UK. Meanwhile, the small population of Twitter folks are crying fowl, yelling at their bought-off Europe/UK politicians. It seems these people are unable to enlarge their understandings of issues because they don’t understand how the US Hegemon operates.
And, why the Brics seem in limbo: they’re not cancelling their DEBTs via their own Oligarchs and the US’ Debts they are burdened by. It’s as though they’re stuck in a maelstroem with not means of moving forward..
Thank you so much, Michael Hudson.
BRICS does not have the power to cancel debts owed to other parties. So I don’t understand your argument. BRICS also in its Kazan statement said it wanted the IMF to continue to be the lead actor in financial rescues, so they are not planning over time to set up a substantial enough currency crisis intervention apparatus to replace Western institutions.
So glad M. Hudson is making that point about the elites of BRIC + countries.
Countries shouldn’t practice even a little neoliberal economics. That’s like being a little pregnant.
So many countries constantly having to bail out their financial sectors in some way and they keep on coming to the USA to learn economics.
I’d said before that I thought BRICS main focus was setting up a way for the elites and corporations of those countries to avoid sanctions. I wasn’t seeing any major drive for creation of a system that callenged economic neoliberalism.
This!
Yves’ points about the English Industrial Revolution reminded me of Eric Williams’ Capitalism and Slavery. Sugar was the oil of the times. The slave-driven sugar trade financed the industrialization of England and its path to empire.
(England turned from North America to India bc it was more profitable and less trouble.)
you might enjoy Rum: A Social and Sociable History of the Real Spirit of 1776 by Ian Williams. excellent book about the sugar trade.
You also might look to the Cod fish which fed the slaves. See Mark Kulansky’s book, named, Cod.
Cod to the south molasses back for making into rum.
To is is still a contested theory (Spain, Portugal and France had sugar colonies before Britain but industrialised later, much later in Spain’s and Portugal’s case). but there was an elegant piece of research that I think I saw here showing that areas of the UK with greater links to slave capital (from the emancipation payments by HMG) had faster economic growth and greater business formation in the period before and after than places without. I am not sure if the research found a way to adjust for whether the slave capital was the origin of entrepreneurial capital or the rentier destination, though so the question is still open….
https://warwick.ac.uk/fac/soc/economics/research/centres/cage/news/02-02-24-the_story_of_britains_industrial_revolution_how_slavery_wealth_propelled_economic_growth/
I was taught the Fabian consensus Yves repeats, that 18th century privatisation of the common land created the wealth to fund industrial ventures and the dispossessed underclass to staff them and the cheap(er) agroindustrial food (fertilisers, selective breeding etc) to feed them.
Another important factor was the English dissolution of the monasteries, which occurred much earlier than in France, Spain and Portugal. This also put a lot more land and activity and labour in private and even market hands earlier (and removed it from the “temple” economy of stewardship for the indefinite future…).
i do not see how you can protect yourself from parasitical nations looking for massive trade surpluses, to export their unemployment, poverty and deflation onto others, so that they do not have to revamp their own oligarch driven economies.
tariffs and capital controls are needed tools to use, not solely to rely on, but used as added safety. otherwise internal as well as external parasites will find a way to flood your market with under priced goods, and internal parasites will find ways of off shoring money.
the trick to running a modern economy is that the citizen must be able to service their debt, and it must be small and manageable, consume, save a little, and have vacation time.
take any one item away, and its all down hill from there, take away almost all of them, or all of them, its permanent depression riddle with civic unrest and war.
Hi Michael
To what extent was the Industrial Revolution driven, in a self-reinforcing loop, through capital expropriation / accumulation from colonialism, driving university endowments / scientific research as well as Capex in new machinery, which led to better / more weapons of war, which led to further efficiency in colonialism . . .
Thanks!
I find it fascinating that there are so many Russia-phobes in the US government. I’m old enough to remember the constant fear-mongering about the Red menace, which included us school kids going through air-raid drills, and ducking under our desks to ward off the radiation from the mushroom clouds out on the horizon ( that’d work, wouldn’t it?). But then came the collapse of the Soviet Union. There were even overtures from Gorbachev to unite with the West, but that got the cold shoulder. In fact, we have squandered perhaps the greatest opportunity in modern times to achieve some kind of peaceful accord around the world. But the maniac neo-Cons would have none of it. The Russians, even though they’re not Commies anymore, are still seen as a threat to overrun Europe and beyond (ignoring of course how long they’ve been mired in Ukraine). Instead, we are involved in conflict all over the planet, ignoring what Chomsky has called the two great threats to humanity: nuclear war and climate change. If we survive the 21st century, it will be a miracle.
Of course I watched this show. Of course Dialogue Works is in my YouTube feed. It’s like finding a needle in a haystack among all of the videos of Korean baseball cheerleaders.
The theory that British industrialization was somehow simply immanent to the British Isles / British Culture etc. simply doesn’t stand up. Yes, the enclosure movement provided a significant increase in capital through primitive accumulation and the creation of a reserve army of labour (also aided by the increasing brutality of the work house and treatment of “vagrants”). But there were also many other very important things that drove British capitalism and industrialization:
– The textile industry was protected from destruction by the Indian industry in the C17th, C18th and C19th by both outright bans on the imports of cotton textiles (the Calico Acts of 1701 and 1721) and extremely high import tariffs that were raised at the start of C19th. Then when the British got control of India, by direct actions against the Indian textile industry.
– That same textile industry benefitted hugely from slave grown cheap cotton in the US, with the help of the Cotton Gin invented in the United States
– The expansion of the Empire provided huge trading and profit opportunities that helped propel British capitalism and the development of financial instruments, for example the triangular Slave Trade, the Opium Trade, the colossally profitable British slave plantations in the Caribbean etc. This, as Hudson states, did rebalance the British elite between the landowners and the merchants/capitalists. These profits helped provide the extra capital needed to fund the industrial revolution.
– Colossal amounts of foreign exchange stolen by the Empire from India to fund its foreign investments and also its imports.
– The production of the colonies also produced the cheap sugar that became such a cheap staple of working people’s diet and calorific intake, sugar intake multiplied many times in Britain in the C18th and C19th.
The above are just some of the external drivers that helped produce capitalism and industrialization in Britain, very specifically starting in the highly protected textile industry. In this way, the UK is actually a showpiece for the protection of important “infant industries” from destruction by foreign more efficient competitors. Hudson in other writings covers the US use of such protection to facilitate its own industrialization.
Shashi Tharoor’s book “Inglorious Empire” covers the colossal theft of resources of the Empire from India that were used to fund British development and power projection.
There are also some excellent texts on the links between slavery and the development of British capitalism such as Eric Williams “Capitalism and Slavery”, ignored when published in 1944 but thankfully republished more recently. Also Padraic X. Scanlon’s “Slave Empire: How Slavery Built Modern Britain”
Empire, capitalism and Western industrialization were intricately related, and it is interesting how much of this history has been excised from the accounts of British industrialization, and also that of Northern US industrialization that was so dependent on supplying the slave states and gained much seed money from the opium trade.
The exploitation, extraction and rentier mindset that was used in the Empire has now moved fully to the home countries, with the same result – deindustrialization and under-development.
Thanks Roger – I didn’t have a good reference for that.
“The theory that British industrialization…”
Really fine comment, partly tying to
https://www.nytimes.com/2014/10/05/books/review/the-half-has-never-been-told-by-edward-e-baptist.html?ref=books
October 4, 2014
A Brutal Process
By ERIC FONER
THE HALF HAS NEVER BEEN TOLD
Slavery and the Making of American Capitalism
By Edward E. Baptist
https://www.nytimes.com/2014/10/04/books/the-half-has-never-been-told-follows-the-money-of-slavery.html
October 3, 2014
Harvesting Cotton-Field Capitalism
Edward Baptist’s New Book Follows the Money on Slavery
By FELICIA R. LEE
Please do not set up straw men. It’s an insult.
Neither Hudson nor I said anything remotely approaching “The theory that British industrialization was somehow simply immanent to the British Isles / British Culture….”
I enjoyed Michail Hudson’s interview with Nema though as a Canadian, I was a bit amused by some of his remarks. Canadian francophones, on, the whole do, not speak Occitanian.
I found that reference odd as well. My understanding is that Québécois French is akin to rural 17th century French in ways that make it distinct from contemporary Parisian French rather than specific to any regional French dialect.
I’m with Eve on the rise of capitalism in England. Of course, England plundered the globe, but the commodification of agriculture by the landlords to feed the wool trade preceded the establishment of colonies. Same with increasing productivity in agricultural staples. England really was different and would have developed even if the Americas never existed.
I’ve read a number of Michael Hudson’s books, have learned a great deal from him, and greatly appreciate his analysis. But what often puzzles me, as in this interview with Nima, is that the discussion of what might be possible economically for BRICS countries appears to leave out of the picture the fundamental reality of our current exhaustion of resources, fossil fuels primarily, but other minerals as well. Even if the BRICS countries were to adopt the economic policies of nineteenth century America or Germany (as described brilliantly by Ha-Joon Chang in “Kicking Away the Ladder”), the trajectories of these countries are no longer an option, given the absence of cheap energy. I’ve no doubt that Michael Hudson is well aware of this, so what am I missing?
This is an excellent monologue by Dr. Hudson.
He points out two important issues:
1.the US Financial/Political Control in the UK, Western & Eastern Political Structures.
.
2. his criticism of the BRICs nation who are Not tackling their enormous DEBTS by their own oligarchs and the US Loans given them.
Hudson understands the key US’ position: Controlling ALL energy: oil and gas. Nations can not survive in trade, buying/selling IF they DO NOT control the energy to fuel that trade. End result, the US has bought off all Western puppet leaders via stopping Russian energy to enter West European markets.
BRICS: Hudson observes The Brics Nations are in limbo. Many of them are Billions of $$s in DEBT. Nothing is being done to eradicate those DEBTS even though THAT DEBT is the lynchpin behind why they’re going nowhere fast.
As long as (the mostly) Western European governments remain tied to the US Hegemon, then multiple millions of those citizens will become as indebted and as poor as are multiple millions of Americans.
It’s not necessarily the case that these countries are running out of cheap energy. Taking Russia as an example, its reserves (meaning the amount in the ground that is profitable to extract at current prices and current technology) of coal amount to 160 billion metric tons. Assuming an average energy content in this coal of 20 MJ/kg, this is equal to roughly 900 PWh, or 3.2 PJ. (And even assuming 15 MJ/kg we of course get 675 PWh, or 2.4 PJ.)
With a primary energy consumption of 31.3 EJ in 2023, that’s enough to sustain Russia (at its current rate of energy consumption) for another 100 years, from current coal reserves (which can expand both from new discoveries, higher prices and improved extraction techniques) alone. That’s not even going into Russia’s enormous gas reserves, which store a bit less energy, but almost half of that in coal. (48000 km^3 * 10.1 Wh/liter ≈ 500 PWh). Then we also have the oil, but Russia does not have any massive oil reserves left.
Am I saying that coal is a wonderful fuel? No, it should be eliminated as soon as possible (especially burning it for electricity and heat, as opposed to turning it into chemicals, building materials, plastics etc, which will either last for a long time or can be recycled.). But states that are in a cold war and need continued cheap energy (and if renewables fail to deliver this even in the longer run) are going to dig it up and use it if they have to. That is the reality. The same thing applies to the US, which actually has the largest coal reserves in the world, at 220 billion metric tons.
For China things are a bit more pressing: At current rates of primary energy use, its current coal reserves would only sustain it for another 20 years (but again, this is assuming that all of its primary energy should come from coal, which is far from the case even today). But China is continuing massive build-outs of renewable energy (three quarters of newly installed solar and wind capacity was in China alone last year).
Just a week or so ago, it finally green-lit a long-discussed 60 GW hydroelectric plant in Tibet, which will be almost three times larger than the world’s current largest power plant (China’s own Three Gorges Dam, with 22.5 GW of installed capacity). And they are also, like Russia, building nuclear power plants at much lower cost than in the West and are also said to have a working fission-fusion hybrid reactor almost ready for deployment.
To summarize: Cheap energy is going to continue to be available for a long time to come for those who really want it.
Sorry, this was meant as a reply to Roland’s post above, but somehow I messed it up.
Mining coal and transporting it to power plants requires the use of diesel fuel. Building out the electrical grid and in general shifting to a greater reliance on electricity is also dependent on mining more minerals, which again requires access to affordable diesel fuel, especially as ore grades continue to decrease, requiring even more crude oil to extract greater amounts of ore. Meanwhile the ERoEI continues to decline for existing oil and gas reserves and new “unconventional” reserves (shale gas, tar sands, etc.), meaning that investments in exploration and new production are dropping. ExxonMobil’s Global Outlook for 2024 claims that without new investment global oil production will fall by more than 15 million barrels per day. Obviously they’re wanting to scare governments into more investment, so this prediction needs to be taken with a grain of salt, but if that rate is accepted at face value, then by 2030 oil supplies fall from 100 million bpd to 30 million bpd. No doubt there’s still a lot of coal and oil and gas in the ground. The problem is, it’s becoming too expensive to extract and transport.
More, the energy sector (whether fossil fuels, solar, wind, hydro or nuclear) is heavily dependent on the mining sector. Using data from the 2023 updating of “The Limits to Growth” from the 1970s, showing that resources across the board are beginning to run short right about now, Gail Tverberg suggests that industrial production per person peaked in 2017, and following 2024 will begin to decline steeply.
Obviously there is significant wiggle room in all of these predictions. What I think is undeniable is that the affordable and easy-to-access energy that made the remarkable economic growth of the past two hundred possible is a thing of the past. China’s recent growth is an incredible achievement, no doubt, at least seen from the perspective of the living standards of millions of Chinese. On the other hand, it has hastened the end of an era. Will India be able to reduplicate the achievement?
To address your points in order: In most developed countries, heavy freight on heavily trafficked routes is rarely carried by diesel locomotives over long distances. In Sweden, Switzerland, Russia, China, and so on, trains that transport large amounts of coal or iron ore (or passengers for that matter) do so on electrified railways.
There is zero reason to transport coal with diesel on non-electrified tracks except for tiny stretches and the fact that the US even today (in “good” company with its Anglo-Saxon cousins) still has less than 1% of its railroads electrified (I think really just the Acela corridor) is completely insane. It’s a great example of how the US has more in common, overall, with the third world than with the first world (lately including soaring infant mortality and plummeting life expectancy).
EROI on petroluem and natural gas definitely is decreasing in many places, there I agree. (There are exceptions, like Saudi Arabian oil and Russian and Iranian natural gas, which even in “conventional” form are still in ample supply.) But that isn’t necessarily the case at all with the coal reserves.
As I said earlier: Like it or not, the coal is there, a lot of people would surely prefer that it weren’t, but if we are headed for a new arms race (I think we’re basically already there, except the West brought a knife to a gun fight) where countries feel the need for cheap energy they are going to dig that coal up and use it.
Ironically many so-called environmentalists like the Greens in Germany who at least pretended they wanted the coal to stay in the ground are the greatest cheerleaders for remilitarization and the new cold war against Russia and China. And speaking of Germany, Habeck at some point basically said flat out that coal is now (“unfortunately”) the fuel of the future.
And there is really no reason that it should be more expensive to dig up coal in the future than it is now. If petroleum dires up quickly enough to make its products prohibitively expensive, diesel fuel to run the mining equipment, dump trucks etc. (or whatever you want to run them with, like methanol, hydrogen, electricity) can be procuced from the coal itself.
It’s what Germany did during WWII and what South Africa did very successfully during its isolation due to sanctions. And I don’t think that the energy inputs in relation to the energy from the extracted coal (in other words, the EROI) is as high as you want to paint it as.
Hydropower is definitely not very dependent on any kind of mining. Constructing dams basically requires a lot of cement (but also steel, which of course does need iron ore, in varying amounts, depending on what kind of dam it is), energy and manpower during the construction phase. But they will then stand for 100 years or more, require very little maintenance and produce electricity for that entire time. The EROI (and also the long-term return on investment in most cases) is excellent.
Nuclear power likewise is not very dependent on mining. Nuclear power plants have very high EROI values and just like dams require miniscule amounts of steel, concrete and copper in relation to the amount of energy they will produce during their lifetimes. The cost of fuel is a tiny part of the cost of nuclear power (the lifetime cost is, just as with hydropower or for that matter wind and solar, dominated by the “overnight” capital costs), basically since uranium contains so much more energy per unit of mass or volume than for example coal or gas.
In addition, a fast neutron reactor, grid-connected examples of which the USSR/Russia has built since the late 60’s and are building a number of today, or a fission-fusion hybrid reactor, as China is planning (in addition to fast-neutron reactors for that matter) can produce about 100 times more energy per unit of uranium than today’s light-water reactors.
The “waste” from light-water power plants is actually full of actinides that can be readily “burned” in a fast neutron spectrum, as in both fast neutron fission reactors and in fission-fusion hybrid reactors, and ironically the long-term radioactivity of the waste (hundreds of thousands of years as opposed to hundreds of years) comes precisely from these same “burnable” actinides.
Even in the light-water reactors that dominate today, the refining, enrichment and fuel fabrication stages are about as costly per unit of produced electricity as the needed uranium raw material itself. The latter is basically a non-factor. Uranium as a mineral could become much more expensive and it would not affect the cost of nuclear power very much at all, simply because the fuel cost is such a small share of the lifetime costs of the plant.
The same is however not true for wind and solar power, which actually do have very low EROI values (around 4-5 as I recall) and, in particular for wind power, require enormous amounts of steel and concrete in relation to the lifetime production of energy, and in both cases large amounts of copper and to some extent rare-earth minerals like neodymium.
So to summarize again, I think the EROI issue will be relevant mainly in two places: Many petroleum and natural gas producers (like the US, with its shale schemes, but also Russia as far as oil is concerned) and in solar and wind power. But not in coal (in countries that have lots of it, and the top three happen to be the US, Russia and China), and not in hydropower (but there you have the issue of needing actual rivers that are suitable) or nuclear power (which has other issues, such as the fact that it does come with some risk and that many people, rightfully or not, are strongly opposed to it).
Verethragna, thank you for the detailed and thoughtful response. When I was initially replying to you, I actually thought about the German reliance on coal-to-liquid fuels during WW II. But there was a reason why the German army attempted to capture the oil fields of Baku. There is a significant difference in the energy efficiency of converting coal to liquid fuels and crude oil to liquid fuels. And that translates into a difference in cost. But of course, you’re right, there is increasing research today in improving technologies for converting coal to liquid fuels for use in transportation. The associated CO2 emissions remain staggeringly high, unless combined with CCS. But CCS again reduces EROI, which increases the overall cost of the resulting fuel. As far as I know, it remains a question whether CCS can be scaled up in a cost effective manner.
You’re also right to point out how we have failed in North America to develop electrified rail, which significantly reduces the dependence on diesel fuel for transportation. However, I’m somewhat familiar with the Canadian mining industry in the north, and I can tell you that the majority of mines are hundreds of kilometres from the nearest railroad. That’s not going to change.
I don’t have time to respond to all of your points, especially as you’re clearly more knowledgeable than me in these matters (so it would take some digging that I don’t have time for). All I can say is that if you’re correct, that coal will provide an affordable energy source that enables us to continue to grow our economies, so much the worse for us, and everything else. This brings me back to what sometimes puzzles me in Michael Hudson’s writings (and not only his). Surely at this point what should concern us (if we care about the common good, which I believe Michael Hudson does) is not how to grow but how to reduce our overall economic throughput in an orderly and survivable manner? (Probably not possible I realise.) It’s simply a matter of understanding the implications of exponential growth on a finite planet. More energy use translates into more throughput, which means greater resource depletion and increased waste. We all know where this leads.
Finally, you’re right to point out that the West’s insistence in forcing the rest of the world into a new arms race through its reckless belligerence probably means that such considerations have been tossed out the window for the time being. Which is a shame, as we’re running out of time.
“It’s not necessarily the case that these countries are running out of cheap energy…”
A fascinating and important conversation that I will think about far longer. However, I find no prospect of China running out of cheap energy, quite the reverse actually, and the development level of China now and the partnerships China has formed will provide for the indefinite development of these non-Western partners.
It’s worse than this. I did take a history of economic thought course in the late 1990s when I was enrolled at a certain prestigious American university. That class in particular and the entire economics curricula in general are utter tripe. The history of economic thought class very conspicuously made no mention of John Stuart Mill, Marx, or Keynes. It did curiously glorify David Ricardo and Milton Friedman. Even worse, that class completely erased from history Hayek, Walt Lippman, and Ayn Rand. Neoliberalism as preached by Hayek was simply stated as an irrefutable postulate without any historical context, devoid of discussion on which economist said what, devoid of what are the disadvantages or advantages (if any) of neoliberalism.
As for my spurious degree in economics, the entire curricula indoctrinated me into believing in the so called “efficiency” of the “free market” or “free trade.” Political economy is fundamentally a social science that studies money: what is money, where does money come from, where does money go, and what are the social, political, and economic consequences of said money. Very curiously, I took three and a half years of economics courses, and no economics professor or graduate student teaching assistant bothered to define what is money and what does it do. The “economics” that I studied does not discuss money or how economics and polity are inextricably linked, instead focusing on price and marginal utility. I remember trying to wrap my head around using multi-variable calculus to calculate the derivative of a marginal utility function and the integral of the area underneath the curve from point x1 to x2 of the marginal utility and marginal cost curves. Remember, the point at which the marginal utility function and the marginal cost function meet is the equilibrium, and this equilibrium is the most efficient price. It’s efficient! It’s optimal!
I remember how lonely and ostracized I felt when I summoned the courage to ask the economics professor whether or not applying intricate math to supply and demand curves has any practical value in reality. I also asked how do we know that what we are measuring in theory is actually useful. I felt the wrath of 200-300 students, some of whom I thought were my friends, because I (momentarily) had the audacity to question what I was being coerced to learn. That really hurt. I would have fared better had I showed up in church and declared that Jesus is a homosexual. Several professors threatened to fail me, and I relented. Subsequently, I aired my grievances with my parents, numerous academic counselors, more delusional economics professors, and even the assistant dean of the school. I didn’t find any sympathizers. I was to blame for my failing grades. How did the child in The Emperor’s New Clothes have the mental fortitude to swim against the stream?
Well, I eventually graduated but not before getting PTSD (no joke). Let me also give a special middle finger to Mankiw and Bernanke for writing fictional textbooks that are so awful that the books caused me insomnia. Most ordinarily bad textbooks are soporific.
You would probably enjoy Steve Keen’s work Debunking Economics
You are not alone in your scorn for the priesthood of the economics academy which masquerades as a science
“The history of economic thought class very conspicuously made no mention of John Stuart Mill, Marx, or Keynes…”
This is distressing and from my perspective completely misguided. How can a general economic history or thought course not focus with sympathy on a Mill and Marx and Keynes? No such course for me.
What I did and always recommend to students is read course evaluations and choose courses of direct appeal, courses which were taught in a way that would allow me to be content and successful.
I am saddened about your experience.
Michael Hudson:
“And most of the BRICS country economists, like Chinese economists, have been trained in the United States, and there is no history of economic thought taught in the United States anymore. There’s no economic history that’s being taught, and so the BRICS countries aren’t even aware that their natural economic interest is to get rich in the way that the United States did. And what they do see is China’s remarkable economic takeoff.
“And China calls this socialism with Chinese characteristics, but it could be called the American economics takeoff with Chinese characteristics, because that’s the American economic takeoff. Oh, it was considered socialist because it relied so heavily on the public sector.”
I truly admire Michael Hudson, but these 2 passages are quite incorrect as far as prominent Chinese economists and the Chinese economic system are concerned. The Chinese economy is indeed socialist with Chinese characteristics. I am hurt to think that Hudson would seemingly dismiss what Chinese economists have so painstakingly and distinctly and successfully designed.
https://fred.stlouisfed.org/graph/?g=1pPhr
August 4, 2014
Real per capita Gross Domestic Product for China and United States, 1977-2023
(Indexed to 1977)
https://fred.stlouisfed.org/graph/?g=1pOZz
August 4, 2014
Real per capita Gross Domestic Product for China and United Kingdom, 1977-2023
(Indexed to 1977)