Assisted Suicide of Europe (MUST SEE)

August 23, 2022

Finance Capitalism’s Self-Destructive Nature

July 20, 2022

Posted with Michael Hudson’s permission

Transcript of Interview on The Left Lens with Danny Haiphong May 25th, 2022

DANNY HAIPHONG: Good afternoon, everyone. Happy Wednesday, May 25th, welcome to the stream, to another left lens. Today we have a very special guest so as you’re coming in make sure you are liking the stream sharing it, make sure that you are subscribing to the channel and hitting that notifications bell, and as always you know please do support this work here at this channel and all the work that I do at But with that said I want to introduce our guests because we have a lot to talk about over the next hour and it is economist Michael Hudson.

He is the author of the new book, The Destiny of Civilization: Finance capitalism, Industrial Capitalism or Socialism and I’ll pull that up from his website very soon but I want to just say about Michael Hudson is that he’s been someone I’ve been following for quite some time. He has been making the rounds on various programs talking about political economy and he’s one of the foremost voices of understanding political economy today. Hi Michael, good to be with you thanks so much for joining us today

MICHAEL HUDSON: Good to meet you, Danny.

DANNY HAIPHONG: Very very good to meet you. So I’m going to pull up your new book in a second just on your website so people know where to go and I’ll make sure to link that in the chat so people know where to get it but I want to talk about first, so I mean we’re in an economic catastrophe in a lot of ways currently and there’s a lot of talk about, inflation and money, prices are skyrocketing, and one thing I really appreciate about your work is that you really do focus on political economy and you have been talking a lot about finance capital and something called super imperialism which you’ve written a book about and that has been updated several times even just last year so I wanted to get your take on the role of finance capital uh under this imperialist arrangement and in this time of the neo-liberal era in the united states and across much of the West in the world.

What is finance capital’s role? It seems so dominant now, it seems like the dominant class at this moment that really does control the levers of economic development. Could you talk about what role it plays and how it has spurred the crises that we’re going through today and you could talk about inflation but I definitely want to just kick it to you there so our viewers can get an understanding of the economics and an analysis of this.

MICHAEL HUDSON: Well, most people think of all kinds of capitalism as being the same and the assumption is that industrial capitalism of the nineteenth century somehow was always financialized because there were always banks but financial capitalism is you just pointed out is a political system and as a political system it’s very different from the industrial capitalism dynamic. In industrial capitalism, the whole aim or the hope of the industrial capitalists in the late nineteenth century, especially in Germany and central Europe was that banking would no longer be just usury, it wouldn’t be just consumer lending to exploit labor, and it wouldn’t be lending to the government somehow.

The financial system  would recycle the economy savings and money creation and credit into industrial production and would finance the means of production to make that productive instead of predatory and parasitic as it became and that seemed to be the way that industrial capitalism was evolving up until World War I. Everything changed after that all of a sudden you had the financial system take over as a result of the crisis caused in the 1920s by the German reparations debt that couldn’t be paid and the inter-ally debt that was insisted upon to repay the United States for the arms that have supplied Europe for a century into World War I. Well, the result was a huge depression.

The allies said, well, we didn’t expect to actually have to pay the United States. If we have to pay the United States, then we have to charge reparations on Germany and for a decade there was a debate between John Maynard Keynes and Harold Moulton and others saying that these debts can’t be paid. How are you going to handle a situation where the debts can’t be paid?

The finance capitalists then were the basically the ancestors of today’s neoliberals and they said any amount of debt can be paid by any country if it just lowers the living standards and squeezes labor enough and that’s what basically the philosophy of the IMF ever since world war II when third world countries can’t pay the debt, the IMF comes in with an austerity program and say you have to lower wages, you have to break up labor unions, if necessary you have to have a democracy, and you can’t have a democracy unless you’re willing to assassinate and arrest the labor leaders and the advocates of land redistribution because a democracy means basically rule by the financial sector  centered in the united states. And so finance capitalism ever since WWI and especially WWII and especially since 1980 is the nationalistic doctrine of American banks and the American one percent, and the American financial sector that is sort of merged into a symbiotic unit with the finance insurance and real estate.

In other words, finance capitalism instead of trying to promote overall economic growth for the 99 percent, instead of financing the industrialization of an economy with rising productivity and rising living standards, is now cannibalizing the industrial sector, cannibalizing the corporate sector. As you’re seeing in the U.S., finance capitalism is the economic doctrine of deindustrialization that has occurred in America in England and is now occurring in Europe.

Well, the problem is how do you survive if you’re not industrializing, if you’re not producing your own means of subsistence and how are you going to get this from other countries? Well, the answer is you don’t go to war with them like countries used to go to war with each other to grab their money and their land, you use finance as the new means of war so finance capitalism is the tactic of economic warfare by the United States against Europe and the global south to sort of draw all of the economic surplus of these countries in the form of debt service and the debt service is supplied by basically economic rent seeking from land rent, natural resource rent,  and just plain interest charges on economy. So, none of these are really the result of industrial profits that are made by employing labor and uh selling its products at a markup.

Finance capitalism is not based on surplus value like industrial capitalism was. In fact, it destroys industry and in this cannibalizing of industrial capital, it basically dries out the economy and makes it unable to break even or even to function and in the United States today, for instance, if you look at the balance sheets of corporate revenue much of it is spent on stock buybacks. You buy back your own stock or dividend payouts. Only eight percent of corporate earnings are spent on new capital investment research and development: factories, machinery, and means of production to employ labor.

How did General Electric (GE) go broke? Basically, Jack Welch said let’s use our income not to continue to invest in making more electronic goods and services and appliances, let’s use it to buy our own stock that’ll push up our stock and essentially, we’ll just sell off our divisions and we’ll use the money of selling off our washing machine companies and stoves and sell it off and we’ll just pay it to the stockholders. That’ll push it up and by the way his salary was based on how much he could push up the stock of GE and he was paid in the form of stock options. Well, all of this is now the normal corporate behavior in the United States and corporations are no longer led by industrial engineers as they were a few centuries ago in the nineteenth and twentieth century.

They’re led by financial engineers of the chief financial officer and the ideal of these corporations is to make money financially not by industrial investment….. so on the narrow microeconomic level finance capitalism is a way of basically selling out a company and giving the proceeds to the stockholders and the bondholders but as a political system, because it is so destructive of the economy as you’ve seen in the United States and you’ve seen in Britain through de-industrializing it, it becomes belligerent in an attempt to make other countries just as equally paralyzed by making these countries pay tribute to the U.S. and England and the financialized economies by means of financial engineering, by means of debt service, by means of selling their mineral resources, their public utilities, their land, their roads all to foreign investors–basically to who borrows the money that’s just simply created in the U.S.  and to save all of their money in their central bank reserves in the forms of loans to the U.S. treasury holding treasury bonds which is how the international monetary system worked until just a few months ago when everything changed.

So if you’re England and America right now you can look at President Biden’s speeches and he said well, China is our number one enemy because it’s competing unfairly. China is actually subsidizing industrial development by having its own infrastructure. It gives free education instead of privatizing education and making its labor pay for it. It has public health instead of privatizing social medicine like we do in the United States and making employers and workers pay for it.

Well, industrial capitalism in the nineteenth century was all in favor of strong government infrastructure. The ideal of industrial capitalism was to keep the wage costs of production down not by reducing wages but having government provide a basic infrastructure to cover the basic
needs of employees. The governments would provide free education so that employers didn’t have to pay for it. The governments would provide medical care so that employees didn’t have to pay for it and employers wouldn’t have to pay employees enough money to cover the education costs and to cover the medical care costs. The government would build roads and infrastructure and everything to facilitate the overall cost of doing business by industrial capital.

Well finance capitalism is just the reverse. Finance capitalism wants to privatize and take education, medical care, roads, turn the roads into toll roads, and take all of these and privatize them and make them financial  corporations that will essentially pay out their economic rent to the bondholders and the stockholders and this economic rent adds to the cost of education and everything else that workers need to live on so the result is to make it a high cost economy and that’s why Biden has said China and Russia are America’s enemies because the only way that America can succeed given our privatized economy, given the fact that Americans have to pay up to forty three percent of their income for rent, given the fact that eighteen percent of America’s GDP is for medical care, given the heavy student loan debt–only if other countries tie themselves in the same knot, only if other countries impose the same economic overhead on their labor force and on their industry can there be equal competition.

If other countries have a mixed economy and are more efficient because they have an active government providing basic needs, that’s “autocracy” and that’s the opposite of “democracy.” Democracy is where everything is privatized and ultimately the one percent own everything.

Autocracy is any government that’s strong enough to have its own public investment. Any government strong enough to tax or regulate the financial sector is called “autocracy” so the U.S. in the 19th century would be called an autocracy as I guess the Austrian school called it  – civilization is basically an “autocracy.”

There never has been an unmixed economy without government regulation, without a government investment, although Rome began to get to that point at the end of its empire and we all know what happened to it. So basically, finance capitalism is a predatory international economic policy aimed at draining the rest of the world all to pay the leading one percent of wealth holders in the U.S. and their satellite oligarchy in England and a few European countries.

DANNY HAIPHONG: Well, I mean that was an incredible summary with so much in there. I mean what you describe reminds me of what we have called at Black Agenda Report, this Great Race to the Bottom, like that is what finance capital facilitates because it’s you know there’s a lot of talk about outsourcing and production going from the U.S. and the West to other places, the global south, poor countries, oppressed nations, and all of it is underwritten by finance capital because it’s this international monetary system that you describe which is actually plundering the Global South for super profits and also plundering the United States and the West’s economic base for super profits.

So it’s like the super profits come rolling in from all sides and oftentimes the jingoists and the chauvinists will frame things as oh well China is taking our jobs. They rarely say Bangladesh or some other country that is actually being super exploited. So in many ways it’s framed like that to distract us from everything that you described. The fact that this class and this policy are plundering from all sides.

MICHAEL HUDSON: Well, you use the word super profit and, in a way, what is super profit? Super profit is what the classical economists called economic rent. It’s over and above profit. Profits are made by employing labor and basically that’s not how most wealth is created in today’s world. A financialized economy sees wealth is not created by making profits by investing in factories and plant and equipment and employing labor to make a profit, it’s made on getting a third world country, a global south country in debt and saying well if you can’t pay the debt yeah that we’ve given you then you have to sell off your raw materials, your land, all of your natural monopolies and the way to make money in finance capitalism is to buy up the monopolies and the whole idea of industrial capitalism was to get rid of economic rent.

The main aim was to get rid of the landlord class that was the carryover from feudalism, the warrior warlords that had conquered England and France and other countries. Land was to be brought into the public domain. That was the first item in the communist manifesto. You tax the land rent and then nationalize and socialize the land. The idea was to get rid of monopoly rent because monopoly rent is unearned income and to get rid and essentially to get rid of financial rent of interest that is just made as John Stewart Mill said and you ‘make it in the sleep’ if you’re a bond holder or a landlord. You get the rents not from playing any productive service at all but making this money in the sleep and so that has nothing to do with profits.

Unfortunately, the national income accounts don’t label economic rent as a distinct category they call any income that someone makes whether it’s a Goldman Sachs and Citibank or GE or any country and call it earnings and the theory is that everybody earns what they make but that wasn’t the idea of industrial capitalism.

The idea of industrial capitalism is from the physiocrats and Adam Smith and John Stewart Mill and Marx was that earnings were something that was actually made productively with money by employing labor to produce a surplus that would be reinvested but economic rent was unearned and that’s why natural monopolies should all be kept in the public domain instead of being available to be monopolized. So, like in America when Indiana ran into trouble it privatized and sold out the roads to be made into a toll road and now almost everybody avoids the toll roads and drives on the side roads.

When Chicago had problems paying its local debt, they sold the rights to the sidewalk and parking meters causing vast increases in the cost of living and doing business if you live in downtown Chicago where you have to park a car. So the ideal of industrial capitalism was I guess what Schumpeter called creative destruction by lowering the cost of production the way that a country would, an industrial country would win out in the world market, first England then the United States, Germany, Japan, and the way that they went out was by underselling competitors.

But finance capitalism adds as much as it can to the cost of production. It adds as much as it can to the cost of living because instead of treating education and healthcare and transportation as a public right, a natural human right, it’s all privatized by the one percent.

DANNY HAIPHONG:  Yeah, I mean it’s so true. Even in the Communist Manifesto there’s a section where Marx outlines the very idea of what socialism would look like and in it, it’s explicit how socialism will begin with the commanding heights of the economy, as you said these natural monopolies, they were going to be public owned like that’s the only way that you can have anything remotely socialist and now we’ve gotten to the point where finance capital has usurped them, has completely privatized them or is attempting to with whatever is left of the public domain, the public sector so to speak globally. And you bring up this really interesting point about the cost of everything going up, especially the cost of production.

I mean that’s just seen in how a lot of these big corporations have enormous amounts of debt now, corporate debt is at this astronomical level and you think well, look at all these super profits they’re making, look at all these huge profits they’re making. We always hear about all these corporations making these huge profits but we rarely hear about all the debt that these corporations are accumulating because of finance capital and so it’s really incredible.

I love talking about this because it’s these things that we don’t hear about because finance capital really is writing the rules and they have such undue influence over the media and over so many things. So I wanted to ask though about China so let’s just jump there because I want to ask you a question because I recently got into a debate with this, I don’t even know if I want to call a journalist but he’s a commentator, Matt Stoller. He’s very anti-China and this is a talking point especially on the far right but I would say that a lot of people think this, a lot of people think China and Wall Street are merged together, that they work together to undermine workers across the world especially in the capitalist epicenters, of the finance capitalist epicenters so to speak, U.S. and the Western countries.

Could you talk about China and its monetary system? You mentioned it briefly about why the U.S. is so hostile right now, why Biden can’t stop talking about competition and autocracy versus democracy. You talk about the differences in the monetary systems and how China treats finance because I think this is not really well understood and it has global implications. I think it has huge implications because I think there’s a general shift in a direction of how we address this flailing dollar-led economy, the global economy of imperialism and China is really at the center of this so could you speak on this if you would?

MICHAEL HUDSON: Well, what gets Americans so upset is that China’s getting rich by doing
exactly what the United States did in the 19th century. I’ve written a book America’s protectionist takeoff where I described the whole idea of American protectionism was tariff protection for its industry, government subsidized research and development, government subsidy of industry by having infrastructure as a fourth factor of production alongside land labor and capital – and it was supposed to have public banking.

So basically China, like the United States, said we want to raise the living standards of labor not because of an abstract ideal but because highly paid labor is more efficient labor, a highly paid labor is more educated, it’s better fed, it’s healthier and the Americans in the nineteenth century pointed out that America was the highest paid labor in the world but it was also the most productive and high paid labor outsold pauper labor.

Well China began under Mao with, you’d look at pictures back in the fifties, and even early sixties and you’d see masses of beggars and I’d look at the pictures and I said how on earth are they going to solve this problem? Well, they actually did it and China realized that in order to survive in the modern world you had to have uh well-paid, well-housed, well-fed, well-educated labor and they’ve done it.

The difference is that America had kept money creation in the hands of the treasury ever since the greenbacks in America’s Civil War. Basically, the government created money but in 1913, JP Morgan and the financial sector got together and they said we’ve got to get the government out of money and credit. If we can control money and credit, we can control the economy so they convinced President Wilson to have the Federal Reserve. They said we’re not even going to let a treasury official be on the Federal Reserve.

We’re going to move the Federal Reserve banks out of Washington. We’re going to have the key bank in New York where Wall Street is the ideal of a Federal Reserve to make a centrally planned economy and America is a much more centralized planned economy than China but its centralized planning is on Wall Street by the financial sector, by the leading financial corporations instead of the government.

So, where America took economic forward planning out of the hands of the government in 1913, China has kept the financial system in the hands of the government. Let’s look at how these two countries create money in a different way since the Obama depression began in 2008.

The Federal Reserve has created a tidal wave of credit, all into the stock market, in the bond market, all of this recent zero interest policy. This flood, these nine trillion dollars of federal reserve credit has only been to support banks, real estate prices, bond and stock prices, to support property prices. That’s not what they do in China, although the prosperity that China has created has increased uh housing prices and there has been private credit increasing housing prices. China has kept money creation in the hands of the government itself so that when the government creates money it can finance the creation of factories plant and equipment, dams, transportation infrastructure, public housing.

It doesn’t create money to lend to financial speculators and stockholders to increase their holdings, it creates actual tangible means of production. Now of course, if you create tangible means of production and employ labor and have high speed railroads and research laboratories,  you’re going to overtake countries that are busy closing down the factories and cutting back research and development because they want quick payouts.

So the chief public utility to be kept in the public domain, (China realizes and has realized from the beginning) is the banking system and credit creation even so there’s still private credit creation to some extent. They’ve also let some participation by American Wall Street firms such as Goldman Sachs because it’s hoped, it wants to avoid war and it hopes that it can by providing opportunities for financial profit to American companies that will somehow uh convince Wall Street to resist the Biden administration’s race hatred of China and the attempt to move towards a new war against China.

Obviously, the assumption that China made that seemed rational at the time was well the American economy is run by Wall street so if we can have Wall Street say we’re doing just fine with China, everything’s going to be okay. But Wall Street and the Federal Reserve bank and the  treasury have not even been consulted on this year’s war, NATO’s war with Russia in Ukraine at all. It’s Blinken and Biden and the neocons basically are waging a war that has sidelined finance and the result is to create the present crash in stock market prices and the parallel decline in bond prices.

So, finance capitalism is intrinsically self-destructive whereas industrial capitalism is self-expansive. Finance capitalism is self-destructive and that’s exactly what’s happening today and that’s what China wants to avoid by basically following the logic of what used to be called industrial capitalism.

By the 19th century, everybody used the word socialism and it wasn’t only the Marxists that were using the word socialism. There were Christian socialists, libertarian socialists, anarchist socialists and all different kinds of socialists. They recognized that you have to have the government sponsorship of a balanced and fair economic development. You have to prevent people from getting rich not by providing any productive service at all but just by being good rip-off artists and that’s basically what finance capitalism is: opportunity for rip-off artists to get rich uh by taking money away from the 99 percent, into their own hands.

DANNY HAIPHONG: Yeah, and that’s exactly what has happened and we’ve seen the differing results between China and the United States since that crash. China was able to sustain growth despite the worldwide economic crisis. As you said, living standards still rose. I think wages were going up something like seven to ten percent every year after the financial crisis and a lot of that was because of investment in jobs.

I’ve spoken to people in China and they say well in China if you go work for a factory, wages tend to rise and actually workers want to go there and sometimes they don’t want to leave even though China is trying to move more into the high-tech sector and the service sector. A lot of people want to stay in the factory jobs because it’s paying and it has some of these benefits and subsidies that are very alien here now.

I tell people there’s a housing allowance and they’re like what’s that? Like how could you say that? It’s China! China’s horrible! It’s like, well, you know factory workers have a housing allowance. How are you going to reproduce labor? We look at Marx and China’s very big on Marx. Look at what Marx was saying you got to reproduce the worker, you got to make sure that the worker has what they need, like that’s the bare minimum of what any economy should do but that’s what capitalism was originally supposed to do.

You reproduce the worker so you can extract the surplus. Finance capital is a great race to the bottom that workers oftentimes are not reproducing themselves. There’s a huge crisis of life expectancy and all sorts of things that didn’t used to be characteristic of capitalism. Standards used to rise as capitalism developed more advanced productive forces.

You mentioned this current crisis of the dollar and finance capital kind of being sidelined in the Ukraine crisis. I find this very interesting because finance capital is so hegemonic and it has so much influence over Washington and Europe but what you’re saying is very true because and we just see it that there’s just a catastrophe. There’s this huge inflation and there’s the crisis of the dollar like what’s happening here?

How come it seems that the further and further the United States gets into this proxy war with Russia over Ukraine, the more and more it deepens its involvement, and it’s been a long involvement, it’s not just since February, but ever since this period we’ve seen just this impending economic collapse. So, what’s happening here? Why is it that finance capital is sidelined and how do you see this going with the Ukraine crisis especially around the dollar?

MICHAEL HUDSON:  What do you mean by crisis of the dollar?

DANNY HAIPHONG: Well, it seems like what the United States is trying to impose its hegemony through its foreign sanctions, is having this blowback effect where now you have countries seeking alternatives to the dollar and the U.S. seems to be more economically vulnerable even though it’s expanding and trying to dominate. It’s this very strange contradiction that feels very unstable and it feels like the dollar is artificially inflating itself as it is also dealing with the fact that there is no end game here in Ukraine. It seems like messing with a big country like Russia and its relationship to Europe is moving us toward economic catastrophe, an economic crisis if there’s not already one underfoot.

MICHAEL HUDSON:  No that’s not what’s happening with the dollar at all. People with all of the emphasis on America’s war against Russia to try to break it away from China before going to war with China, the first thing that America wanted to do was to lock in its control over Europe because that’s the easiest way to get things is you want to take over the richest economies in the
world and lock them into the United States and that means taking over the Eurozone, England and Japan. And the dollar has been soaring against these currencies.

To put it another way, the Euro has been plunging toward one dollar per Euro. The pound sterling has been plunging to one dollar per sterling. The Japanese yen has been plunging even more so there’s a huge movement to safety into the dollar.

The Americans have successfully destroyed the basis of European industry. They’ve finally beaten Germany. They’ve left Germany without energy and GDP in any country compared to energy per worker and basically the productivity that makes goods is basically embodied energy and Europe has been getting its energy from Russia in the form of gas and oil.

Well, the United States has asked Europe to commit economic suicide basically by saying, “don’t buy Russian gas, wait three or four years, spend five billion dollars on building new ports so that you can import American liquefied natural gas at seven or eight times the price and meanwhile let your chemical industry, your car industry, your basic industries go bankrupt.  Take it on the chin for America and Europe said, “okay not Europe but the politicians that America have meddled in European politics to promote to sign on the dotted line for treaties” made that decision so even if the Europeans don’t want to commit suicide, America has its proxy politicians in its Tony Blairs, in the head of the social Democratic Party in the advocates of pollution and global warming at the head of the Green Party.

You have in England you have a Boris Yeltsin and in Japan you have leaders who are willing to continue to sacrifice Japan’s growth to serve the United States. So these countries, the investors in Europe, England, and Japan are moving their money into the United States especially because the United States is raising its interest rates through the Federal Reserve and that’s telling Japan and Europe not to do it so the Eurozone has very low rates.

People are borrowing at under one percent and moving it into the United States to make two, two and a half percent. Japan has almost interest-free money from the central bank. It’s moved its money into the U.S. so the dollar, while I won’t say it’s soaring against these currencies, other currencies in the U.S. orbit are collapsing against the dollar because they’re following U.S. advice.

So, I think when you say other countries are breaking away, you’re talking about the bulk of the world, Central Asia and Latin America and China and the key to the present New Cold War is America has to achieve its almost dictatorial dominance over Europe and Japan. It’s the client oligarchies and client dictatorships and without realizing that this is American democracy, where the leaders of the whole world follow what the United States tells them to do because the United States identifies itself as the democratic center.

So democracy no longer means a political system where voters get to determine who is in charge, democracy is the policy dictated by the United States State Department. Any country that goes its own way or develops the power potentially to go its own way such as China and Russia is called an autocracy. So, you have to realize in today’s world democracy is autocracy and autocracy is democracy.

You could say yeah, the question is of course will the world really break into two halves and it looks like it is breaking into parts and there will be the U.S. and its allies, the U.S., Europe, and Japan against a Eurasian core that will go hand in hand with Africa and Latin America and other Asian countries who are able to rely on trade and investment among themselves. And the United States by seeming to isolate Russia and China and Iran and other countries actually is isolating its own dollar from the rest of the world. So, there is an iron curtain but it’s not to keep other countries out, it’s to keep its own allies within.

DANNY HAIPHONG: Do you see this succeeding? We’ve been hearing a lot about Russia’s relationship with Europe and just how deep its energy sector is with Europe and how that relationship is a very difficult relationship to break economically. Although Europe is doing everything it can, everything you’ve described. It made me think about how throughout this crisis Europe, because of the dominance of the U.S. and just listening to whatever the U.S. said, was actually going way above and beyond what the U.S. would commit to in terms of Russia and how economically they would wage this kind of warfare. But China and Russia, with Russia’s energy and its natural resources but China I think in a broader kind of portfolio, have so much to offer to Europe, do you think that this will succeed?

Europe has been going the road of austerity for many years but this seems like such a huge step in that direction. Europe could look very much like the United States very soon. Do you see this working given how China has so much to offer it and already has a lot of countries in Europe maybe not the biggest of the clients like the UK for example but a lot of European countries have big relationships with China even the UK does despite all of the nonsense, all the New Cold War stuff. What do you think? Do you think this will work?

MICHAEL HUDSON: There’s a lot of crap that futurists tend to fall into and that’s imagining that countries are going to act in their self-interest. This is the mistake Stalin made with Hitler. He thought if Germany attacks Russia in World War II, it’s obviously going to lose. No sane country would attack Russia just as winter’s coming but Hitler attacked Russia. You’d think that if you tried to say what is a logical future.

Let’s go back to 1991 when the Soviet Union self-dissolved. The whole idea, the dream at that point according to Russia’s leaders was well, if we can have peace, we’re not going to have a war budget anymore. Europe is going to invest in us and help us rebuild a rationalized, efficient industry and we will trade with Europe and we’ll both get rich on mutual trade.

Well, this terrified the United States. It said, “oh my! We want it, we Americans want to be the beneficiaries of Russia.” We don’t want to trade with it. We want to carve it up and privatize it and take over. Basically, have Wall Street take over its oil resources, its gas resources, its nickel resources, its electric utilities. The last thing America wanted was this symbiotic mutual gain between Europe and Russia and I think that Putin and most of the leaders at that time expected that Europe would act in its self-interest and they could both end up gaining.

But that’s not what happened obviously. Europe followed American dictates and continues to because it’s, again, its leaders follow, its leaders are really just like Zelensky in Ukraine, they’re just as dependent on what the State Department dictates to them to do as Zelensky is. And there’s something evangelistic about it.

The Europeans I’ve spoken to really believe that America is the land of the future and that neoliberalism, that finance capitalism, somehow is going to be an ideal of private enterprise. They’ve bought the rat poison, they’ve eaten the rat poison, and they actually believe it and think of themselves not simply as servants of the United States following what it’s doing. As the Pakistan former Prime Minister said a few weeks ago, slaves of the United States policy, they actually are evangelistic promoters of neoliberalism and as sort of disciples, just as bishops you could say really. It’s like a religion and they treat the American-centered neoliberalism as the new religion . It’s literally a crusade against Russia and Europe and I think this has shocked Putin.

I would imagine the Chinese leadership also thinking: How can Europe be so completely unrealistic? How can its media lie so constantly about what’s really happening in Ukraine? How can Europe deify the neo-Nazis in Ukraine as freedom fighters, as heroes, as wonderful people to be supported? I think this has been such a shock to the Russian leadership that they realize finally that, well, Europe is not going to act in its self-interest.

There is not going to be any mutual gain.  Europe again and again is just going to grab any money that we have there like they’ve grabbed our whatever was in European or American banks. There’s really nothing we can do. So there’s been a fundamental reorganization with Russia and the rest of the Shanghai Cooperation Organization (SCO), meaning not only with China but with Iran, with India, with all of the other Eurasian countries. So, in that sense the United States has brought about exactly what it feared. The whole rest of the world is going its own way productively in a capital investment way, raising living standards, things that democracies are supposed to do well.

In the United States, we really don’t have democracy because the political parties are controlled by the donor class, the one percent, that’s what the Citizens United Supreme Court ruling meant. The United States is left without any means of self-support and Europe will be left without any means and self-support at some point. Europe may say, gee we made a mistake, maybe we should have tried to profit from Russia because everybody else is profiting with and getting Russian gas and nickel and China and other countries are rebuilding Russian industry and we could have had our car industry build up Russia but we don’t have a car industry anymore because it doesn’t have the gas that it needs and the raw materials and titanium it needs from Russia so now, we’ve seen other countries replace us.

And so, Europe has been rendered pretty much obsolete and even if it says we made a mistake, let’s be friends again, I don’t think Russia or other countries will trust it mainly because they can afford not to trust it.

They say, why take a risk with trusting Europe may not just continue to be America’s poodle?

Why take a risk? Why not just say, we’re doing just fine the way we are? Why not just work with each other peacefully? And all that the United States can do about this is threaten to bomb it and the way to stay away from this threat is simply to say look, you go your way, we’ll go our way and to have enough of the military between them to defend themselves against the American potential military attack despite the almost eight hundred military bases the United States has. If the United States is not getting foreign exchange from these countries anymore, the dollar with the euro and the yen and the sterling will all go way down against the Eurasian currency block and they’re going to move into a common block with their own counterpart to the IMF, their own counterpart to the World Bank, their own trade organization and the world will be split into two parts – just like the world split when the Roman empire fell apart and the east went forward, Western Europe went down. This is really the final submergence of western Europe.

DANNY HAIPHONG:  Yeah, I mean you have more activity now in the BRICS plus, right. The BRIC countries are trying to move forward and add more partners and expand their financial operations. I mean there’s so many multilateral institutions mainly led by China with Russia’s heavy involvement and in other countries that are building a kind of independent monetary system and economic development system that can as you said ‘avoid the risks’.

The Ukraine crisis is such a huge deal in part because of how geopolitics like you were saying, geopolitics plays such a big role. What the United States has done and what Europe has done during this Ukraine crisis is show countries like Russia and China that they not only cannot be trusted but it’s almost a guarantee that not only will this Ukraine situation have no quick ending right, there’s no like, we’re pulling out! The ball is rolling and they can’t catch it. They’re not going to be able to stop what they’re doing. There’s so many issues with that but they’ve even escalated the situation. You have countries like Finland and Sweden saying we’re going to join NATO. You have just so many, just all of these points that show that the United States and Europe can’t be trusted.

What are you to do other than make sure that you can keep the right, as China says, to sovereign economic development safe? And the only way you do that is by increasing that sovereign part, sovereignty, and I think Russia learned a big lesson here. I mean you mentioned those assets that were stolen. They were just stolen. It was bigger than Afghanistan which had the same situation happen to it but with Russia it was probably the biggest problem with all the economic moves that were made against Russia, the assets being stolen right out from under it. That’s a huge blow economically and it facilitated so much change.

But I wanted to and you know this is the last question because I feel like a lot of these developments are leading to a positive thing that we see countries like China and Russia increase the sovereignty of their economic development models. Can you end with talking about socialism and you know, where do you see this concept of socialism going as an economy, as
a political economy?

We know China has its model, other countries are trying their own models, but what do you think are its prospects now in this environment because China has its particular model, it seems like a lot of countries want to emulate that. You see Cuba and other countries wanting to understand how to do what China has done because it is an economic miracle in a lot of ways.

You were talking about how China was living, how people were living in China just in the sixties and seventies, it’s just a completely different situation. What do you see the prospects of it in this a very chaotic environment, the geopolitics imperialist finance capital it’s creating all this chaos, what do you think the prospects are and could you I guess enlighten our audience about socialism and your work on it?

MICHAEL HUDSON: Well socialism is really how industrial capitalism of the 19th century was
supposed to evolve. Everybody thought that it was going to evolve into a more democratic system because the first aim of industrial capitalism, what it really needed politically was to get rid of the landlord class because there’s no way that, as David Ricardo pointed out, there’s no way that England could become the workshop of the world if you let the landlord class continue to get more and more land rent and force labor to pay more and more for its food.

Today, it’s housing as well as food. There’s no way that it could be competitive so in order to get rid of the landlord class, you had to get rid of the house of lords in England and the upper house in every European country because the upper house and the senate were controlled by the hereditary landlords and so industrial capitalism backed democracy.

Already by 1848, the year that the Communist Manifesto was written, that led to revolutions all over European countries getting rid of the old aristocracy. Well, the rentiers fought back and actually it was wasn’t until World War I that the monarchies were overthrown and the aristocracies connected to the monarchies and land no longer was owned by a hereditary class. It was democratized but it was democratized on credit and that you had the banking system replay the role that the landlord class had played out before and the bankers were the new rentier class. The bankers were the new people whose interest charges and debt services and privatization of economic rents prevented economies from underselling non-rentier economies.

So, socialism was basically getting rid of the free lunch. Marx described capitalism as being revolutionary because he said what was revolutionary was getting rid of all of the unnecessary cost of production and that meant the unnecessary rentiers, the rent seekers, the coupon clippers, the financiers, and the monopolists. Everybody could agree that socialism was getting rid of this parasitic class that was not necessary for economies to grow and actually whose takings slowed the economy.

Socialism was to free economies and free markets from rent seeking, not freedom for rent seeking. After the 1890s, socialism was to get rid of a free lunch income whereas finance capitalism is all about how to get a free lunch if you’re a member of the one percent.

So in one sense, socialism is freeing economies from the legacy of feudalism which fought back in the modern world into a kind of neo-feudalism operating through financial control, not simply land ownership and monopoly ownership. And China has been able to get rid of this and at the same time avoid the central planning that gave socialism a bad name under Stalinism because China said well, let one hundred flowers bloom and we’re going to we realize that we can’t plan all sorts of innovations because there are so many possibilities of productive innovations.

We’re going to let people get rich by being creative, by being productive, by adding but we’re not going to let them get super rich. They can get pretty rich but then at a certain point they’re so rich that they’re getting rid of a monopoly we’re going to sort of cut down the high grains of wheat as they say so they’ve got a sort of consensus government where this occurs.

Other countries will have great difficulty putting this in place because there really isn’t any economic doctrine of socialism that’s been developed recently. There’s been just an out of hand rejection of all discussion of what socialism really was and what makes a socialist economy more efficient than a finance capitalist economy and that really is the key.

If countries, if economic theory, would talk about what makes a socialist country more efficient- lower cost with higher living standards-then it wouldn’t be economics anymore because economics are what gets published in the University of Chicago economic journals. I don’t know what you should call it, futurism or reality economics. There has to be a new discipline that our countries are going to develop to try to explain how to think about developing a world that doesn’t have parasites in it.

DANNY HAIPHONG: Right, so true. I mean what you were saying about all this, it just gets you thinking about what China has done to be able to control these forces. You see it in the tech sector especially, now you see it with this common prosperity drive. Like there is a drive to control these forces that can, as industrial capitalism found out of the old in America and Europe, you let those forces get out of control and then finance capital turns around and takes everything. And China has prevented that and you don’t hear it, even in like the Bernie Sanders social democracy milieu, you don’t hear them talk about this.

They’ll say like socialism is when you have Medicare for All but it’s not just that, it’s how as you were saying, what are the forces that need to be arrested? What are the forces that need to be strengthened to be able to ensure that the public good and public wealth is protected? That’s not in the discussion. It’s still not in the discussion.

I mean, it’s not on discussion even among the most so-called progressives. But they don’t talk about it like that because as you said earlier, it’s like autocracy or authoritarianism or something when a government is strong in the interests of economic development for people. It’s almost like finance capital has dominated even just the idea of it and the idea of what socialism is and what it could be.

But Michael, do you have like five to ten more minutes for a couple of questions? We had some in the audience and I think one of them is very good and I wanted to know your take on it.
Thank you for the super chat. So, they said that the People’s Republic of China has three trillion in USD foreign exchange reserves. What measures, I know that you’ve done a lot of work in China and you’ve done a lot of work around this. This person’s asking, what measures should the central government take to ensure they don’t get seized just like how the U.S. seized Russia’s foreign exchange reserves but I’ll let you answer that because I think that’s a great question.

MICHAEL HUDSON: Well, I bet this is just what they’re discussing right now in China. Because of COVID, I haven’t gone there since 2019 because I’d have to be isolated in a hotel room for two weeks so I’m not party to their discussion but they’re obviously worried that the Americans can do to them what they did to Russia. What are they going to do?

They need to keep some dollars just to intervene in the foreign exchange market to stabilize their exchange rate but they don’t need too many dollars and in fact in the third edition of my book Super Imperialism, which is coming out in Chinese now, the first edition sold about sixty thousand copies there and it is the first book of mine translated in China. So that was all about this question that you asked. This is very much in discussion now.

How do they run down their dollar holdings and what are they going to replace it with? Well, in principle they can replace it with holding each other’s currencies: Rubles, Indian currency and Pakistan currency and with gold because gold doesn’t have a liability attached to it. It’s a pure asset.

The world, the whole world is now de-dollarizing. America has, or Biden has, killed the dollar standard. This was America’s free lunch, being able to print dollars and never have to pay them back and now countries are all going to be dumping the dollars. They realize that America is just a gangster state financially and obviously they’re going to dump the dollars and this probably will push up China’s exchange rate and countries selling the dollars will increase their exchange rate against the dollar and that will hurt their relative exports. So, I think they’re trying to figure out how we can all do this together and keep a rough parity among our own currencies while really de-dollarizing. I don’t know what they’re doing but you can be sure this is what is on the forefront of everybody’s mind there.

DANNY HAIPHONG: Indeed indeed. It’s a huge question. I mean it really is trying to unravel and get oneself out of this hegemonic system, the dollar system. It’s something that you cannot escape and there’s been so much unfair, I feel like unfair condemnation and criticism of China and other countries trying to go their own path, for just their participation, it’s something you need to participate in right now to survive absent of another system.

Last question and I mean this isn’t so related to what we’re talking about but it is I think a good super chat question and I think it gets into economics too. What are the chances that China will simply not open back up for the next ten years or so looking at this long term because of COVID-19. I don’t know what you think Michael. My opinion of that from what I’ve learned about China there is a huge domestic tourism industry and foreign tourism is very important but I don’t know for me it feels like it’s going to open up before that. It seems like the economic situation that COVID-19 restrictions are difficult to continue on permanently but what do you think? Do you think that China could maintain these kinds of hard travel restrictions for a long period? I hope not. I want to go back; I need to go back and learn more but what do you think?

MICHAEL HUDSON:  Well, I asked that very question of the universities that I’m associated with yesterday. We had a long discussion and the answer is nobody has a clue. They’ve been criticized in the West for avoiding COVID-19 but there’s no discussion in America or Europe of
long COVID and now that there’s a report that a million Americans have long COVID and it really seems awful, your IQ goes down by ten percent and it’s almost like inheriting a trust fund. You’re stupefied. As a result of that they’re also tired. Some professors I know there say that they still have not fully recovered from COVID months and months ago. They still had very low energy. There’s no way of knowing. This doesn’t look good and if the thought of staying in you know traveling all the way over there, staying in an isolated hotel for two weeks just to have a few days of meetings and then come back and be isolated again, nobody has a clue but it doesn’t look good.

DANNY HAIPHONG: No, it doesn’t and I myself, I’ve avoided COVID unironically like the plague like I am so lucky not to have caught it and part of it is U don’t want, exactly what you’re saying, long COVID. I don’t want that. I don’t want that in my life and I feel like you know I know so many people who have gotten COVID-19 and they lived through it and while they had it, it was awful. It was bad but they lived but now they have all of these other symptoms like I know people who had their whole lives kind of turned upside down because they just can’t get the energy back or the motivation or whatever it is.

It has an effect on your breathing and mental health and there’s so many aspects of long COVID that are difficult to understand and I think China you know at one point it was like a twenty one day quarantine. I know people who are traveling there and who go there often and they were staying twenty-one days you know in a quarantine hotel. I mean you know China has done such a great job containing and addressing COVID as best that they can under these circumstances. And so well of course I have my own deep desires to go back, but I totally understand why the government and why the people there who support this policy would be very careful because you have in China a population so huge. If they did what the United States did, I think the recent estimates are like one point seven million would die and then how many would have long COVID? Millions upon millions more because the case numbers would be astronomical through the roof.

MICHAEL HUDSON I am sure they’re watching what happens in North Korea which is just experiencing its first outbreak. I mean that’s sort of an example. The difference of course is that China is inoculating people and there are also pills the Chinese have sent me and many kinds of medicine in case I get COVID.

DANNY HAIPHONG: That’s great. Amazing, so before we depart Michael, I’ll stay on for another fifteen minutes or so but I definitely want you to plug whatever you’d like to plug now I will pull up the book again and your website. So, if there’s anything you’d like to plug please everyone, keep liking the stream, keep sharing and subscribing to the channel all that good stuff supporting the work at but Michael is there anything you would like to plug?

MICHAEL HUDSON: All of my articles are on my website and I’m also on patreon and they can join on patreon and I have an ongoing discussion there so the website, patreon are my favorite sites where I publish, and Naked Capitalism, the Saker, Counterpunch, my articles are usually on a lot of these different websites and you’re showing it now so yeah and the books are available on Amazon or Xlibris and you can all buy them and they’re well printed and priced not very expensively.

DANNY HAIPHONG: Great conversation Michael. Thanks so much for coming. We will have to talk again as things continue to develop so thanks so much.

MICHAEL HUDSON. It’s good to be here Danny. Thanks for having me.

هكذا غيّر بوتين ونصرالله قانون الحرب

 الإثنين 20 حزيران 2022

ناصر قنديل

منذ العام 2000 والعالم يعيش إيقاع صعود حركتين، حركة يقودها الرئيس فلاديمير بوتين في روسيا، وحركة يقودها السيد حسن نصرالله في لبنان، وقد اعتمدت كل منهما منهجاً خاصاً ومختلفاً وجديداً في صناعة التوازن، وصولاً لتحقيق التفوق الاستراتيجي، ما أتاح لهما التربع على عرش القوة، وتغيير قانون الحرب.

انطلق بوتين من روابط الدين والقومية التي تجمع مواطنيه على استعادة أمجاد تاريخ العظمة التي أصيبت في الصميم مع انهيار الاتحاد السوفياتي، ما أعقبه من إذلال ومهانة للروس بصفتهم ينتمون للدولة الروسيّة لا غير، واستثمر بوتين على هذه النهضة ليبني معادلة القوة على توظيف الأصول الثابتة للأمة الروسية، بوجه معادلات العالم الافتراضي التي تصنع قوة الغرب. فاستند إلى الطاقة البشرية لبناء جيش مقاتل يستعدّ ضباطه وجنوده للموت والتضحية، مقابل شركات متخصصة للخدمات العسكرية والأمنية واللوجستية وشركات تجنيد المرتزقة والجامعات الإرهابية الرديفة القابلة للتوظيف مثل تنظيمات داعش والقاعدة وفرق النازيين الجدد، تحل مكان الجيش الوطني بمفهومه المتوارث من الحربين العالميتين، ووظف بوتين موارد روسيا من الأصول الثابتة في المعادن والخامات والقمح والحبوب والنفط والغاز، لتكوين اقتصاد يخدم بناء فائض القوة الذي تستدعيه الحروب، مقال اقتصاد المصارف والأسهم والبورصة الذي يستند إليه الغرب ويسيطر عبره على العالم.

بالتوازي انطلق السيد نصرالله، من منسوب الكرامة الذي حملته ومثلته المقاومة وعزّزه انتصارها الأول في تحرير الشريط الحدودي المحتل عام 2000، وانتصاره بالصمود والثبات والقدرة على منع جيش الاحتلال من دخول الأرض اللبنانية وتحقيق أهدافه بتدمير المقاومة عام 2006، ومعادلات الردع التي أنتجتها الانتصارات، لتشكيل نواة جيش صغير لا ينام وهو يتجهّز ويستعدّ بكل ما تحتاجه منازلة حاسمة مع الكيان الذي يمثل صفوة ونخبة وطليعة جيوش الغرب المقاتلة، راسماً معادلات التسليح والتمكين التقني بمعايير حرب حديثة تستند الى مشاة البر والصواريخ الدقيقة والطائرات المسيّرة، مقابل جيش يملك مئات الطائرات وآلاف الدبابات وقوة نار هائلة ونصف مليون جندي، ويصنف من أقوى جيوش العالم، وقد سبق وخاض حرباً شاملة على جيوش خمس دول عربية مجتمعة على ثلاث جبهات وانتصر فيها بصورة ساحقة خلال ستة أيام، وقد جاءت وقائع الحرب في أوكرانيا تقول إن الحرب الجديدة باتت حرب مشاة البر والصواريخ والدقيقة والطائرات المسيّرة، بعدما كانت كل الحروب التي سبقت منذ الحرب العالمية الأولى حرب الطائرات والدبابات.

جاءت حرب أوكرانيا لتضع وجهاً لوجه قانون الحرب الأميركية مقابل قانون الحرب الروسية، وفي مقابل عجز جيوش الغرب عن تحمل نزف الدماء قياساً بالجيش الروسي، بفعل تباين التكوين والبنية والأهداف، ولتجنب حرب نووية مدمّرة وغير مضمونة النتائج، مع الفوارق التي راكمها بوتين لصالح التفوق الروسي، بينما اعتمد بوتين على ضباطه وجنوده وتضحياتهم وثباتهم ومن خلفهم شعبهم، واعتمد الغرب وعلى رأسه الأميركيون، على الجيش الأوكراني، ومنظمات القومية المتطرفة والنازية الجديدة، وشركات تجنيد المرتزقة، وشركات الحروب الرديفة والاستخبارية، وقدموا أسلحة وذخائر بمليارات الدولارات لتأمين أعلى نسبة توازن ممكنة في الميدان، حتى يتسنى ربح الحرب في ميدان آخر، حملته حزمات العقوبات القاتلة الأميركية والغربية، التي تستند بصورة محورية على فعالية أنابيب المال الافتراضية والى جانبها أنابيب الاعلام والمعلومات الافتراضية ايضاً، لإسقاط روسيا بالضربة القاضية؛ وبالمقابل حافظ بوتين على برودة إدارته للحرب في الميدان المباشر لضمان تقدم ثابت وتدمير منهجي لمصادر القوة المقابلة، وكان محسوماً ان يأتي التفوق لصالح روسيا في ميدان الحرب التقليدية للجيوش بفعل فوارق القدرة البشرية والتسليحية الهائلة لصالح روسيا، ولذلك وضع بوتين مطمئناً ثقله في ميادين الحرب الموازية، والرئيسية، حرب صمود الاقتصاد الروسي، وحرب بدء إنهاك اقتصادات الغرب، ومع مئة يوم من بدء الحرب ظهر أن أنابيب الغاز والموارد الطبيعية أقوى من أنابيب المال المصارف، وان الأصول الثابتة تنتصر على الاقتصاد الافتراضي، وتكرّست معادلة قانون حرب جديد، حيث قوة الأنابيب الافتراضية تكمن في تدفقها، بينما قوة أنابيب الأصول الثانية تظهر عند توقفها، وعندما تتوقف الأنابيب، يربح من يملك أنابيب الأصول الثابتة ويفقد صاحب الأنابيب الافتراضية قدرة التأثير.

في احتفال حزب الله بأربعين ربيعاً على التأسيس وانطلاق المقاومة، يحضر كشف حساب التوازن في معادلة المواجهة بين فائض القوة المادي الناتج عن مراكمة المال والسلاح والقوة النارية، مقابل فائض قوة آتٍ من التأسيس على قيمة مضافة تمثلها القضية والفكرة والمعنويات والروح، ويثبت أن فائض القوة الناتج عن قيمة مضافة قابل بصورة متكررة للتحوّل إلى قيمة مضافة جديدة وفائض قوة جديد في عملية مستدامة لا تتوقف، والحفاظ على التفوّق الأخلاقي، يتيح تكرار العملية وتصاعدها، بينما فائض القوة الصافي قابل للتآكل، فيتحوّل إلى مجرد أكوام من الحديد والمعادن، أقرب إلى الخردة، يديرها روبوتات بلا روح، وحيث تهزم الروح تحسم الحرب لصاحب الروح المتوثبة بوجه الروح الخامدة، وتتكرس معادلة انتصار فائض القوة الآتي من قيمة مضافة لقدرته على العودة الى الأصل مجدداً كقيمة مضافة، بينما يبقى فائض القوة الجاف مجرد أرقام في جداول الحساب، تفقد قيمتها عند اختبار الميدان.

معادلتا الأصول الثابتة والقوة الافتراضية، وفائض القوة والقيمة المضافة من جهة موازية، معادلتان جديدتان نظرياً في علم الحرب، تؤكدان نظرية الاستقطاب التفاعليّ لكتابة التاريخ، حيث الحروب ليست مجرد تقابل بين الجيوش عدداً وعدة، وبين الدول مالاً ومقدرات.

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Economic Rent and Exploitation: Michael Hudson, Shepheard Walwyn

June 18, 2022

Michael Hudson, Shepheard Walwyn recording May 23, 2022
Part one:

Part two here:

Jonathan Brown
Michael, welcome to the podcast.

Michael Hudson
It’s good to be here. I’m looking forward to it.

Jonathan Brown
Michael, I think you have one the most extraordinary upbringings and journeys into economics. And I just wanted to give our listeners just some sense of how you got from being the godson of Leon Trotsky all the way to what I consider to be probably the most important economist in the world today.

Michael Hudson 00:23
There’s no direct causality there that could have been anticipated. I never studied economics in college, because I went to school at the University of Chicago. We know that there were some students at the university who were at that business school. They were such strange people that we never even thought of going near them, because there was something otherworldly about them, something abstract.

My degree was in German language and history of culture, because the head of the History of Culture Department was Matthijs Jolles, a German professor and translator of von Clausewitz, On War. And in at the time, my intention was to become a musician. And I had to learn German in order to read the works of Heinrich Schenker. In music theory, my teachers were German. And for the History of Culture, most of the books that I was reading were, were all in German. And the German professors were also heads of the Comparative Literature Department and other departments. That meant that I could take all the courses cafeteria style at the university that I wanted.

I had to go to work when I graduated. I went to work for a while for direct mail advertising for the American Technical Society, a publisher a block away from the university, and then went to work for Free Press that was headed by Jerry Kaplan, a Trotskyist follower of Max Shachtman. And he wanted to send me to New York to help set up Free Press there.

Soon after I came to New York, Trotsky’s widow died. And Max Shachtman was the executor of her estate. He thought I should go into publishing by myself. And I had already had the copyrights for George Lukacs, the Hungarian Marxist and I thought tried to get funding for a publishing company with Trotsky’s works and other works. I’ve been writing a history of music and art theory. And needless to say, I didn’t get any funding because nobody was at all interested in publishing the works of Trotsky. I even tried to get Dwight Eisenhower the write the introduction to his military papers, wouldn’t work.

I was urged to meet Terence McCarthy, the father of a girlfriend of one of my schoolmates, Gavin MacFadyen. He was the first English-language translator of the first history of economic thought that was written: Karl Marx’s Theories of Surplus Value (Mehrwert), reviewing the value theory of classical economics. Terence said that he would help guide me in economic thinking if I’d get a PhD in economics and go to work on Wall Street to see how the world works. But I had to read all of the bibliography in Marx’s Theories of Surplus Value. So I had to begin buying the books, and ended up working as a sideline with one of the reprinters, Augustus Kelly, who was reprinting many of the classical economists. He was a socialist. There were other dealers in New York: Samuel Ambaras, Sydney Millman. I began buying all of the 19th-century classical economic books that I could, sinse that was the only way that I could get copies.

I took graduate classes in the evening while working at a bank for three years, the Savings Banks Trust Company. It was a commercial bank, but was acting as a central bank for the savings banks that in America finance mortgages. All their savings are reinvested in mortgages. So for three years my job was to track the real estate market, the mortgage market, interest rates, the funding of mortgages, the growth of assets by the savings banks, all growing at compound interest. All the growth in savings in the New York savings banks in the early 1960s was simply the accrual of dividends. So you’d have a step function at dividend time every quarter, going up exponentially. There was hardly any new savings inflow. It’s as if you’ve just left a given amount of savings in 1945, and let the amount rise exponentially. All this increase in savings was recycled into the real estate market.

The New York banks wanted to extend their market so they couldn’t just keep bidding up New York housing prices. They won the right to lend out of state, especially the Florida. So my job was basically seeing that real estate prices were whatever a bank would lend. At that time, banks would not lend you a mortgage if the debt service exceeded 25% of your income. And you had to put up usually 30% of the purchase price as a down payment, but possibly 10%. So housing was affordable. You could buy a really nice house for you know, $20 or $30,000. Now, it costs $400,000 to buy just a one room apartment in a condominium.

I bought a house for $1 down – it was $45,000 total. I took out a mortgage from Chase for half the price, and the other half was a purchase-money mortgage. So it was easy. Anybody coul get a house in New York at that time. Housing was readily affordable.

After I finished my PhD courses, I changed jobs. My real interest at the time was international finance and the balance of payments. So I went to work at Chase Manhattan as their balance of payments economist. This was at a time when the balance of payments and even balance-sheet analysis was not taught in schools. It was very specialised. I realised that what I was taught, especially in monetary theory, had nothing at all to do with what I was learning in practice.

In monetary theory, for instance, that was the era of Milton Friedman in the 60s and 70s. He thought that when you create more money, it increases consumer prices. Well, I thought that obviously was not how things worked. When banks create money, they don’t lend for people for spending. About 80% of bank loans in America, as in England, are mortgage loans. They lend against property already in place. They also lend for corporate mergers and acquisitions, and by the 1980s for corporate takeovers.

The effect of this lending is to increase asset prices, not consumer prices. You could say that money creation actually lowers consumer prices, because 80% is to increase housing prices. Banks seek to increase their loan market by lending more and more against every kind of real estate, whether it’s residential or commercial property. They keep increasing the proportion of debt to overall real estate price. So by 2008 you could buy property with no money down at all, and take 100% mortgage, sometimes even 102 or 103% so that you would have enough money to pay the closing fees. The government did not limit the amount of money that a bank could lend against income. The proportion of income devoted to mortgage service that was federally guaranteed increased to 43%. Well, that’s a lot more than 25%. That’s 18% of personal income more in 2008 than in the 1960s – simply to pay mortgage interest in order to get a house. So I realised that this was deflationary. The more money you have to spend on mortgage interest to buy a house as land and real estate is financialized, the less you have left to spend on goods and services. This was one of the big problems that was slowing the economy down.

Well, it was obvious to me that rent was being paid out as interest. Rent is for paying interest. If I talked with various developers about buying buildings, they said, “Well, we try to buy our buildings without any money at all. The banks will lend us the money to buy a building, and they calculate how much is your rental income going to be? That rental income will carry how much of a bank loan at a given interest charge, and lend the money to buy it.” That is how real estate rent was financialized.

Democratization of real estate on credit means turns rental income into interest, not taxes
This meant that the role that had been played in the 19th century by landlords is now played by banks. In the 19th century, the problem was absentee landlords, the heirs of the warlords who conquered England or other European countries in the Middle Ages. You had hereditary rent. Well, now our rent has been democratised. But it’s been democratised on credit, because obviously, the only way that a wage earner can afford to buy is is on credit. For an investor you can buy whole buildings on credit.

Finance has transformed real estate into a financial vehicle. So that that’s what rent is for paying interest means. There’s a symbiotic sector, Finance, Insurance and Real Estate – the FIRE sector. It’s the key to today’s financialised economy. Most real estate tax in America is at the local level, because after the income tax was introduced, commercial real estate was made tax exempt by the pretence that buildings depreciate in value, as if they don’t in fact rise in price. The pretence is that they wear out, even though landlords normally pay about 10% of the rental income for repairs and upgrades to keep the building from wearing out.

Today in New York, and I’m sure in London too, the older a building is, the better it’s built. Real-estate developers have crapified building codes so that the newer the building, the more shoddily it’s built. They call shoddy buildings “luxury” real estate, meaning is built with really not very thick walls. I think the junkiest building in New York is Trump Tower, which is sort of the model of shadiness which they call luxury. It’s very high-priced.

The academic economics curriculum finds unproductive credit to embarrassing to acknowledge
While I saw the importance of finance and real estate, none of that was discussed in the university’s economics courses at all. The pretense is that money is created by banks lending to investors who build factories and employ labour to produce more. All credit is assumed to be productive, and taken on to finance productive investment in the form of tangible capital formation. Well, that that was the hope in the 19th century, and actually was the reality in Germany and in Central Europe, where you had banking becoming industrialised. But after World War I, you had a snap back to the Anglo-Dutch-American kind of banking, which was really just the Merchant banking. It was bank lending against assets already in place.

Classical economics as a reform program to free economies from economic rent and rentier income

I realised that the statistics that I worked on showed the opposite of what I was taught. I had to go through the motions of the PhD orals. and avoided conflict by writing my dissertation on the history of economic thought, because anything that I would have written about the modern economy would have driven the professors nutty. Needless to say, none of the academic professors I had ever actually worked in the real world. It was all very theoretical. So that basically how I came to realise that the 19th century fight for 100 years – we can call it the long 19th century, from the French Revolution, up to World War I, and from the French Physiocrats, to Adam Smith, Ricardo and Malthus, John Stuart Mill, Marx, Simon Patton and Thorstein Veblen – was the value and price theory of classical economics to quantify economic rent as unearned income.

The purpose of value and price theory was to define the excess of market price over actual cost value. The difference was economic rent. The essence of classical economics was a reform campaign – that of industrial capitalism. It was a radical campaign, because the basic cost-cutting dynamic of industrial capitalism was radical. It realised that in order to make Britain, France or Germany, or any country competitive with others, you had to get rid of the landlord class and its demands for economic rent. You also had to get rid of monopolies and their economic rent. You had to get rid of all payments of income that were not necessary for production to take place. The aim was to bring prices in line with the actual cost value of production, to free economies from this rake-off to unproductive investment, unproductive labour and economic rent – land rent, monopoly rent and financial interest charges. Those were the three basic categories of rent on which classical political economy focused.

To translate classical rent theory into practice, you needed a political reform, You had to get rid of the landlord class’s political power to block reform. It wasn’t enough simply to say that economic rent was not a necessary cost of production, not part of real value. The landlord class would simply say, “Well, what are you going to do about it?”

The proponents of industrial capitalism saw that the constitution of England, France and America required giving governments the power to pass laws to free economies from economic rent. in order to do that, they needed democratic reform of the political system. In England they needed to empower the House of Commons over the House of Lords. That effort led to a constitutional crisis in 1909 and 1910, when the House of Commons, Parliament, passed a land tax. That was rejected, as I’m sure you know, by the House of Lords. The crisis was resolved by saying the Lords could never again reject a Revenue Act passed by the House of Commons. That political reform was part and parcel with classi9cal economic theory defining rent as an unnecessary cost of production.

But where did this leave the interests of labor – the majority of the population? As a broad social reform, classical economics began to falter by 1848. You had revolutions in almost every European country. These revolutions were not fully democratic in the sense of they weren’t really for wage labour, which was the bulk of society. They were bourgeois revolutions, including land reform. They were all for getting rid of the landed aristocracy and the special privileges that the aristocracy held. But they were not very interested in helping consumers, and labour’s working conditions, shortening the workweek, shortening the workday and promoting safety. There was nothing really about public health, or public social infrastructure spending. So things began to falter by 1848.

But they still made progress through the balance of the 19th century. By the time World War I broke out in 1914, it looked like the world was moving towards socialism. Almost everybody in the 19th century, across the political spectrum, whatever you were advocating was called socialism.

Socialism and strong government as the program of post-rentier industrial capitalism
At the broadest level, socialism meant collecting economic rent and getting rid of the landlords and the aristocracy, either by taxing away rent or nationalizing land and natural monopolies, in hope that that by itself would create a viable industrial economy. you had libertarian socialism, Marxist socialism, anarchist socialism, industrial socialism and Christian socialism. Almost every reformer wanted that as a label. The question is, what kind of socialism were are you going to have?

That was what the aftermath of World War I was fought about. The fight was largely shaped by the Russian Revolution, which unfortunately went tragically wrong under Stalin and gave socialism and communism a bad name. But it still had a good name in England after World War II. And also in America in the 1930s, as a result of Franklin Roosevelt’s New Deal that saved capitalism by investing in public infrastructure.

I can give you an example of where pro-capitalist theory was in the 1890s. In the United States. The industrial interests in America faced a problem once the Civil War ended in 1865. They wanted to create an industrial society – ideally, a fair society with rising living standards. How do you do that without training people to administer such an economy? You need to train people in a university. You have to teach them how economies worked. But the main universities in America were religious colleges, founded to train the clergy. Yale, Harvard, Princeton and most taught British free-trade theory, which trivialized economic theory.

So the business interests and the government saw the need to teach reality-based economics. They saw that there was little hope in trying to reform the existing universities. Their economics departments – called moral philosophy – were unreformable. So it was necessary to create new universities. All through America, each state was given a land grant to enable it to create a new university and teach reality economics. They also would teach economic history and how the world actually works. Most of all, they would teach protectionist trade theory and how to create a society and economy that is more efficient than other economies?

Well, the first business school in America was the Wharton School at the University of Pennsylvania. Its first economics professor was Simon Patton, a protectionist. And he explained that if you’re going to make industrial products at prices that outcompete those of England, you need public infrastructure spending. You need as much of the cost of living as possible to not to be paid by the employers to factor into the price of their products, but to be paid by the government.

Patten cited public roads and canals to lower the cost of doing business. He also noted that every time you build a road or railroad, you’re going to raise the land value along these routes – and lower land prices for areas replaced by the now-more-accessible producers. You can simply self-finance the cost of these by taxing the rent.

You also need public education, and that should be free so that you don’t have like today, to earn enough money to pay an enormous student debt – and receive a high salary to afford to pay that. If the government would provide free education, you wouldn’t have to pay workers enough to pay this student debt, so they wouldn’t need such high wages simply to break even.
Today 18% of America’s national income is from medical insurance. If you have a public health system and socialized medicine, as England had after World War II and as Bernie Sanders advocates today, then you wouldn’t have to pay workers a high enough salary to afford this enormous medical expense. England realised this already in the 1870s and ‘80s, when Benjamin Disraeli campaigned as a conservative for health.

So the movement towards public infrastructure towards government spending was led by the industrialists. It was they themselves who wanted strong government. The common denominator of politics from Adam Smith through all of the 19th century was to free economies from the unnecessary economic rent, to free them from unearned income, from the free lunch. To do that, you have to have a government strong enough to take on the vested interests – first the landlord class in the House of Lords, and then the financial class behind it.

Jonathan Brown 26:00
Well, just to clarify that, Michael, I think what you’re, what you’re saying is, I know in some of your writing you talk about the view of government or the public sector was it was a fourth means of production. So you got land, labour, capital and the public sector.

Michael Hudson 26:16
That was the term that Simon Patten used. Government infrastructure is a fourth means of production. But what makes it different from profits and wages is that if you’re a wage earner, you want to make as high a wage as possible. If you’re a capitalist, you want to make as high a profit as possible. But the job of public investment is not to make an income, not to do what was done under Thatcher and Tony Blair, not to treat public utilities, education and health as profit making opportunities. Instead, Patten said, you should measure their productivity by how much they lower the cost of doing business and the cost of living for the economy at large.

Jonathan Brown 27:03
And what that allows a country to do, so if you’re good at it, is to get together and ask how to educate our people, lower the cost of transportation so we’ve got we’ve got a mobile workforce, all those things. We can then start to compete against other nations who are ahead of us, who may have more expensive means of production, and we can maintain that advantage. We’re not stuck in a lower level of the economy where we’re basically working for someone else. We’re able to develop ourselves as a nation. And I guess the benefit of us doing it collectively is that we can minimise the cost, then use a natural monopoly power in government hands to provide efficient services across the board. Is that right?

Michael Hudson 27:46
Yes, but they went further. Protectionists in America said the way to minimise costs – and it may seem an oxymoron to you – the way you minimise costs is to have high-wage labour. You raise the wages of labour, or more specifically, you want to raise the living standards, because highly paid labour, highly educated labour, well fed labour, well rested labour is more productive than pauper labour. So they said explicitly, America’s going to be a high wage economy. We’re not like Europe. Our higher wages are going to provide high enough living standards to provide high labour productivity. And our higher labour productivity, shorter working day, better working conditions, healthy working conditions, public health, well educated labor will undersell that of countries that don’t have an active public sector.

Jonathan Brown 28:45
and Henry Ford being the poster boy for that approach, of doubling his employees’ salaries and so on.

Michael Hudson 28:53

Jonathan Brown 28:54

<h4>The fight against classical economics and its concept of rent as unearned income</h4>
Michael Hudson 28:55
Needless to say, the fight for the kind of democracy that will free economies from economic rent was not easy. By the late 1880s, and especially the 1890s, you had the rentiers fighting back. In America the fight was led by John Bates Clark. There was a movement, which today is called neoliberalism, to deny the entire thrust of classical economics. Clarke said that there is no such thing is unearned income. That meant that economic rent does not exist. Whatever a businessman makes, he is said to earn. Whatever a landlord makes, he earns – so there was no unearned income.

This came to a head around 1890 the Journal of Ethics. Clark wrote the first essay, and it was refuted by Simon Patton. There was a fight against the concept of economic rent by academic economics, especially in New York City at Columbia University, where Clark ended up, This is really the dividing line: You recognise that much of the economy is unearned income and you want to get rid of it. To do that, you have to pass laws that will tax away the unearned income, or better yet, you put land and other natural resources and natural monopolies in the public domain where the public sector directly sets prices. That was what Teddy Roosevelt did with his trust busting.

Jonathan Brown 31:13
Michael, I just want to say reading your work is something of a revelation. I’ve got a degree in economics for what it’s worth. And I would say the only valuable thing that I found from a getting a degree in economics is that I know, resolutely when an economist is talking bullshit. How do you know that? It’s when his lips move.

Michael Hudson 31:32
If it’s an economist, they’re talking bullshit – let me make it easy, right!

Jonathan Brown 31:36
And then the thing is, that reading your work, for example, going back to Thorstein Veblen, his work, which only made it into the mainstream when I was getting a degree in the 90s, was conspicuous consumption. It had nothing to do with absentee landlords or, and the profound importance of that, and then I’m looking in J is for Junk Economics, and you talk about the free lunch, and how Milton Friedman said that there’s no such thing as a free lunch.

When you look at your work, you prove that actually there is, and that he’s having it! And you say, “Most business ventures seek such free lunches not entailing actual work or real production costs, and to deter public regulation or higher taxation of rent-seeking recipients of free lunches. They have embraced Milton Friedman’s claim that there’s no such thing as a free lunch”.

And you talk about: “Even more aggressively rent extractors accused governments of taxing their income to subsidise freeloaders, pinning the label of free lunches on public welfare recipients, job programs, beneficiaries of higher minimum wage, when the actual antidote to free lunches is to make governments strong enough to tax economic rent, and keep the potential rent extracting opportunities and natural monopolies in the public domain.”

Michael Hudson 32:51
Veblen was indeed was the last great classical economist. He coined the term neoclassical economics. I think that’s an unfortunate term. When I went to school in my 20s, I thought neoclassical meant ‘Oh, it’s a new version of classical economics’. It’s not that at all. What Veblen meant was there used to be the old classical economics of Adam Smith, John Stuart Mill and Marx, all about economic rent and exploitation. “Neo” means there’s a new body of completely different, post-classical economics aiming to make classical economics obsolete. That is the new mainstream economics of today, trying to make itself “classical.” So Veblen he should have used the terms post-classical or anti-classical economics.

Jonathan Brown 33:44
Or even pseudo classical?

Michael Hudson 33:49
It’s antithetical, because the root of classical value and price theory was to isolate and define economic rents statistically. To deny economic rent is to deny the whole point of classical value and price theory. That is where economics became untracked.

Unfortunately, it became untracked largely by Henry George, who rejected classical economics and very quickly followed J.B. Clark and accepted his mushy value and price theory. Removing all elements the cost of production from value theory, analysing prices simply in terms of consumer demand and what people want, and not analysing what determines land and other asset prices, loses focus.

George became very popular as a journalist. He wrote wonderful journalism to expose the railroads in California as landlords, and he wrote a wonderful book on the Irish land question. But when he tried to talk about the whole economy, he didn’t want any competition. He said, in effect, “Economics begins and ends with me. Forget everything, Adam Smith and classical economics.” He’s sort of an early Margaret Thatcher. There’s no such thing as society or the economy. Only “tax the landlords.”

Jonathan Brown 35:35
What are you doing? You’re destroying my view of Henry George! He’s an early Margaret Thatcher? How, how could that possibly be?

Michael Hudson 35:47
Well, in two ways. The first way is that in the 19th century, in order to tax the land rent, you had to take on the most powerful vested interests of all: the real estate interests and the financial interests. But Henry George was a libertarian. He was for small government. He broke with the socialists, because he warned that socialism had a potential for authoritarianism. Well, we know that he was right in that warning, because we saw what happened in Stalinist Russia. But obviously, what you want is a government that is strong and democratic, and with enough authority to tax and regulate the vested interests. (That term is Veblen’s, by the way.) That was the ideal in America, but it needed a strong enough government so that Teddy Roosevelt could come in and be able to bust the trusts.

The government was strong enough in 1913-14 to impose an American income tax that fell just on 1% of the population, almost entirely on economic rent, on land rent, mineral rent on monopoly rent of the big corporations. If you’re a libertarian, your government is too small to take on these vested interests. And you’ll never win. You’ll end up like the Social Democrats or like today’s Labour Party under Mr. Starmer, not able to be very efficient. So that was George’s first problem.

The second problem was when he said that all you have to do is tax the land and everything else will take care of itself. Well, as you know, he was nominated as a celebrity candidate by the socialist and labour groups in New York City in 1876 to run for mayor. They gave him their programme – safe housing, workers housing, safe working conditions, food laws that protect people from poison, like you don’t want to use chromium for cake frosting to make it yellow.
Well, George threw out the whole labour programme and said that there’s only one thing that mattered: If you tax the land rent, the cakes will take care of themselves, worker safety conditions will take care of themselves. You don’t need socialism; just tax land rent.

Well, the word “panacea” came into popular use in the English language at that time, because George didn’t see the economy as a whole. That was a tragedy. He was great as a journalist describing rent and the machinations of the railroads. But once he tried to talk about the economy, without really describing how it worked as a system, saying there really isn’t any economic system, it’s just about land rent. That separated him from the other reformers.

By the 1890s you had many of reformers in America, who had been inspired by George’s journalism in the 70s and early 80s, including attacks on the oil monopoly and the Rockefellers. They asked what happened to George? Well, he became a sectarian. He formed his own party and said, we’re only going to talk about land rent. This diverted attention away from how the overall economy works. And if you don’t understand how the economy is all about providing a free lunch in one way or another, not only to landlords but to the financial sector primarily, then you’re really not going to address the interests of most of the population.

So his sectarian party shrank. Still, in the first decade of the 20th century you had followers of Henry George and socialists going around the country debating each other. They had great debates, they spelled out the whole problem. I wanted to reprint all these debates somewhere, what both the socialists and the Georgists said: “One thing we can agree on is that society is going to get go either your way or our way. We’re talking about how is the future of the political system and the economic relations and taxes that follow from this system. How are they going to evolve?”

The socialists focused on labour’s working conditions, because these were getting worse and worse. In America the fight for labour unionisation got quite violent, and corrupt. The abuse of consumers, the growth of monopolies, all these were growing problems. The socialists focused on these problems – and decided to leave the discussion of rent to followers of George. I think that was very unfortunate, because George had pried the discussion of economic rent away from the classical value theory and its political dimension, which was socialist.

I find little interest in today’s socialist movement or the socialist movement 50 years ago about land rent. They are more concerned about international issues, about war, about almost everything except land rent. And today I find the greatest interest in rent theory as a guide to a tax system in the context of an overall economic system to be in China. So that’s really where the debate over how to keep the price of housing down by keeping the financial sector from trying to capitalise the land rent into a bank loan.

That’s a big fight in China today. It should have been also in Russia. Fred Harrison, in the early 1990s, brought a group of people including me over to Russia. We made two trips to the Duma and did everything we could to explain that Russia could have a great advantage to rebuild its industry into a productive economy. The first thing that it should have done was to keep housing prices down. It could have given everybody their houses, free and clear, without any debt. Of course, some places would be more valuable than others, but Russia would have had the lowest-priced economy in the world. In America, the rent can take up to 43% of a home buyer’s income.

Well, there was pushback from the Russians. They had no rent in a socialist economy. Ted Gwartney, an American real estate appraiser, walked down the streets of St. Petersburg with the local mayor, I think on a fall or winter days. He pointed out that one side of the street was very sunny. The other street was in the shade. That’s how the sun is in the northern latitudes in the winter. Most people were walking on the sunny side of the street. That means that if you’re going to have a store, whether it’s a bakery, a food store or a restaurant, the store on the sunny side of the street is going to be able to attract more customers. Their site has more economic rent than the dark side of the street. Same thing with buildings near a subway. They will be worth more than sites far away from transportation.

The mayor said understood the point, and asked how to actually make a land value tax so to collect this rent? Ted explained that St. Petersburg’s layout was much like that of Boston, where a land map was easy to make. It showed that there was a peak centre of values near the subway, with rents tapering off further away. He suggested to apply Boston as a scale model to St. Petersburg. Just plug in a few prices, and you have a land-valuation map.

Russia could have been a low-cost economy. It could have kept the oil and gas, Yukos, GazProm, nickel and platinum resources all in the public domain to finance investment in re-industrialization, to become independent of the West. But as we all know, Ted and the people that Fred Harrison bought were completely overwhelmed by the billions of dollars that U.S. diplomats spent on promoting kleptocracy and shock therapy in Russia. Its officials and insiders worked for themselves, not Russia.

And it wasn’t only Russia that missed opportunities. I brought Ted Gwartney and his mathematical model-maker to Latvia, where I was Economic Research Director of the Riga Graduate School of Law. I was asked by the leading political party of Latvia, the Centre Party – basically the party of Russian speakers, with 1/3 of the population and votes – to draw up a model for how Latvia could restructure its post-Soviet economy and industry. Ted met with the tax authorities and housing authorities and explained how to use land rent as the tax base. They were amazed and said, “This is great. We can hire a separate appraiser for every single building. This will create a lot of employment”. No he said. He had been the appraiser for Greenwich, Connecticut, the state’s wealthiest city. He said, “We can do a whole city in about one week.” They couldn’t believe this in Latvia.

Around the time of his visit there was a meeting in Boston of the Eastern Economics Association. It was largely created by John Kenneth Galbraith to go off the economic mainstream. I think the Schalkenbach Foundation had a session on political critics of Henry George, so there were a lot of Georgists. Other people who came to the Eastern Economic Association meeting were socialists, including Alan Freeman who was the assistant to Ken Livingston, the Mayor of London.

When everybody was having lunch after the economic meetings, I brought Alan over to sit down with Ted Gwartney. Ted explained what he did, and Alan said, “Oh, I’ve never heard of this! I’ve got to come and meet you some more.’ So he came to New York and we went up to visit Ted in Connecticut. He explained how to make a land value map. Alan said, “You should win the Nobel Prize for this! This is amazing! There’s nothing like this in England.”

Ted explained that there are about 20,000 appraisers in America that do what he did. There are abundant statistics. Every city has a map of land and building appraisals: here’s the value of the building, here’s the value of the land. So smoothing out a land value map is pretty easy to do. Alan could hardly believe it.

Well, I went back to London shortly and met with Alan. It turned out that political pressures in England, especially from the Labour Party, led London to hire Weatheralls, a real estate company, do appraisals. So we never got to do our version of a real estate appraisal of London to calculate land rent.

But this is what all of the theories of the Physiocrats, Adam Smith, Ricardo, John Stuart Mill, Marx, Veblen, Alfred Marshall, all of them were focusing on. Yet this idea is so alien that from London to St. Petersburg, they don’t have any idea of how the simple concept can be done. The economics profession is in denial. It’s followed the idea that there’s no such thing as unearned income, everybody gets what they make.

The National Income and Product Accounts treat rent as a product, not a subtrahend
A byproduct of this value-free doctrine is how countries calculate their national income and product accounts. And if you look at the GDP accounts for the United States (and I’ve published a number of articles on my website and in major economic journals), rent is counted as part of GDP.

This is easiest to see in real estate and finance. The Bureau of Labor Statistics sends its employees around to ask homeowners what the rental income of their home would be if they had to rent it. If you were a landlord and rented yourself how much rent would that be? This appears in the NIPA statistics as “homeowners imputed rent.” That’s 8% of GDP. But it is not really income, because it is not actually paid. Nobody gets it. But value-free designers of GDP want to describe all of the income that landlords make as contributing to GDP. They say that landlords provide a productive service, they provide housing to people who need it, and they provide commercial properties to businesses that need it. Well, that’s not exactly how John Stuart Mill put it. He said that rent is what landlords make ‘in their sleep’. So how can you rationalize how productive landlords are?

Another element of American GDP is financial services. I called up the Commerce Department where they make the NIPA statistics and asked what happens when credit card companies increase their interest charges. And where do penalty charges for late payments appear? Credit card companies in America make billions of dollars in interest a year and even more billions in fees, late fees and penalties. Most of the income that credit card companies make are actually on these fees and penalties. So where does that appear in that GDP? I was told, in “financial services.’ So the “service” of calculating how far the debtors must pay for falling behind in their payments. They typical charge 29%. That’s all counted as a contribution to GDP. But in reality it is a subtrahend, leaving less to spend on real “product.”

This raises the question of just what income and product actually mean. Well, this brings us back to what classical economics is all about. The “product” should be measured by what its actual necessary cost of production is. But there’s a lot of income over and above this necessary cost of production. Namely, economic rent, that’s unearned income. But the income and product accounts don’t say how much is “earned” and how much is “unearned” land rent, monopoly rent, natural resource rent, interest and financial charges.

A classical economic accounting format would show how much of the prices for what our society produces is actually necessary, and how much is a subtrahend. Classical economists treat the land rent that you pay, interest charges and monopoly prices as a rake-off. So not all of your income is income equals “product,” because only a portion of that income represents a real product.

In America, the head of Goldman Sachs a few years ago said Goldman Sachs partners – a financial management firm – make more money than almost anyone else in America, because they’re the most productive. If you make a lot of money, by definition, you make it by being productive. That’s the false identity.

Jonathan Brown 55:25
That’s really the John Bates Clark idea that if you make the money, you’ve earned it. And it’s not just because you control the gate. You’re the gatekeeper, to stop people and make them pay the toll. You’re the troll under the bridge, taking people’s money as they cross, which is essentially what financial economics is about.

Michael Hudson 55:48
Right. I have spoken with a number of political advisors, many of whom were followers of Henry George. They’ve described to me how political all of this definition of the economy is. A number of friends of mine have been trying to show how much of what the United Nations calculates as income and product is actually economic rent. Steve Keen, Dirk Bezemer and Jacob Assa are in this group. There are a number of others who do it. We publish in places like the Review of Keynesian Economics, Journal of Economic Issues and other not-mainstream journals. A lot of this was taught where I was a professor for decades, at the University of Missouri in Kansas City.

Our graduates had problems getting jobs, because in order to get an appointment at a university, you have to publish articles in prestige journals. The University of Chicago, the Milton Friedman boys, the Chicago Boys control the editorial boards of all these prestige magazines, just like they control the Nobel Economics Prize Committee. The prize basically is given to Chicago Boys every year for not explaining how the economy works.

A precondition for what you call an economist, especially a Nobel Prize winning economist, is not to understand how the economy works. Because if you understand that, you’re going to threaten the vested interests that are getting the free lunch. You have to say there’s no such thing as a free lunch, everybody earns whatever they can get. Robbers and criminals like that idea. “Yeah, we stole it fair and square!”

Crime pays, and rent seeking also pays.

You can get much more money quicker by extractive means – by rent extraction – than you can by investing in plant and equipment and developing products and marketing them and making a profit over time, and spending on research and development. That’s why in today’s United States, 92% of corporate revenue, called earnings, (although not all of it is earned – that’s a euphemism) is spent on stock buybacks and dividend payouts, not on new capital investment.

So the way that the economy works today is no longer industrial capitalism; it is finance capitalism. Instead of Industrial Engineering, making society produce more with all of the environmental protection cost included, you have financial engineering, making wealth by increasing stock-market prices. Wealth is not achieved by earning it. You don’t save up your earnings and get wealthy. I think half of Americans are unable to raise $400 In an emergency. They have no savings at all.

For most people it’s very hard to save up money, especially if they have student debt, credit-card debt, medical debt and mortgage debt. After paying this, there’s really no income left to be saved. So you have the 1% of society, the rentier portion that had to pay income tax back in 1914, getting huge amounts of income and the rest of the society getting less and less. The result is economic polarisation. The dynamics of society are financial and basically rely on rent seeking that has been financialized.

I’ll give you another example of the GDP. One of the problems that makes GDP statistics meaningless is depreciation, the idea that buildings depreciate. When Ronald Reagan came in, the real estate interests and their banks basically took over the government. Henry George and the Libertarians oppose central planning by elected democratic governments, and that leaves central planning to Wall Street’s financial interests. Every economy is planned, and if you don’t have a government strong enough to do the planning, then the planning is done by the financial sector and the real estate sector, and they were given free rein under Ronald Reagan.

Under Reagan’s 1981 tax “reform” you could pretend that if you buy a big commercial building, you can write off 1/7 of the entire costs every single year as tax deductible income. At the end of seven years, you change your ownership from one name to another name, and you start all over again. The same building can be re depreciated again and again and again.

Donald Trump wrote in his autobiography, he loves depreciation, because he said thanks to the pretence of depreciation, his buildings are all going up in value, but he gets to pretend they’re falling, and deduct all of that fictitious over-depreciation from his taxable income. It’s actually economic rent. But if you look at the national income statistics, you can’t find economic rent in them at all. I was able to piece it together by adding up what goes into economic rent: Real estate taxes are part of economic rent, and also interest payments, because interest is paid out of economic rent. But fictitious depreciation tax loopholes also should be there.

But nowhere in the national income statistics is a report of how much income real estate owners actually claim as depreciation. They haven’t done that because if they showed this, people would think, ‘Wait a minute, this is a giveaway. This is utterly unrealistic.” So they only put in a figure for how much they [think] buildings are actually depreciating over a period of decades. So you have a fictitious national income accounting format that makes it impossible to calculate what land rent is – and that was the major focus of classical economics.

How are you going to get a statistical system that actually reflects this? Well, one associate of mine, Jacob Assa, has written a few books on this criticising economic rent. He worked in the United Nations here in New York until quite recently. But as I said, our graduates can’t publish in the University of Chicago economic journals whose party line is that ‘there’s no such thing as economic rent’, just like there’s no such thing as society is beyond “the market.”

I wanted to publish statistics on this and in 1994 the Henry George School in New York asked me to calculate what rent was and the land value. I found out that the value of land, the market price of land in the United States was twice what the government reported.

The government pretends that real estate prices rise mainly because buildings keep growing in value, even though they’re supposed to depreciate. They pretend that buildings grow in value by taking the original cost of the building, and multiplying it by the Construction Price Index. Whatever is left is reported as land value. Well, in 1994 the Federal Reserve reported that the land value of all of the commercially owned real estate in the United States was negative $4 billion. This is crazy.

The statistics are drawn up by a methodology that the real estate interests lobbied for. When I calculated this, the Georgists in America got furious. They said that I was showing that land value and rents were much higher than they thought. They worried that this might lead people to want to tax real estate. Lowell Harriss of Schalkenbach explained that Georgists today represent mainly real estate developers, and that their major audience was local mayors, whose biggest campaign funders are the real estate interest.

These Georgists called themselves “two raters,” wanting to keep overall real estate taxes unchanged (“revenue-neutral”) but shift the tax from commercial landlords onto homeowners by taxing land, not buildings – e.g., electric utilities, office buildings and other capital-intensive structures.

By representing the developers, Georgists proposed to save society by having the developers build up those slums, build up those vacant lots. Like George, they said that there was no need to worry about ecology or any problem except cutting property taxes for large real estate owners. You don’t need to worry about workers conditions or anything else. Let’s just give an economic incentive (i.e., a tax cut) to help contractors build up those vacant lots.

I was told if I published a new explanation of my statistics showing that most rent was paid out as interest, I could never have any relations with Schalkenbach and the Henry George school again. So I published them in a Harper’s Magazine cover story and have lived happily ever after.

Jonathan Brown 1:06:13
And was that “The New Road to Serfdom”?

Michael Hudson 1:06:22
Yes. I chose that title because the purpose of industrial capitalism was to free economies from the legacy of feudalism. And the legacy of feudalism was the landlord-warrior class collecting hereditary rent and the predatory banks that were not making loans for industry. None of the industrialists got their money to invest in banks. The inventors of the steam engine couldn’t get loans except by mortgaging their houses. Banks don’t lend money to create capital, only for the right to foreclose on it.

Jonathan Brown 1:07:02
This is all included in your in your latest book that just came out, The Destiny of Civilization: Finance Capitalism, Industrial capitalism, or Socialism, which I gather was a series of lectures to a Chinese University. Is that correct?

Michael Hudson 1:07:16
Yes. There were 160,000 viewers for the first lecture, and there’s a huge interest in this in China, because they realise that higher housing prices make them poorer and more highly indebted, not richer. What is pushing up housing prices in China is the amount of credit that banks will lend against the property.

A land tax would keep housing prices down, because the rent could not be available, to be capitalized into a bank loan. As China gets more productive and more prosperous, people obviously are going to be able to afford housing, which is how most people define their status. If a site gets more valuable because of public investment in transportation, or schools or parks nearby, that’s going to make it more valuable. But if you tax this rental income, then you’re going to keep the housing price down.

I think Fred Harrison and Don Riley wrote a book Taken for a Ride where they show that the money that London spent on extending the Jubilee Line increased real estate prices by twice as much as the line cost. London could have simply collected the land’s increase in rental value that this public investment created and made it self-financing.

Instead it was a giveaway.

They ended up taxing labour and business, and the effect was to increase Britain’s cost of living and hence the cost of production, which is why Britain is de-industrialising. It’s been de-industrialising because despite the attempts through 1909 and 1911, to free itself from landlordism, the bankers have taken the place of the landlords. They are the class today that the landlords were in the 19th century. So we’re back on the revival of what really was feudalism – a rake-off by a hereditary privileged class.

America’s monetary imperialism coming to an end with de-dollarization
Jonathan Brown 1:09:47

I’m wondering where we go next. I want to get into the conversations that you started with the 1972 first edition of Super Imperialism. I know we had a third edition fairly recently, with your prescience of the predictions in analyzing the situation for America, and how the balance of payments deficit was a result of U.S. expenditure by the military. Getting into the current manifestation of the de-dollarization challenge that seems to be accelerating through the Ukraine and Russia crisis, I wonder what background we need to give the listeners just to tell them about how that system works.

Michael Hudson 1:10:39
One of the things that most people don’t understand is money, largely because of the academic discussion confusing matters. Until 1971, countries running a balance of payments deficit would have to settle it either in gold or by selling off their industry to investors in the payments-surplus countries. Well, beginning with the war in Korea in 1950-1951, the U.S. balance of payments moved into deficit. The entire U.S. balance of payments deficit from the Korean War to the 1970s was a result of its foreign military spending.

By the time the Vietnam war was ending, the Americans had to sell its gold every month. Vietnam had been a French colony, so the banks there were French. As America spent more dollars in Southeast Asia, these dollars were sent from local French bank branches to their head offices in Paris. The Paris bank would turn over these dollars to the central bank for francs, and the central bank, under General de Gaulle, would cash in these dollars for gold.

Germany was doing the same thing, using its export proceeds that were paid in dollars to buy gold. So America’s gold stock was steadily going down, until finally it had to withdraw from the London Gold pool and stop making the dollar gold convertible. Back in 1950 when the Korean War began, the American Treasury had 75% of the world’s monetary gold. It had used this monetary power to control diplomacy in other countries. The basis of America’s political power was its gold stock.

Once they left the gold-exchange standard there was hand wringing. How was the United States going to dominate the world if it didn’t have gold anymore, if the military spending abroad had made it run out of gold? My Super Imperialism pointed out that henceforth when foreign central banks got more dollars, what were they going to use them for? Well, there’s only one thing that central banks at that time did: That was to buy government securities. So the central banks of France, Germany and other payment-surplus countries had little option except to buy U.S. Treasury bills and bonds. Some of these were special non-marketable bonds that they couldn’t sell, but they were stores of value.

So the money that America was spending abroad was simply recycled to the United States. It didn’t mean that America had to devalue the dollar through running a balance-of-payments deficit, like today’s Global South countries do, or do as England had to do with its’ stop-go policies, always raising interest rates to borrow when its deficits threatened to force the pound sterling to depreciate.

Jonathan Brown 1:13:57
Michael, this insight was that was that when you were working at Chase Manhattan, and you were advising the State Department on what to do with the fact that they were having these balance of payments problem, because of military spending?

Michael Hudson 1:14:07
My job at Chase was to analyse basically the balance of payments of Third World countries and then of the oil industry. I had to develop an accounting format to find how much does the oil industry actually makes in the rest of the world. I had to calculate natural-resource rent, and how large it was. I did that from 1964 till October 1967. Then I had to quit to finish my dissertation to get the PhD. And then I developed the system of balance-of-payments analysis that actually was the way it had been calculated before GDP analysis.

I went to work for Arthur Andersen and spent a year calculating the whole U.S. balance of payments. That’s where I found that it was all military in character, and I began to write in popular magazines like Ramparts, warning that America’s foreign wars were forcing it to run out of gold. That was the price that America was paying for its military spending abroad.

I realised as soon as it went off gold in 1971 that America now had a cost-free means of military spending. Suppose you were to go to the grocery store and just pay in IOUs. You could just keep spending If you could convince the owner, the grocer to use the IOU to pay the farmers and the dairy people for their products. What if everybody else used these IOUs as money? You would continue to get your groceries for free.

That’s how the United States economy works under the dollar standard, at least until the present. This is what led China, Russia, Iran and other countries to say that they don’t want to keep giving America a free ride. These dollarized IOUs are being used to surround them of military bases, to overthrow them and to threaten to bomb them if we don’t do what American diplomats tell them to do.

That led already a few years ago to pressure to de-dollarize the world economy and make it multipolar, not simply an extension of the U.S. military, U.S. investors, mining and oil companies. The post-dollar aim was for other countries to keep their economic surplus among themselves to promote their own economic growth, instead of imposing IMF dictated austerity programmes to impose austerity so that they can pay foreign dollarized bondholders.

Just about everybody thought that it would take many years for China, Russia, Iran, India, Indonesia and other countries to get their act together and create an alternative. But this year the Biden administration itself destroyed America’s free ride for the dollar. First the United States grabbed Venezuela’s foreign exchange, then Biden grabbed all of the foreign exchange of Afghanistan, just confiscated it. And then a month ago he confiscated $300 billion of Russia’s foreign exchange reserves. He said, in effect, that we are the leading democracy in the world, and global democracy means that America’s military gets to appoint foreign presidents.

And so we don’t like the person you’ve voted in as president for Venezuela. We’re going to hire this little nitwit that we bought out, Juan Guaido, and appoint him president. To force you to accept this, we’re going to take away all of your gold reserves held in the Bank of England, and we’re going to give it to Mr. Guaido as our nominee for the bastion of democracy, to do what a democratic regime is supposed to do: hiring terrorist groups to kill all land reformers and labour leaders, to finance a neo-Nazi takeover like we did in Chile under Pinochet, and just like we’ve done in democratic Ukraine with our funding of neo-Nazis to fight against the Russians there.

This confiscation of foreign reserves and foreign money held in U.S. banks shocked the rest of the world. Nobody had believed that countries would actually grab other countries’ financial savings. If you go back to the wars in the 19th century, the Crimean War and others, countries would continue to pay their foreign debts.

All this was ended by President Biden rejecting the international rule of law. He said that “We have a ‘rules-based’ order, in which we can make up the rules. Number one, we are exempt from the rules. Only you have to follow them. Number two, the rules or whatever we say.” China, Russia and India would have taken years by themselves to denominate their trade in their own currencies. Biden’s money grab has impelled them to create a new economic order independently of the United States and Europe, whose euro and sterling are satellite currencies of the United States.

Jonathan Brown 1:19:54
So Michael, this is a crazy situation that we’ve got. Even If you have deposits in a bank, the deposits don’t really belong to you, but they used to be respected.

Michael Hudson 1:20:07
Well they belong to you, but they can be stolen.

Jonathan Brown 1:20:09
Yeah, but then they don’t belong to me, do they? They’re kind of mine, but not. Likewise, if I annoy the wrong person, I could have my car impounded, because I’ve just annoyed the local politician, which is essentially what’s happened to a Russian oligarch. Now, whether or not the oligarch deserved that $500 million yacht, obviously, they didn’t, but it was technically theirs. So what Americans are doing is showing that if you piss them off, they will take all your resources, which has happened in other countries, right? We’ve stolen it.

The British did that, right? We appropriated resources and stole resources from other nations. If you want the best example of that, you can just go into the very beautiful British Museum and see all the artefacts that we’ve appropriated, one of which was a Rosetta Stone, which I know you write about.

So we’ve got this situation now that the Americans have declared the most profound economic war on Russia, threatening China that we can do the same. China’s got trillions of U.S. dollars. And one of the things that I don’t quite understand, looking at your philosophy and Super Imperialism, was in demonstrating that the Americans can have a free lunch by getting people to buy U.S. Treasury bonds. How is it that the U.S. dollar has gone up against all currencies pretty much other than the rouble since declaring war in Ukraine?

Michael Hudson 1:21:43
Europe has committed economic suicide, United States offered its leaders a lot of money in their offshore accounts, and made sure that their kids got free education in the United States. But in return, they would have to represent the United States, not Germany, France or other countries. The Americans have been meddling in European politics for years. European politicians do not represent their own countries. They represent the American State Department and American diplomacy. And they were told to lock their countries into the U.S. economy.
For instance, European businesses had a hope that Americans really hated. The Europeans hoped that after 1991, now that communism was over, they could invest in Russia to make money. They could sell exports to Russia and make mutual gains from each other. But the Americans wanted to make all the money off Russia for themselves, mainly by using the kleptocrats they backed to sell the natural resources that they grabbed to U.S. investors. The Harvard Boys wanted to make sure that rent-yielding natural resources were given the kleptocrats – who could only make their money in hard currency by selling shares abroad in the assets they grabbed, keeping their payments in England or the United States.

So they’ve asked Europe not to buy Russian gas, but to spend seven times as much buying American liquefied natural gas, and spend $5 billion to build the ports to accept this gas – while going without gas for about three or four years…let their pipes freeze… stop making fertiliser… Don’t feed your land, we’ll take it on the chin for America. Your standard of living is going to have to drop by 20%, but it’s all for American democracy. And the European heads said that’s fine.

America said that you Europeans are bothering them by trying to stop global warming. That’s a direct attack on a major arm of U.S. diplomacy, the oil industry. American companies control almost all the world’s oil trade. It’s the highest rent-yielding sector in the world. And it’s income-tax free. It’s politically powerful, and as long as America can control the oil trade, it can talk to Latin American countries or African countries and say if they elect a leader that U.S. officials don’t like, it can impose sanctions and stop exporting oil to them to freeze them out. They won’t get fertilizer, so the U.S. can starve you out. It can put a sanction on their food trade. 

Agriculture is Americans biggest trade surplus.

Jonathan Brown 1:25:14
That’s what they’re doing with the conflict in Ukraine to Russia, and also China as well. Are there other major sources of grain, wheat and rice?

Michael Hudson 1:25:26
Yes. But President Biden has blamed Putin for creating a world food shortage and threatening to cause a famine, because Ukraine can’t export its grain. Ukraine, at American direction, has put mines all over the Black Sea. So the Black Sea’s ports have mines around them. If a ship hits them, it’ll blow a hole in the hull and will sink.
As a result, if you’re a shipping company and want to transport grain, you have to get insurance, because if you don’t have insurance, then you’re in danger of going bust if your ship goes under. But no insurance company will insure it until the Ukrainians remove the mines that they put. You need minesweepers for that. Needless to say, Russia doesn’t want American minesweepers in, because they may very well attack as there’s a war on.

So you have the United States blocking Ukrainian grain exports, which was a huge export. You’ve had the American dollar area, the NATO countries, refusing to import food from Russia, which is the world’s largest agricultural exporter. This is creating a crisis for Global South countries, for Latin America and Africa.

Meanwhile, global warming is causing droughts that are reducing the harvest. The Green Party in Germany has a pro-war policy that is making global warming rise faster. By supporting military warfare against Russia, and U.S. military adventurism in general, they are becoming major lobbyists for the air polluters. The largest air polluter is the American military. The Green Party in Germany advocates fighting Russia more, providing it with more arms, and thus supporting the military that is now the largest new contributor to global warming. In effect, this means that Europe is willing to say, ‘Okay, we are willing to have the sea levels rise another 10 feet, as long as we can help America dominate Russia’.

Europe even is letting America keep the Trump tariffs on its exports, in place, so it can’t export more for America. It looks like Europe will have to de-industrialize, maybe we’ll go back to the 19th century and become a country of farmers. That basically is the situation that its subservience is imposing.

Jonathan Brown 1:28:49
I’d like to come back to the just what China and Russia can do, given their reserves. They understand they’ve got… they’ve got lots of reserves of gold, and also large grain stores, China having the most as I understand it, but can you help me understand why all these nations around the world have U.S. dollar reserves in some form or other, most of it in bonds? Why is the dollar still increasing at this moment in time?

Michael Hudson 1:29:28
Because the Euro was going down. The Japanese Yen is going down. The Yen is the worst performing currency, because they’ve held their interest rates very low. Their aim is for banks to make money by borrowing low at low rates and lending to foreign countries at a higher rate. Europe is also keeping its interest rates low. The American Federal Reserve is raising the interest rate, and that is money from low interest rate countries. Capital from Europe and Japan is flowing to America.

Currency values are primarily set by relative interest rates and capital flows. They’re not set by the cost of production for imports and exports. They are not caused by trade, unless there’s a radical breakdown of trade. All these zigzags that you see are short-term capital movements. America tells other countries to keep their interest rates low, so that money will flow from their banks and financial to the United States to buy American securities that yield higher returns. As long as the Euro is a satellite currency to the dollar, it’s going to continue to go down. So the both the euro and the British Sterling are now moving towards $1 per pound and $1 per euro.

Jonathan Brown 1:28:49
That’s a short-term measure. The long-term measure is that countries have to start selling the bonds that they’ve got in U.S. currency. So long term, it has to come down. Is that right?

Michael Hudson 1:29:28
Yes. They’re going to hold each other’s currencies. Especially now that Russia is denominating its exports, in roubles instead of dollars. The American banks have lost the trade financing of the world oil trade, certainly Russian oil and agricultural trade. Instead of holding dollars, countries will hold rouble reserves to stabilise their currencies via the rouble, China is holding rouble reserves, and Russia is holding Chinese yuan reserves.

The balance will be held more in gold and some kind of assets without a liability attached to them. I think the logical direction in which this is moving is that the non-dollar countries will create their own version of the International Monetary Fund, their own World Bank, their own trade organization. So there will be one set of trade and financial and development organisations and military organisations in the U.S. and Europe, in NATO, that is, in the white countries, and another set of relations and the non-white countries that are actually developing while America and Europe shrink.

Jonathan Brown 1:33:06
So what’s your idea of how much gold China actually holds, because there’s the published numbers [which] are really extraordinarily small aren’t they for an economy that’s so big.

Michael Hudson 1:33:18
I don’t know. Governments can hold gold not only through their own treasury, but through some subordinate agency. I no longer go into the financial statistics like I used to, because it takes a whole year to do a balance sheet that is comprehensive. All I know is that they saw how America simply grabbed Russia’s dollar holdings, and they don’t want the same thing done to them. President Biden has said China is America’s number one long-term enemy, and he wants to destroy the Russian economy first and then attack China after prying them apart.

Obviously, China is reading the newspapers and wants to avoid that fate.

Jonathan Brown 1:34:16
The other thing that I find utterly remarkable, for example, is that Biden in his speech said that he wants to get rid of Putin. I think if it was a U.S. Defence Secretary or Secretary of State saying that he wants to arm Taiwan……. If I ran China and I said I want to arm Mexico, or if anyone in South America wants any weapons then my doors open to you, I would expect the Americans to be very upset with that because I’m breaching the Monroe Doctrine. Can you help me understand, having been in the corridors of power, whether Chase Manhattan or the contacts you’ve got, how can …. how can politicians be so delusional to think they can say stuff like that without having a negative consequence?

Michael Hudson 1:35:18
Well you know who’s really upset by that? The Taiwanese! They say, Oh, they want to make Taiwan into another Ukraine, to fight to the last Taiwanese, just like the Ukrainians have been used. They see two choices before them. If they do arm and get weapons that can hit China, then China is likely to bomb them. On the other hand, I’ve met Taiwanese officials for 40 years, and many have said that their long-term hope is to be reintegrated. They want to be investors in China, but they want to merger under terms where they can be sort of like Hong Kong, able to have a merger that will make them prosperous too.

So Taiwan’s choice is between following the Americans and becoming the Ukraine of the Pacific, or joining with China. Given the fact that China is growing and America is shrinking, what are they going to choose? Well, I would imagine that you will see a strong, peaceful integrationist movement with China. But China remembers that Chiang Kai Shek massacred the communists in 1927.

Jonathan Brown 1:36:47
So what are we looking at then, who is in charge, President Biden or other people?

Michael Hudson 1:36:56
President Biden is a front man. They’re all the front men for the faceless people in the State Department, the neocons who are controlling things. Biden has always been right-wing, just a corrupt party politician. He does what he’s paid to do. He’s unimaginative. He’s brought in some real Russia haters – people who have a visceral hatred of Russia because of their family background under the tsars or under Stalin. Blinken said that his family was Jewish and lost under the tsars, and maybe under Stalin. He wants to kill Russians because he’s so angry at what they did to his ancestors. That is the neocon mentality in a nutshell. It’s a crazy mentality.

The Federal Reserve and the Treasury officials say they were not consulted in the political moves that Biden and Blinken and the neocons are making. There is the kind of single-minded tunnel vision at work. They really are Russia haters and China haters. There is a lot of racism you’re seeing in New York, where it’s very dangerous for Asian women to take a subway. Almost every week, the lead news item is yet another Asian woman attacked or pushed in front of a subway. There’s a there’s a new race hatred in America. And they are treating Russians as the Ukrainians do, as if Slavic speaking people are a separate race.

Jonathan Brown 1:38:49
Extraordinary. So Super Imperialism came out, as I understand it, and was used by the State Department to figure out how to continue running their economics …

Michael Hudson 1:39:04
At first U.S. officials thought that going off gold was going to be a disaster. Herman Khan told me, “You’ve shown that we’ve run rings around the British Empire.” He hired me for the Hudson Institute, which is a national security institute, and brought me to the State Department for meetings and to Army War colleges and Air Force war colleges to talk about it. I guess I shouldn’t be surprised that the main people who wanted to learn how imperialism works were the imperialists themselves. I had thought that the anti-imperialists were going to be my main audience, but the imperialists really needed to know what was new.

Jonathan Brown 1:39:50
They took your book, Super Imperialism and they read it as a love letter, right.

Michael Hudson 1:39:56
Not a love letter. They saw it as a “how to do it” book. I was a technician.

Jonathan Brown 1:40:04
Right. And working for Herman Kahn, he’s a powerful guy that people don’t talk about so much anymore, but he was, he was extraordinarily influential at the time, right?

Michael Hudson 1:40:14
Yes, he had a great sense of humour. He was a great speaker. He was absolutely brilliant. He wrote a book on thermonuclear war, saying that even if there were to be a war, somebody would be left to survive. That made him one of the models for Dr. Strangelove in the movies. I would sit and hear Herman talk about military strategy, and was awed by how he thought it all through. He was a brilliant military tactician. He would bring me and sit down with generals, and they would explain things. I don’t have a good military sense, or any military training at all. He wrote that, personally, he wanted to be right under the first hydrogen bomb. He didn’t want to live in the post-nuclear world. But there would be some survivors somewhere. That made him notorious. He was so reviled for even having brought up discussion of the topic that needed to be discussed, that he wanted to have ideas that people liked. And that was the corporate environment study. That was what I was pretty much in charge of. I was the economist, he was the military. We had the same salary there.

We would go around the world disagreeing with each other. It would be like a show. He’d talk about the world being a cup half full. I talked about the cup being half-empty, as he put it. I talked about the debt overhead, and how debt was growing and would ultimately stifle the economy. He talked about how productivity would be sufficient to pay debt, although productivity doesn’t necessarily give you the money to pay the debt. Productivity does not grows exponentially, but tapers off. As debt grows, any rate of interest is a doubling time. And it doubles quicker than the economy can double.

Jonathan Brown 1:42:24
And this is really coming back to one of your initial questions from Terrence McCarthy, which was to focus on productivity, wasn’t it?

Michael Hudson 1:42:33
Yes. And the idea was focusing on productivity, you realise that it all comes down to labour ultimately. How do you make labour more productive? How do you make industry more productive? You get rid of what is unproductive – and the unproductive overhead is rent. So how much corporate spending is just plain overhead? How much is unnecessary for corporate industry to take place? That line of questioning brings you back into the classical economics.
Marx is really the last great classical economist who pushed it all to its logical end. His contribution was to explain that just as the landlord exploits by taking rent, the industrial capitalist exploits labour by charging more for the products of labour than it costs to hire labour to produce.

However, unlike the rentier, unlike the landlord, the capitalist uses this economic surplus value to expand production, to build yet more factories, to employ yet more labour. This is an expanding society, whereas the rent paid to landlords is a kind of exploitation that is pure overhead and shrinks industrial capitalism. That’s why Marx said that the political aim of industrial capitalism was to free society from the landlords, predatory bankers and monopolists. That’s why the Communist Manifesto‘s program begins with collecting rent for the public sector. You can tax the land as a transition to socialising it. That was the Communist Manifesto’s classical economics.

Jonathan Brown 1:44:26
You have these views, and yet you were still a valued member of the team at the Hudson Institute.

Michael Hudson 1:44:33
Yes, because I was explaining how the world worked. Herman and I disagreed so much, we were genuine friends. I liked him, and we couldn’t believe that the other would actually believe something so different. But we said okay, if the arguments that we’re having is the “big argument,” it’s going to determine where the economy is going. Either he’s right or I’m right.
This is like the debates between Henry George’s followers and the socialists in the early 1900s. It was going to be one world or another.

What is the key to analysing the economy? Is it to focus on rent and finance, or on technological potential? My point is that technological potential can be smothered by so much overhead paid to the rentier class via the FIRE sector – finance, insurance and real estate – that there’s no money left to invest, no income left for wage earners to spend on buying the goods and services that they produce.

Jonathan Brown 1:45:48
And yet the technology sector in my opinion is actually the new monopolist. Instead of having a competition, in that sense they’re the new landowners. So Google is a spectrum landowner. If I want to host these videos, then I’ve got to negotiate or accept the terms of the landowner YouTube. I’m posting them there, but I won’t be making any money on it. Because I’m one of the serfs on YouTube.

Michael Hudson 1:46:16
This is the problem that China is dealing with in its own way. What do you do when Jack Ma and other IT specialists end up as billionaires? Well, China did not have an anti-monopoly group. It let 100 flowers bloom and let billionaires develop, but would then have them transfer their money to the government in one way or another. They haven’t done this in the way that Western economies do, by an anti-monopoly tax, but by a political consensus way.

In countries like Russia, I’m trying to get them to formalise this into formally calculating the magnitude of economic trends. You want innovation to take place, you want people to make the fortune, but at a certain point they can’t somehow make so big a fortune that it ends up crashing the economy.

Jonathan Brown 1:47:37
But looking at your writing from the Byzantine times and the ancient Near East, is the importance of the leader of that particular economy or society to make sure that no one got so rich that they could overthrow the leader? Which is really what you’ve got with someone like Zuckerberg, the power that he was able to wield in the election, whether you agree with him or not, was extraordinary. And likewise, if you look at the fight that’s currently going on with Elon Musk and Twitter, is to recognise that actually we want, we want our people to own these resources that we pretend are private, but actually have tremendous social power.

Michael Hudson 1:48:24
Yes, they financialized politics in America, by the Supreme Court’s Citizens United ruling. Anyone can contribute as much as they want, if you’re a corporation. The rentier interests give to pro-rentier politicians to act as their puppets. The money goes for advertising airtime on television and the media to overwhelm all the people who normally would want to minimise the rentier class. So essentially, you’ve financialized politics in America much more than has occurred in Europe. But in Europe, it’s the right wingers who basically control the press, commercial television and media. So if the media are controlled by the right wing with their own agenda, they frame the economic issues from the vantage point of the rentier class instead of from the vantage point of how an economy actually develops and grows wealthier in a fair manner.

Jonathan Brown 1:49:48
I know we need to need to wrap up. Just thinking about the scenarios for Russia and China currently. Everybody who is part of the original white economies of Europe, realises that if they don’t side with America, they get overthrown. But also right now they have a short-term challenge that the Americans are going to let them starve because they’re stopping wheat exports coming through the European ports. But then you’ve also got Russia with resources, you’ve got China with grain resources.

So there is a potential that when people start to starve, and you look at the challenges in Sri Lanka, with politicians being murdered and people running out of food, there’s a chance for China to step in and say, we can send you grain exports. And by lucky coincidence, because of the all the lock downs that China’s got right now, a lot of the world’s boats and ships are currently waiting outside ports in China.

Michael Hudson 1:50:54
[Missing part here] Computer chips are part of the problem. And that’s probably going to make them friendlier with Taiwan. Taiwan has the computer chips.

Jonathan Brown 1:51:03
And by your assessment, because Taiwan do not want to be another Ukraine, American actions are likely to accelerate the reintegration.

Michael Hudson 1:51:12
There’s a bell shaped curve, I haven’t met with the Taiwanese in quite a few years so I don’t know, up to date what the dynamic is. But just by logic, you can see the international environment in which they’re operating. You wonder how they are going to calculate the plusses and minuses of the U.S. versus China? What economy do they want to attach themselves to so that they can get richer fastest?

Jonathan Brown 1:51:46
And also stay safe and not get involved in unnecessary wars. When you look at the tragedy in Ukraine, all these people dying when you’ve got such a strong opponent in Russia, how can you go to war with them for any period of time?

Michael Hudson 1:52:07
Well, that’s what the world is divided into. The U.S. and European society is built on war. It’s the only foreign policy they have, because they don’t have an economic power anymore. They’ve de-industrialised and the rest of the world that is trying to industrialise and trying to feed itself. China, Russia, India, the Global South are the anti-war part of the world. So the world is dividing into two parts: a rentier part supporting finance capitalism [that] is trying to impose it on other countries, to financialize China and Russia to make them put a Margaret Thatcher or Boris Yeltsin in charge of China. While they try to put their own candidates in charge, a la General Pinochet, the rest of the world is trying to defend itself against this terrorism.

So the Western world that calls itself democracy is the terrorist military world. The nations that it calls authoritarian are any authority strong enough to control and tax the financial interests – that is, any government strong enough to regulate finance and real estate. Such an economy is by definition authoritarian as opposed to a democracy, where Wall Street and the financial centres are the democratically elected central planners. So what’s at issue is who’s going to plan society: the financial sector, or the people as in China and other countries.

Jonathan Brown 1:53:41
I think that says it. From a Western lens it’s a different type of democracy.

Michael Hudson 1:53:48
Yes. But democracy really means an economy run to benefit the great bulk of the population, who happen to be wage earners? Or is it going to be for the 1%? Is the economy run for on behalf of the 99% and the 1%? Well, the 99% need a strong government to run it in their own interests and cope with the counter-revolutionary policies, the neo-feudal rentier policies of the 1%.

Jonathan Brown 1:54:22
Okay, so knowing China, then your take on its zero-COVID policy that the authorities are implementing in some parts of the country?

Michael Hudson 1:54:32
The more I read about long COVID here, the worse it seems. I’m 83 years old, so my wife and I have not gone to a restaurant since 2020. We haven’t even gone to our friends’ houses for dinner. We’re isolating ourselves. China has isolated itself at great cost, but it saved the population not only from having COVID itself, but from having long COVID. There are now a million Americans with long COVID. They also say that long COVID lowers your, your IQ by 10%.

It’s almost as dangerous is inheriting a trust fund when it comes to impairing your IQ. It’s debilitating.

My webmaster in Australia and his family have COVID. So I’m very sympathetic with what China’s doing, even though it means that I can’t go there, because I’d have to be isolated in a hotel room for two weeks just to give a few days’ meeting – and then be isolated again when I come back. So China is making a huge effort not to sicken its population with COVID. And now of course, since the Russians have began to publish all their findings of the US bio-warfare labs in Ukraine that were designed to spread a COVID like diseases by migrating birds and bats and manmade aircraft over Russia.

Now, they’ve reopened the question ‘was COVID a US bio-warfare from the very beginning’? And the Chinese are looking at it and saying ‘was it engineered’? If the Americans are trying to engineer COVID to affect mainly Slavic population and their DNA signatures, could they have been doing the same thing against Asians? So all of this is suddenly opened up. The World Health Organisation has refused to divulge any of the USA biowarfare efforts, and the U.S. has stonewalled all efforts to find out about the bio-warfare. This is isolating America and Europe.

If American Europe is left with its current foreign policy, biowarfare and atomic bombs, NATO will be shunned by the civilised world. As Rosa Luxemburg said a century ago, the choice is between socialism or barbarism. NATO, Europe and America represent the new barbarism. The alternative is socialism. That is how the world seemed to be developing in Europe and America until World War I untracked everything. The rest of the world now has a chance to get back on track. I don’t know what’s going to happen in the West.

Jonathan Brown 1:57:47
Michael, as always, you always get more into your stuff than I expected. Are there any things that you’d like to say to our listeners, before we finish up,

Michael Hudson 1:57:56
I’ve probably said too much. And I hope you can edit out anything that’s embarrassing.

Jonathan Brown 1:58:01
I may get thrown off YouTube for publishing some of your comments. So you may have to go back and review a few of them. But as always, Michael, thanks so much your time what we’ll do is we’ll send a link to everybody for the website and also for the new book, as well which I think and those series of lectures when I was researching for this conversation were the single best economic lectures I’ve ever listened to – truly extraordinary levels of insight and real economics rather than theoretical or textbook stuff. So as always from ShepherdWalwyn, thanks so much for your time and for your contribution.

Michael Hudson 1:58:41
Well, if you transcribe it all in will be worth it. \

Jonathan Brown 1:58:45
That’s, that’s our promise 100%. So thanks very much.

Michael Hudson 2:00:05
Thanks a lot.

Will the Global South break free from dollarized debt?

In his latest book, economist Michael Hudson pits socialism against finance capitalism and tears apart the ‘dream civilization’ imposed by the 1 percent.

June 09, 2022

By Pepe Escobar

Let’s jump straight into the fray. Hudson begins with an analysis of the “take the money and run” ethos, complete with de-industrialization, as 90 percent of US corporate revenue is “used to share buybacks and dividend payouts to support company stock prices.”

Michael Hudson’s new book on the world’s urgent global economic re-set is sure to ruffle some Atlanticist feathers.Photo Credit: The Cradle

With The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism, Michael Hudson, one of the world’s leading independent economists, has given us arguably the ultimate handbook on where we’re at, who’s in charge, and whether we can bypass them.

That represents the apex of “Finance Capitalism’s” political strategy: to “capture the public sector and shift monetary and banking power” to Wall Street, the City of London and other western financial centers.

The whole Global South will easily recognize the imperial modus operandi: “The strategy of US military and financial imperialism is to install client oligarchies and dictatorships, and arm-twist allies to join the fight against designated adversaries by subsidizing not only the empire’s costs of war-making (“defense”) but even the imperial nation’s domestic spending programs.” This is the antithesis of the multipolar world advocated by Russia and China.

In short, our current Cold War 2.0 “is basically being waged by US-centered finance capitalism backing rentier oligarchies against nations seeking to build up more widespread self-reliance and domestic prosperity.”

Hudson presciently reminds us of Aristotle, who would say that it is in the interest of financiers to wield their power against society at large: “The financial class historically has been the major beneficiary of empires by acting as collection agents.”

So inevitably the major imperial leverage over the world, a true “strategy of underdevelopment,” had to be financial: instrumentalizing IMF pressure to “turn public infrastructure into privatized monopolies, and reversing 20th century pro-labor reforms” via those notorious ‘conditionalities’ for loans.

No wonder the Non-Aligned Movement (NAM), established in Belgrade in 1961 with 120 nations and 27 observers, became such a threat to US global strategy. The latter predictably fought back with a slew of ethnic wars and the earliest incarnations of color revolution – fabricating dictatorships on an industrial scale, from Suharto to Pinochet.

The culmination was a cataclysmic Houston get-together in December 19, 1990 “celebrating” the dissolution of the USSR, as Hudson reminds us how the IMF and the World Bank “laid out a blueprint for Russia’s leaders to impose austerity and give away its assets – it didn’t matter to whom – in a wave of ‘shock therapy’ to let the alleged magic of free enterprise create a neoliberal free-for-all.”

Lost in a Roman wilderness of debt

To a large extent, nostalgia for the rape-and-pillaging of 1990s-era Russia fuels what Hudson defines as the New Cold War, where Dollar Diplomacy must assert its control over every foreign economy. The New Cold War is not waged only against Russia and China, “but against any countries resisting privatization and financialization under US sponsorship.”

Hudson reminds us how China’s policy “followed almost the same path that American protectionism did from 1865 though 1914 – state subsidy for industry, heavy public-sector capital investment…and social spending on education and health care to upgrade the quality and productivity of labor. This was not called Marxism in the United States; it was simply the logical way to look at industrialization, as part of a broad economic and social system.”

But then, finance – or casino – capitalism gained steam, and left the US economy mainly with “agribusiness farm surpluses, and monopolies in information technology (largely developed as a by-product of military research), military hardware, and pharmaceutical patents (based on public seed-money to fund research) able to extract monopoly rent while making themselves largely tax-exempt by using offshore banking centers.”

That’s the current State of Empire: relying only “on its rentier class and Dollar Diplomacy,” with prosperity concentrated in the top one percent of establishment elites. The inevitable corollary is US diplomacy imposing illegal, unilateral sanctions on Russia, China and anyone else who defies its diktats.

The US economy is indeed a lame post-modern remake of the late Roman empire: “dependent on foreign tribute for its survival in today’s global rentier economy.” Enter the correlation between a dwindling free lunch and utter fear: “That is why the United States has surrounded Eurasia with 750 military bases.”

Delightfully, Hudson goes back to Lactantius, in the late 3rd century, describing the Roman empire on Divine Institutes, to stress the parallels with the American version:

“In order to enslave the many, the greedy began to appropriate and accumulate the necessities of life and keep them tightly closed up, so that they might keep these bounties for themselves. They did this not for humanity’s sake (which was not in them at all), but to rake up all things as products of their greed and avarice. In the name of justice they made unfair and unjust laws to sanction their thefts and avarice against the power of the multitude. In this way they availed as much by authority as by strength of arms or overt evil.”

Socialism or barbarism

Hudson succinctly frames the central issue facing the world today: whether “money and credit, land, natural resources and monopolies will be privatized and concentrated in the hands of a rentier oligarchy or used to promote general prosperity and growth. This is basically a conflict between finance capitalism vs. socialism as economic systems.”

To advance the struggle, Hudson proposes a counter-rentier program which should be the Global South’s ultimate Blueprint for responsible development: public ownership of natural monopolies; key basic infrastructure in public hands; national self-sufficiency – crucially, in money and credit creation; consumer and labor protection; capital controls – to prevent borrowing or denominating debts in foreign currency; taxes on unearned income such as economic rent; progressive taxation; a land tax (“will prevent land’s rising rental value from being pledged to banks for credit to bid up real estate prices”); use of the economic surplus for tangible capital investment; and national self-sufficiency in food.

As Hudson seems to have covered all the bases, at the end of the book I was left with only one overarching question. I asked him how he analyzed the current discussions between the Eurasia Economic Union (EAEU) and the Chinese – and between Russia and China, further on down the road – as being able to deliver an alternative financial/monetary system. Can they sell the alternative system to most of the planet, all while dodging imperial financial harassment?

Hudson was gracious enough to reply with what could be regarded as the summary of a whole book chapter: “To be successful, any reform has to be system-wide, not merely a single part. Today’s western economies have become financialized, leaving credit creation in private hands – to be used to make financial gains at the expense of the industrial economy… This aim has spread like leprosy throughout entire economies – their trade patterns (dependency on US agricultural and oil exports, and IT technology), labor relations (anti-unionism and austerity), land tenure (foreign-owned plantation agriculture instead of domestic self-reliance and self-sufficiency in food grains), and economic theory itself (treating finance as part of GDP, not as an overhead siphoning off income from labor and industry alike).”

Hudson cautions that “in order to break free of the dynamic of predatory finance-capitalism sponsored by the United States and its satellites, foreign countries need to be self-sufficient in food production, energy, technology and other basic needs. This requires an alternative to US ‘free trade’ and its even more nationalistic ‘fair trade’ (deeming any foreign competition to US-owned industry ‘unfair’). That requires an alternative to the IMF, World Bank and ITO (from which Russia has just withdrawn). And alas, an alternative also requires military coordination such as the SCO [the Shanghai Cooperation Organization] to defend against the militarization of US-centered finance capitalism.”

Hudson does see some sunlight ahead: “As to your question of whether Russia and China can ‘sell’ this vision of the future to the Global South and Eurasian countries, that should become much easier by the end of this summer. A major byproduct (not unintended) of the NATO war in Ukraine is to sharply raise energy and food prices (and shipping prices). This will throw the balance of payments of many Global South and other countries into sharp deficit, creating a crisis as their dollar-denominated debt to bondholders and banks falls due.”

The key challenge for most of the Global South is to avoid default:

“The US raise in interest rates has increased the dollar’s exchange rate not only against the euro and Japanese yen, but against the Global South and other countries. This means that much more of their income and export revenue must be paid to service their foreign debt – and they can avoid default only by going without food and oil. So what will they choose? The IMF may offer to create SDRs to enable them to pay – by running even further into dollarized debt, subject to IMF austerity plans and demands that they sell off even more of their natural resources, forests and water.”

So how to break free from dollarized debt? “They need a critical mass. That was not available in the 1970s when a New International Economic Order was first discussed. But today it is becoming a viable alternative, thanks to the power of China, the resources of Russia and those of allied countries such as Iran, India and other East Asian and Central Asian countries. So I suspect that a new world economic system is emerging. If it succeeds, the last century – since the end of World War I and the mess it left – will seem like a long detour of history, now returning to what seemed to be the basic social ideals of classical economics – a market free from rent-seeking landlords, monopolies and predatory finance.”

Hudson concludes by reiterating what the New Cold War is really all about:

“In short, it is a conflict between two different social systems, each with their own philosophy of how societies work. Will they be planned by neoliberal financial centers centered in New York, supported by Washington’s neo-cons, or will they be the kind of socialism that the late 19th century and early 20th century envisioned – a ‘market’ and, indeed, society free from rentiers? Will natural monopolies such as land and natural resources be socialized and used to finance domestic growth and housing, or left to financial interests to turn rent into interest payments eating into consumer and business income? And most of all, will governments create their own money and steer banking to promote domestic prosperity, or will they let private banks (whose financial interests are represented by central banks) take control away from national treasuries?”

The views expressed in this article do not necessarily reflect those of The Cradle.

Michael Hudson: Interview with the newly founded German magazine “ViER”

June 03, 2022


By Michael Hudson

“Taken from an interview with the newly founded German magazine “ViER” which will be published in August 2022.” ViER (FOUR), stands for the media as fourth power in checks and balances.

(1.) Prof. Hudson, your new book “The Destiny of Civilization” is out now. This lecture series on finance capitalism and the New Cold War presents an overview of your unique geo-political perspective.
You talk about an ongoing ideological and material conflict between financialized and de-industrialized countries like United States against the mixed-economies of China and Russia. What is this conflict about and why is the world right now at a unique “point of fracture” as your book states?

Today’s global fracture is dividing the world between two different economic philosophies: In the US/NATO West, finance capitalism is de-industrializing economies and has shifted manufacturing to Eurasian leadership, above all China, India and other Asian countries in conjunction with Russia providing basic raw materials and arms.

These countries are a basic extension of industrial capitalism evolving into socialism, that is, into a mixed economy with strong government infrastructure investment to provide education, health care, transportation and other basic needs by treating them as public utilities with subsidized or free services for these needs.

In the neoliberal US/NATO West, by contrast, this basic infrastructure is privatized as a rent-extracting natural monopoly.

The result is that the US/NATO West is left as a high-cost economy, with its housing, education and medical expenses increasingly debt financed, leaving less and less personal and business income to be invested in new means of production (capital formation). This poses an existential problem for Western finance capitalism: How can it maintain living standards in the face of de-industrialization, debt deflation and financialized rent-seeking impoverishing the 99% to enrich the One Percent?

The first U.S. aim is to deter Europe and Japan from seeking a more prosperous future to lie in closer trade and investment ties with Eurasia and the Shanghai Cooperation Organization (SCO, a more helpful way of thinking about the global fracture from the BRICS). To keep Europe and Japan as satellite economies, U.S. diplomats are insisting on a new economic Berlin Wall of sanctions to block trade between East and West.

For many decades U.S. diplomacy has meddled in European and Japanese internal politics, sponsoring pro-neoliberal officials into government leadership. These officials feel that their destiny (and also their personal political fortunes) is closely allied with U.S. leadership. Meanwhile, European politics has now become basically NATO politics run from the United States.

The problem is how to hold the Global South – Latin America, Africa and many Asian countries – in the US/NATO orbit. Sanctions against Russia have the effect of hurting the trade balance of these countries by sharply raising oil, gas and food prices (as well as prices for many metals) that they must import. Meanwhile, rising U.S. interest rates are drawing financial savings and bank credit into U.S.-dollar-denominated securities. This has raised the dollar’s exchange rate, making it much harder for SCO and Global South countries to pay their dollarized debt service falling due this year.

This forces a choice on these countries: either go without energy and food in order to pay foreign creditors – thereby putting international financial interests before their domestic economic survival – or defaulting on their debts, as occurred in the 1980s after Mexico announced in 1982 that it could not pay foreign bondholders

(2.) How do you see the ongoing war/special military operation in Ukraine? Which economic consequences do you foresee?

Russia has secured the Russian-speaking Eastern Ukraine and its southern Black Sea coastline. NATO will continue to “poke the bear” by sabotage and new ongoing attacks, especially by Polish fighters.

NATO countries have dumped their old and obsolete weapons into Ukraine, and now must spend immense sums modernizing their military hardware. The outflow of payments to the U.S. military-industrial complex will put downward pressure on the euro and British sterling – all coming on topo of their own rising energy and food deficits. So the euro and sterling are headed down toward parity with the U.S. dollar. The euro is almost there now (about $1.07). This means sharply rising price inflation for Europe.

I read and hear conflicting information on the new sanctions. Some experts in the East and West believe this will harm the national economy of the Russian Federation tremendously. Other experts tend to believe this will backfire or have a huge boomerang-effect on the Western countries indeed.

The overriding U.S. policy is to fight against China, hoping to break of the Western Uighur regions and divide China into smaller states. To do that, it is necessary to break away Russian military and raw-materials support for China – and in due course to break it up into a number of smaller states (the Western large cities, northern Siberia, a southern flank, etc.).

Sanctions were imposed in hopes of making living conditions so unpleasant for Russians that they would press for regime change. The NATO attack in Ukraine was designed to drain Russia militarily – by having the bodies of Ukrainians deplete Russia’s supply of bullets and bombs by giving their lives simply to absorb Russian arms.

The effect has been to increase Russian support for Putin – just the opposite of what was intended. There is a growing disillusion with the West, after seeing what the Harvard Boys did to Russia when the United States backed Yeltsin to create a domestic kleptocrat class that tried to “cash out” its privatizations by selling shares in oil, nickel and public utilities to the West, and then spurring military attacks from Georgia and Chechnya. There is a general agreement that Russia is making a long-term turn Eastward instead of Westward.

So the effect of U.S. sanctions and military opposition to Russia has been to impose a political and economic Iron Curtain locking in Europe to dependency on the United States, while driving Russia together with China instead of prying them apart. Meanwhile, the cost of European sanctions against Russian oil and food – much to the benefit of U.S. LNG gas suppliers and agricultural exporters – threatens to create long-term European opposition to U.S. unipolar global strategy. A new “Ami go home” movement is likely to develop.

But for Europe, the damage already has been done, and neither Russia nor China are likely to trust that European government officials can withstand the bribery and personal pressure brought to bear by U.S. interference.

Here in Germany I’m listening to the new Minister for Economy, Mr Robert Habeck from the Green Party, who talks about activating the federal “emergency gas” and asks the Emirates for resources (this “deal” seems to be failed already, news say). We see the end of North Stream II and huge dependency for Berlin and Brussels on Russian resources. How this will all sum up?

In effect, U.S. officials have asked Germany to commit economic suicide and bring on a depression, higher consumer prices and lower living standards. German chemical companies have already begun to shut down their fertilizer production, given Germany’s acceptance of trade and financial sanctions that prevent it from buying Russian gas (the raw material for most fertilizer). And German car companies are suffering from supply cut-offs.

These European economic shortages are a huge benefit to the United States, which is making enormous profits on more expensive oil (which is controlled largely by U.S. companies, followed by British and French oil companies). Europe’s replenishment of the arms that it donated to Ukraine also is a boon to the U.S. military-industrial complex, whose profits are soaring.

But the United States is not recycling these economic gains to Europe, which is looking like the big loser.

Arab oil producers already have rejected U.S. demands that they charge less for their oil. They look to be windfall gainers from the NATO attack on the Ukraine proxy battlefield.

It seems unlikely that Germany can simply give back to Russia Nord Stream 2 and the Gazprom affiliates that have conducted trade with Germany. Trust has been broken. And Russia is afraid to accept payments by European banks since the theft of $300 billion of its foreign reserves. Europe is no longer economically safe for Russia.

The question is just how soon Russia will simply stop supplying Europe altogether.

It looks like Europe is becoming an appendage of the U.S. economy, in effect bearing the fiscal burden of America’s Cold War 2.0, with no political representation in the United States. The logical solution is for Europe to join the United States politically, giving up its governments but at least getting a few Europeans in the U.S. Senate and House of Representatives.

(3.) Which role does the a) New Cold War and the b) neoliberal finance capitalism play in the current war between Russia and Ukraine? According to your recent research.

The US/NATO war in Ukraine is the first battle in what looks like a 20-year attempt to isolate the Dollar Area West from Eurasia and the Global South. U.S. politicians promise to keep the Ukraine war going indefinitely, hoping that this may become Russia’s “new Afghanistan.” But this tactic now looks like it may threaten to be America’s own Afghanistan. It is a proxy war, whose effect is to lock in Europe’s dependency on the United States as a client oligarchy with the euro as a satellite currency to the dollar.

U.S. diplomacy tried to disable Russia in three major ways. First, isolating it financially by blocking it from SWIFT bank clearing, system. Russia responded by smoothly moving over to China’s bank-clearing system.

The second tactic was to seizing Russian deposits in U.S. banks and holdings of U.S. financial securities. Russia responded by picking up U.S. and European investments in Russia on the cheap as the West dumped them.

The third tactic was to block NATO members from trading with Russia. The effect has been that Russian imports from the West have declined, while its exports of oil, gas and food are soaring. That has raised the ruble’s exchange rate instead of hurting it. And as sanctions block Russia’s imports from the West, President Putin has announced that his government will invest heavily in import substitution. The effect will be a permanent loss of Russian markets for European suppliers and exporters.

Meanwhile, the Trump tariffs against European exports to the United States remain in place, leaving European industry with shrinking business opportunities. The European Central Bank may continue to buy European stocks and bonds to protect the wealth of the One Percent, but if anything will cut back on domestic social spending so as to comply with the 3% limit of budget deficits that the eurozone has imposed on itself.

In the medium and long run, the US/NATO sanctions are therefore aimed mainly against Europe. And Europeans don’t even seem to see that they are the primary victims of this new U.S. economic war for self-serving energy, food and financial dominance.

(4.) In Germany the stopped energy project Nord Stream II is still a big political issue. In your recent online article “The Dollar Devours the Euro” you wrote: “It is now clear that today’s escalation of the New Cold War was planned over a year ago. America’s plan to block Nord Stream 2 was really part of its strategy to block Western Europe (“NATO”) from seeking prosperity by mutual trade and investment with China and Russia.” Could you explain this to our readers?  source:

What you characterize as “blocking Nord Stream 2” is really a Buy-American policy. The United States has persuaded Europe not to buy in the lowest-price market, but to pay as much as seven times more for its gas from U.S. LGN suppliers, and to spend a reported $5 billion on expanding port capacity – that will not even be available for a year years.

This threatens a very uncomfortable interregnum for Germany and other European countries following U.S. dictates. Basically, national parliaments are now subservient to NATO, whose policies are run from Washington.

One price that Europe will pay, as noted above, is declining exchange rate against the U.S. dollar. European investors are likely to move their savings and investments out of Europe to the United States in order maximize their capital gains and simply avoid price declines for their stocks and bonds as measured in dollars.

(5.) Prof. Hudson, let’s take a look at further developments in Germany. In May the German parliament – Bundestag – passed a new bill: German lawmakers approved possible expropriation of energy companies. This could enable the Berlin government to put energy companies under trusteeship if they can no longer fulfil their tasks and if the security of supply is at risk. According to REUTERS, the renewed law – which still needs to pass the upper house of parliament – could be applied for the first time if no solution is found on the ownership of the PCK Refinery oil refinery in Schwedt/Oder (East Germany), which is majority-owned by Russian state-owned Rosneft.

It looks like Europe and America will confiscate Russian investments in their countries, and sell off (or have Russia confiscate) NATO-country investments in Russia. This means a de-linking of the Russian economy from the West, and a closer linking with China – which looks like the next economy to be sanctioned by NATO as it becomes an Eastern Pacific Treaty Organization involving Europe in tis confrontation in the China Sea.

I would be surprised if Russia resumes selling oil and gas to Europe without being reimbursed for what Europe (and also the United States) has seized. This demand would help bring European pressure on the United States to give back the $300 billion in foreign reserves that it has grabbed.

But even after such a give-back and reparations settlement, trade seems unlikely to be resumed. A phase change has occurred, a change in consciousness as to how the world is splitting up under U.S. diplomatic attacks on allies and adversaries alike.

My question would be: Socialism is a big topic in your new book. What’s your view on those “socialist” measures taken now by a capitalist country like Germany?


A century ago, the “final stage” of industrial capitalism was expected to be socialism. There were many different kinds of socialism: State socialism, Marxian socialism, Christian socialism, anarchist socialism, libertarian socialism. But what occurred after World War I was the antithesis of socialism. It was finance capitalism and a militarized Finance capitalism.

The common denominator of all socialist movements, from the right to the left of the political spectrum, was stronger government infrastructure spending. The transition to socialism was being led (in the United States and Germany) by industrial capitalism itself, seeking to minimize the cost of living (and hence the basic living wage) and the cost of doing business by government investment in basic infrastructure, whose services were to be provided freely, or at least at subsidized prices.

That aim would prevent basic services from becoming opportunities for monopoly rent. The antithesis was the Thatcher-neoliberal doctrine of privatization. Governments turned over public utilities to private investors. Companies were bought on credit, adding interest and other financial charges to profits and payments to management. The result has been to turn neoliberal Europe and America into high-cost economies unable to compete in production prices with countries pursuing socialist polities instead of financialized neoliberalism.

This opposition in economic systems is the key to understanding today’s world global fracture.

(6.) Especially Russian oil and gas are in the focus right now. Moscow demands payments in Rouble only and is expanding their field of buyers filling it with China, India or Saudi-Arabia. But it seems Western buyers can still pay in Euro or US Dollar. What is your take on this ongoing war on resources? The Rouble appears to be a winner.

The rouble certainly is rising. But this does not make Russia a “winner” if its economy is disrupted by the sanctions blocking its own imports needed for its supply chains to operate smoothly.

Russia will end up the winner if it can mount an industrial import-substitution program, and re-create public infrastructure to replace what has been privatized under U.S. direction by the Harvard Boys in the 1990s.

Do we see the end of the petro-dollar and a rise of a new financial architecture in the East accompanied by a strengthening of BRICS and Shanghai Cooperation Organization (SCO)?

There will still be petrodollars, but also a variety of currency-area blocs as the world de-dollarizes its international trade and investment arrangements. In late May, Foreign Secretary Lavrov said that Saudi Arabia and Argentina want to join BRICS. As Pepe Escobar recently noted, BRICS+ may expand to include MERCOSUR and the South African Development Community (SADC)

These arrangements probably will call for a non-U.S. alternative to the IMF to create credit and provide a vehicle for official foreign-exchange reserves for the non-NATO countries. The IMF will still survive to impose austerity on U.S. satellite countries while subsidizing capital flight from Global South countries and creating SDRs to finance U.S. military spending abroad.

Summer 2022 will be a testing ground as Global South countries suffer a balance-of-payments crisis from the rising oil and food deficits alongside the higher domestic-currency costs of carrying their foreign dollar debts. The IMF may offer new SDRs for them to pay US dollar bondholders to keep the illusion of solvency going. But the SCO countries can offer oil and food – IF countries give assurances of repaying credit by repudiating their dollar debts to the West.

This financial diplomacy promises to introduce “interesting times.”

(7.) In your recent interview with Michael Welch (“Accidental Crisis?”) you have a specific analysis on the current events in Ukraine/Russia:
“The war isn’t against Russia. The war isn’t against Ukraine. The war is against Europe and Germany.” Could you please elaborate on that?


As I explained above, the U.S. trade and financial sanctions are locking in Germany to dependency on U.S. exports of LNG, and purchases of US military arms to upgrade NATO into the de facto European Governing Authority.

The effect is to destroy any European hopes for mutual trade and investment gains with Russia. It is being turned into the junior partner (very junior) in its new trade an investment relations with the increasingly protectionist and nationalistic United States.

(8.) The real problem for United States seems to be this: “The only way of maintaining prosperity if you can’t create it at home is to get it from abroad.” What is Washington’s strategy in there?

My book Super Imperialism has explained how, for the past 50 years, ever since the United States went off gold in August 1971, the U.S. Treasury Bill standard has given the United States a free ride at foreign expense. Foreign central banks have recycled their dollar inflow resulting from the U.S. balance-of-payments deficit into loans to the U.S. Treasury – that is, to buy U.S. Treasury securities to hold their savings. This arrangement has enabled the United States to undertake foreign military spending for its nearly 800 military bases around Eurasia without having to depreciate the dollar or tax its own citizens. The cost has been borne by countries whose central banks have built up their dollar loans to the U.S. Treasury.

But now that it has become unsafe for countries to hold dollar-denominated U.S. bank deposits or government securities or investments if they “threaten” to defend their own economic interests or if their policies diverge from those dictated by U.S. diplomats, how can America continue to get a free ride?

In fact, how can it import basic materials from Russia to fill parts of its industrial and economic supply chain that is being broken down by the sanctions?

That is the challenge for U.S. foreign policy. One way or another, it aims to tax Europe and make other countries into economic satellites. The exploitation may not be as blatant as the U.S. grabbing of Venezuelan, Afghan and Russian official reserves. It is likely to involve undercutting foreign self-sufficiency to force other countries into economic dependency on the United States, so that the U.S. can threaten these countries with disruptive sanctions if they seek to put their own national interests over what U.S. diplomats want them to do.

(9.) How will all this affect Western Europe’s (Germany / France / Italy) balance of payments and hence the euro’s exchange rate against the dollar? And why do you think the European Union is on a path to become new “Panama, Puerto Rico and Liberia”?

The euro already is a satellite currency to the United States. Its member countries cannot run domestic budget deficits to cope with the coming inflationary depression resulting from the U.S.-sponsored sanctions and resulting Global Fracture.

The key is turning out to be military dependency. This is “cost sharing” for the U.S. sponsored Cold War 2.0. That cost sharing is what has led U.S. diplomats to realize that they need to control domestic European politics to prevent its populations and businesses from acting in their own interests. Their economic squeeze is “collateral damage” to today’s New Cold War.

(10.) A philosopher from Switzerland wrote a critical essay in mid of March for the German socialist newspaper „Neues Deutschland“, a former news outlet for the GDR government. Ms Tove Soiland criticized the international Left for current behaviours regarding Ukraine crisis and covid management. The Left, she says, is too much pro authoritarian government/state – and thereby copying methods of the traditional right-wing parties. Do you share this view? Or is it too harsh?

How would you answer this question, esp. regarding the thesis in your new book: “… the alternative path is broadly mixed-economy industrial capitalism leading to socialism …”. source:

The State Department and CIA’s “mighty Wurlitzer” has focused on gaining control of Europe’s Social Democratic and Labour parties, anticipating that the great threat to U.S.-centered finance capitalism will be socialism. That has included the “green” parties, to the point where their pretense of opposing global warming is shown to be hypocritical in light of the vast carbon footprint and pollution of the NATO military warfare in Ukraine and related air force and naval exercises. You can’t be pro-environment and pro-war at the same time!

This has left the right-wing nationalist parties less influenced by U.S. political meddling. That is where the opposition to NATO is coming from, as in France and Hungary.

And in the United States itself, the only votes against the new $30 billion contribution to military spending against Russia came from Republicans. The entire “left wing” Democratic Party “squad” voted for the war spending.

The Social Democratic parties are basically bourgeois parties whose supporters have hopes of rising into the rentier class, or at least becoming stock and bond investors in miniature. The result is that neoliberalism has been led by Tony Blair in Britain and his counterparts in other countries. I discuss this political alignment in The Destiny of Civilization.

U.S. propagandists call governments that keep natural monopolies as public utilities “autocratic.” To be “democratic” means to let U.S. firms by control of these commanding heights, being “free” of government regulation and taxation of finance capital. So “left” and “right,” “democracy” and “autocracy,” have become an Orwellian Doublespeak vocabulary sponsored by America’s oligarchy (which it euphemizes as “democracy”).

(11.) Could the war in Ukraine be a landmark to show a new geopolitical map in the world? Or is the neoliberal New World Order on its rise? How do you see it?

As I explained in your Question #1, the world is being split into two parts. The conflict is not merely national by the West against the East, but is a conflict of economic systems: predatory finance capitalism against industrial socialism aiming at self-sufficiency for Eurasia and the SCO.

The non-aligned countries were not able to “go it alone” in the 1970s because they lacked a critical mass to produce their own food, energy and raw materials. But now that the United States has de-industrialized its own economy and outsourced its production to Asia, these countries have an option not to remain in dependency on U.S. Dollar Diplomacy.

(Updated with transcript) Ben Norton aka Multipolarista interviews Michael Hudson: Destiny of Civilization

May 12, 2022


The decline of the US dollar, the three ‘systems’, the sanctions war on Russia, on the eve of the publication of Prof. Hudson’s new book:  The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism.”

UPDATE:  This wonderful transcript is now available just underneath the video


BENJAMIN NORTON: Hey, everyone. I’m Ben Norton, and this is the Multipolarista podcast. And I have the great pleasure of being joined today by one of my favorite guests, one of I think the most important economists in the world today. I’m speaking with Professor Michael Hudson.

If you’ve seen any of the interviews I’ve done with Professor Hudson over the past few years, you probably know that he’s a brilliant analyst. He always has, I think, the best analysis to understand what’s going on economically and also politically, geopolitically, in the world today.

And right now is, I think, a very important moment to have Professor Hudson on today. We’re going to talk about the economic war on Russia and the process of economic decoupling between Russia and China and the West, which is something that Professor Hudson has talked about for many years. And that really has accelerated with the Western sanctions on Russia over Ukraine.

We’re also going to talk about the decline in U.S. dollar hegemony. A recent report from the International Monetary Fund, which is dominated by the U.S., acknowledged that the use of the dollar in foreign bank reserves is gradually declining.

Now, it’s not going to disappear overnight. But even the IMF is acknowledging that dollar hegemony is eroding. And, of course, the IMF acknowledged that the Western sanctions on Russia are going to further erode the hegemony of the U.S. dollar.

We now see Russia doing business with China in the Chinese yuan. Russia is also doing business with India with the Indian rupee. And of course Russia has been telling Europe that if it wants to buy Russian energy, it has to do so with Russian rubles.

So there’s so much to talk about today, Professor Hudson, but I want to begin in the first half of this interview today talking about a new book that you’re just about to publish.

Today is Monday, May 9th. You said on Wednesday, May 11th, the book comes out. And it’s called “The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism.”

And everything that I just prefaced this interview with, discussing the economic war in Russia and sanctions and decoupling, this is all deeply related to what you talk about in this book. And I had the pleasure of getting an early copy and reading through it. It’s a really important book, I think.

And you talk about this fundamental divide internationally – and this is a divide that actually goes back historically as well – between these three models for different economic systems you discuss: finance capitalism, industrial capitalism, and socialism.

And your argument is that the U.S. empire has been a force for imposing neoliberalism, which is a particular form of finance capitalism, which is nonproductive, in which finance capital destroys productive industries in pursuit of rent-seeking, and what you call the rentier class.

So instead of producing, as the classical bourgeois economists had said capitalism would be a productive system instead, finance capitalism is fundamentally a system of destruction and debt.

And your argument is that this is deeply rooted in U.S. foreign policy. This is the U.S. foreign policy strategy for expanding its economic power, is imposing this finance capitalist model on the world.

So can you expand further on your argument about the fight between finance capitalism, industrial capitalism, and socialism, and why you decided to publish this book now?

MICHAEL HUDSON: Well the book came out of a series of 10 lectures that I did for my Chinese audience. I’ve been a professor at Peking University for a number of years in economics, and have professorships at other universities, Wuhan and Hong Kong.

And I have a fairly large audience of about 65,000 people per lecture there. And I was asked to give my general overview, sort of a history of economic development in the West, for the Chinese.

And in order to understand today’s finance capitalism, you have to understand what industrial capitalism was, as it was described in the 19th century.

And it’s often forgotten, or played down, that industrial capitalism was revolutionary. What it was trying to do – from the physiocrats in France in the late 18th century to Adam Smith, John Stuart Mill, Marx, and the whole late-19th century flowering of socialism – the ideal of classical value theory and rent theory, was to say what is the actual value, the cost value of producing goods and services?

And what is earned by the capitalist, when he employs labor to make a profit, and what is unearned? And what is unearned was the landlord class. That was the hereditary warrior class that conquered all of the European kingdoms in the Middle Ages.

And the attempt by England’s industrialists was saying, look, we cannot become the workshop of the world; we cannot undersell foreign countries if we have a landlord class ripping off all of the money in land rent.

And if we have predatory banking, or the wealthy people just lend really for buying property, or making distressed loans or predatory loans that have nothing to do with financing actual capital formation.

Well, what made this capitalism revolutionary was the British industrialists and advocates of industry, even the bankers in Ricardo’s time, said, well, in order to overthrow the landlord class, which controls the House of Lords and all of the upper chambers of government in Europe, we have to have democratic reform.

If we have democratic reform and give voting to the people, they’re going to vote against the landlord class, and then we can have an efficient economy where our prices of our exports and our goods and services reflect the actual cost of production, not the rake off for the rentiers class, not the rake off of what landlords take, not the rake off of what predatory bankers take.

And the whole long 19th century leading up to World War One was this revolutionary value theory that depicted land rent and monopoly rent and financial returns as being unearned income and wanting to strip it away.

And all of this seemed to be moving toward socialism. The industrialists were all in favor of government public utilities, of government enterprise, because they said, if the government doesn’t provide health care, then individuals are going to have to pay it, and it’ll cost a lot of money, like it does in the United States.

And so you had the conservative prime minister of England, Benjamin Disraeli, saying, health, all is health, we’ve got to provide public health for the people.

And it was the conservative Bismarck in Germany that said, we’ve got to provide pensions. If labor has to save up for the pensions, then it’s not going to have enough money to buy the goods and services that we Germans are producing. We have got to make pensions public.

So all of this move towards socialism was not only in favor of increasing living standards, which soared in the 19th century, but also in freeing the economy from the rentier class, from the landlords, from the bankers.

And for the classical economists, a free market was a market free from landlords, free from bankers, free from monopolists.

Well, needless to say, the rentiers fought back. And by after World War Two, we’ve seen a continual anti-classical theory replacing the classical idea of free markets with a value of free theory, saying, well, everybody earns whatever they they have. All wealth is earned, not unearned. And if Goldman Sachs partners are paid more than anyone else, that’s because they’re so productive.

So you had a move rejecting classical economics, a junk economics, and a kind of artificial economics that doesn’t really talk about how finance capitalism has worked.

And as it turns out, the business plan of finance capitalism was so predatory that it was anti-industrial.

That’s why President Clinton in the United States moved to invite China into the International Labor Organization, saying, well, we can fight wage rises in America by a race to the bottom. We can we can hire Asians to do work, and that will cause unemployment here. And that’s wonderful for the industrialists. It will basically cut wages and keep American wages down.

Well, that basically is the strategy of finance capitalism, and the aim of finance capitalism is not to invest in factories, and plant equipment, and research and development, but to live in the short term, but to make money by financial engineering, not industrial engineering.

And it becomes predatory, and so you have the whole ideological attack on public enterprise. You have Frederick Hayek’s “The Road to Serfdom,” where you say, if government provides public healthcare, that’s “the road to serfdom,” where actually it’s finance capitalism that is the road to debt peonage and serfdom.

And you have now a whole disparagement of government. And all of this is a counter-revolution to the revolutionary impetus of industrial capitalism in its early stages.

And it’s true that corporations now are just as right-wing as the the banks and the hedge funds. But that’s because corporate industry has been taken over by the financial sector, and the heads of almost every industrial corporation are rewarded the how high they can push the stock price, to exercise the stock options they’re paid in.

And you increase the stock price not by investing more, not by hiring more labor or increasing productivity or increasing sales, but simply by using whatever income you have to buy back your stocks. And by buying back your stocks, this forces up their price.

And, most of all, by giving political contributions in this country to the Democrats and Republicans alike, who appoint Federal Reserve heads that have spent $7-9 trillion buying up stocks and bonds to increase the price of buying a retirement income, to increase Wall Street prices, to increase housing prices, and make America even less competitive industrially.

So finance capitalism is what has essentially de-industrialized the United States and turned the Midwest into a Rust Belt.

Well, the alternative, obviously, are the societies that have not followed this neoliberal finance capitalist plan. And the most successful economy, obviously, has been China, which is why it has been spending so much time there.

And China has done exactly what 19th-century United States, Germany, England, and France did. It has kept basic utilities, basic needs, housing, and above all, finance and banking, in the public domain, as public utilities.

Instead of having an independent financial sector operating on its own self-interest, the Bank of China creates the money. And the Bank of China lends money by deciding, where do we need to have investment in real estate to provide housing for the population at as low a price as we can make it? How do we build up the industry? How do we provide an educational system with training? How do we provide health?

And the fact is that the central planning in an efficient socialist style, not the Stalinist planning that everybody refers to of Russia, but a mixed economy as you have in China, which is truly a mixed economy, with guidance, like the French planification.

Well, that is obviously the way in which you survive and you avoid the kind of overloading the economy with debt service, with high rents, with high payments to the health-care monopoly in the United States, by avoiding all of this payment to a rentier class that has what the classical economists call unearned income, predatory income.

And instead of unseating them, we’ve put them in charge, and made the banks and Wall Street, and the city of London, and the Paris Bourse, the central planners.

So we do have central planning much more centralized than anything that was dreamed by the socialists. But the planning, the centralized planning is done by the financial sector.

And financial planning is short-termism; it’s short-term planning; it’s take your money and run. And that’s what is stripping and impoverishing the global economy today.

BENJAMIN NORTON: Absolutely. And, in your book, you write about the important distinction between the classical economic idea of a so-called free market, and how, you argue that, neoliberals turn that idea on its head.

So this is what you write in your book. And this is, again, Michael Hudson’s new book, “The Destiny of Civilization,” which is out this week. You write:

“The neoliberal ideology inverts the classical idea of a free market from one that is free from economic rent to one that is free for the rentier classes” – that is the rent-extracting classes – “to extract rent and gain dominance.”

So they they completely flip the idea of what it means to have a free market.

And then you note that, “in contrast to classical political economy, this neoliberal ideology promotes tax favoritism for rentiers, privatization, financialization, and deregulation.” And you discuss all of that.

That is, of course, what we could call the Washington consensus.

And then you argue that “U.S. foreign policy seeks to extend this neoliberal rentier program throughout the world.”

And you have a very interesting section of your book where you discuss this concept as “free-trade imperialism.”

So can you talk about what your idea of “free-trade imperialism” is and how it relates to U.S. foreign policy?

MICHAEL HUDSON: Well, the Nobel Prize is given basically for junk economics. And probably the worst junk economist of the century was Paul Samuelson.

He made the absurd claim that he proved mathematically that, if you have free trade then, and don’t have tariffs, and don’t have any government protection, then everyone will become more equal. At least the proportions between labor and capital will be more equal. Well, the reality is just the opposite.

And the term “free-trade imperialism” was actually created by a British historian of trade theory who pointed out that, wait a minute, when England went for free trade, the idea was, if we have free trade, we can stifle other countries from being able to industrialize, because if we have free trade, then we can tell America, we will open our doors to your markets – meaning the markets of the slave South, that Britain supported – and in exchange, you will open your markets to our industrial goods.

And America followed that until the Civil War, which was fought not only over slavery, but by the Republican Party after 1853 that said very explicitly, if we’re going to win the election – the Whigs never could win – if we, the new party, are going to win the election and industrialize America, we’ve got to integrate ourselves with the anti-slavery issue, with emancipation, but for us, the economic war of America is a war of, either we’re going to have protective tariffs in the North, or we’re going to end up as a non-industrial, raw materials-producing society, as the South wants.

And that was the debate from 1815, when the Napoleonic wars ended and world trade began again, until really the Civil War.

And America became strong in the way that Germany became strong too, by having protective tariffs, in order to have prices large enough to nurture what was called infant industry, to nurture American manufacturing.

And I wrote a long book about this, published some years ago based on my PhD dissertation, “America’s Protectionist Takeoff.”

Well, the English tried to fight against other countries protecting their economy, saying that if you just have free trade, you’ll get rich. Whereas the reality is, if we have free trade, you’ll get poor, if you’re not already able to have industrial and labor productivity and agricultural productivity on par with the most advanced countries.

Free trade was an attempt to prevent other countries from investing government money and building up their agriculture, and building up their industry, and building up their productivity, and creating a school system, to raise wages, to make wages more productive.

And the American protectionists said, well, we’re going to have a high-wage economy because high-wage labor undersells pauper labor. And skilled, well-fed, well-rested American labor can produce much more than the pauper labor of other countries that have free trade.

Well, what the leading American protectionist economist, Erasmus Peshine Smith, went to Japan and helped industrial help Japan break away from British free trade, helped Japan industrialize.

And other American economists, other foreign economists, all picked up the ideas of the American protectionist, like Friedrich List went to Germany promoting protectionism.

And Peshine Smith’s book, “The Manual of Political Economy,” was translated into all the foreign languages – Japanese, Italian, French, German.

And you had Europe realizing that free trade polarizes economies. Well, it was this that after World War One, and especially World War Two, when you had orthodox economics turning into basically propaganda.

That’s where you and Samuelson and others try to convince other countries, governments are bad, leave everything to the wealthy people, to the finance people, trickle-down economies, it’s all going to trickle down, don’t worry, just give more money to the rich, and don’t have any government interference with markets.

Whereas America had got rich by interfering with markets, to shape them in the years leading up to World War One.

But after World War One, America had already achieved its industrial dominance. And it was after World War One that America said, ok, now our protective tariffs have enabled us to outproduce all the other countries, and our protectionist agriculture especially – the most protected sector in America, has always been agriculture, since the 1930s.

Basically it said, well, now we can outproduce other countries, we can undersell them, now we can tell them to go for free trade.

And after World War Two, the Americans created the World Bank for economic impoverishment, and the International Monetary Austerity Fund.

And the World Bank’s leading objective was to prevent other countries from investing in their own food production.

The guiding line of the World Bank was, we’ve got to provide infrastructure for building up plantation agriculture in Latin America, and Africa, and other countries, so that they will grow tropical export crops, but they cannot be permitted to grow grain or wheat to feed themselves; they must be dependent on the United States.

And so the function of free trade, the World Bank, and the International Monetary Fund has been to finance dependency, backed up by the American support of dictatorships throughout Latin America who agree to have client oligarchies supporting pro-American trade patterns and avoiding any kind of self-reliance, so that the United States can do what it has recently done to Russia and other countries, impose sanctions – say, well, now that you depended on us for your grain, we can now impose sanctions, and you can’t feed yourself if you don’t follow the policies we want.

That was the policy that America tried to use against China after Mao’s revolution. And fortunately for China, Canada broke that monopoly, and said, well, we’re going to sell grain to China. And China was always very friendly to Canada in those earlier decades.

So basically, free trade means no government, no socialism. It means central planning essentially by Wall Street – countries should let American firms come in, buy control of their raw materials, resources, control of their oil and gas, and mineral rights, and forests and plantations, and basically let other countries send their whole economic surplus to the United States, where it will be duly financialized to buy out other countries’ raw materials and rent yielding resources.

BENJAMIN NORTON: Yeah, and in your book, you have a very funny passage that I think really encapsulates this ideology that you’re talking about here.

You referred to Charles Wilson, who was the secretary of defense under Eisenhower in the U.S., and he was also the former CEO of General Motors.

And he famously said, “What’s good for General Motors is good for the country.” And that idea has morphed into the idea that, “What’s good for Wall Street is good for America.”

And then you note that “this merged with evangelistic U.S. foreign policy that says ‘What’s good for America is good for the world.’ And therefore the logical syllogism is clear: ‘What’s good for Wall Street is good for the world.’”

And you describe this, you link it to the new cold war, this idea that what’s good for the U.S. is good for the world and what’s good for Wall Street is good for the U.S., therefore, what’s good for Wall Street is good for the world.

You argue, “We must recognize how finance capitalism has gained power over industrial economies, above all in the United States, from which it seeks to project itself globally, led by the financialized U.S. economy. Today’s new Cold War is a fight to impose rentier-based finance capitalism on the entire world.”

And this is such an important analysis. Because among those very few people of us who talk about this idea of the new cold war and how dangerous it is, there are very few people who frame it in economic terms.

Usually we frame it in political terms, right, the geopolitical interests between the US and the EU on one side, and China and Russia on the other.

And going back to Brzezinski and The Grand Chessboard, his 1997 book, where he talks about the importance of preventing near strategic competitors from emerging in Eurasia. That’s of course a geopolitical discussion and economics is part of it, but it’s often not at the forefront.

But your analysis I think is even more important, and more accurate, because your argument is not only is it geopolitical, but the geopolitical struggle is rooted in economics. And this is an economic struggle between systems.

So talk talk more about the new cold war and how you see it.

MICHAEL HUDSON: Well, as we’re seeing now, the world is dividing into two parts. We can see that in the fight against Russia, which is also a fight against China, and against India, as you noted. And it seems Indonesia and other countries as well.

The United States is pushing a world that can be controlled by American investors. The ideal of the American neoliberal plan is to do to other countries what it did to Russia after 1991: take all of your public domain, your oil companies, your nickel mines, your electric utilities, give them all to the wealthy oligarchy, that can only make money once it’s taken control of these companies, by selling the stocks to the West.

The West will buy out oil, just like Mikhail Khodorkovsky tried to sell Yukos oil to Standard Oil in the West. And we’ve got to put an oligarchy that will sell all of the national domain, all of the patrimony and natural resources, and all the companies, to American investors on the cheap.

The Russian stock market led all the stock markets in the world from 1994 up to about 1998. This was a huge rip off. The United States wants to be able to do that to the rest of the world.

And it was furious when Russia said, we’ve lost more population as a result of neoliberalism than we did in all of World War Two fighting against Nazism. We’ve got to stop.

And Russia began to say, we’ve got to use Russia’s population, and industry, and natural resources for Russia’s benefit, not for the United States’ benefit.

Well, the United States was absolutely furious with this. And the fury has erupted in the NATO war against Russia in the last few months, and what’s ongoing now.

And the United States says, U.S. State Department officials have said, what we want to do is carve up Russia into maybe four different countries: Siberia, western Russia, southern Russia or Central Asia, maybe northern Russia.

And once we’ve done that, we cut Russia off from China, then we go into China. We finance, we send ISIS and al-Qaeda into the Uyghur areas, the Muslim areas, and we start a color revolution there. And then we break up China, into a northern part, a southern part, a central part.

And once we break them up, we can more or less control them. And we can then come in, buy up their resources, and take over their industry, their labor, and their government, and get richer to obtain from China, Russia, India, Indonesia, and Iran the wealth that we’re no longer producing in the United States, now that we de-industrialized.

So the world is dividing into two parts. And it’s not simply the United States and its European satellites on the one hand versus the non-white population on the other hand; it’s finance capitalism versus the rest of the world, which is protecting itself by socialism, which in many ways fulfills what was the ideal of industrial capitalism during the 19th century, when industrial capitalism was actually progressive.

And it was progressive. That’s part of the whole theme of my book. It was revolutionary. It tried to free economies from the legacy of feudalism, from the legacy of hereditary landlords.

And now the financial class is no longer the landlord class, but the landlord class pays most of its rent to the financial class in the form of mortgage interest, as it borrows money to buy property and housing and commercial sites on credit.

And you have the kind of financialization that has increased housing prices in the United States to over 40% of income, that is officially guaranteed for mortgages. That has priced American labor out of the market.

Privatized health care, 18% of GDP, that is pricing America out of the world market. Debt, auto debt, student debt, which in other countries education is free; that’s pricing America out of the market.

So you have a basically un-competitive economy that’s committing financial suicide, following the same dynamic that destroyed the Roman empire, where a predatory oligarchy took over and maintained power by an assassination policy of its critics, just very similar to what America has been doing in Latin America and other countries.

So you’re having history repeat itself with this same kind of world split. And this split couldn’t have occurred back in the 1970s, with the Bandung Conference in Indonesia. There were other attempts by the Non-Aligned nations to break free of American imperialism, but they didn’t have a critical mass.

So right now, for the first time, you have a critical mass. And you have the ability of China, Iran, Russia, India, other countries together to be self-sufficient. They don’t need relations with the United States.

They can handle their own; they can create their own monetary system outside of the International Monetary Fund, which is basically an arm of the Defense Department. They can give loans to build up the infrastructure of countries outside of the World Bank, which is basically an arm of the Defense Department, the deep state.

So you have the American economy – essentially a merger between the military-industrial complex and the Wall Street FIRE sector, finance, insurance, and real estate – really cannot develop any more than the Roman Empire could develop, by trying to obtain militarily what it could not produce at home anymore.

Well, China and other countries, now that they have their industrial base, the raw materials, the food, the ability to feed themselves, the agriculture, and the technology, they can go their own way.

And so we’re seeing in the last few months the beginning of a war that is going to go on for, I think, 20 years, maybe 30 or 40 years. The world is splitting away.

And it won’t be a pretty sight, because the United States and its European satellites are trying to fight to prevent an inevitable break away they cannot prevent, any more than Europe’s landlord class could prevent industrial capitalism from developing in the 19th century.

BENJAMIN NORTON: Yeah, and this is a good segue to what I wanted to ask you about, Professor Hudson, which is the economic war on Russia.

And I should say, of course, that today is May 9th. Today is Victory Day in Russia, celebrating the Soviet Union’s victory over Nazi Germany in World War Two. Not the US and British victory over Nazi Germany, the Soviet victory, in which 27 million Soviets died.

And actually I should say that, here on YouTube, in the comment section, there are some Russians who are your fans, Professor Hudson, saying they’re thanking you for your cogent analysis of Russia.

But on the subject of Russia, Professor Hudson, we now have seen that since Russia’s military intervention in Ukraine on February 24th, we saw really what could be referred to as financial shock-and-awe. That’s a term that’s been used.

Just as when the U.S. invaded Iraq, it waged a military shock-and-awe campaign on Iraq. Well, now it is waging economic or financial shock-and-awe on Russia.

And Russia has been referred to as the most heavily sanctioned country in history. Which I think is probably accurate, although maybe the DPRK, maybe North Korea, is more sanctioned. But I mean we’re talking about levels of sanctions not seen against a country of this size ever.

And you can also refer to it as the contemporary equivalent of medieval siege warfare against Russia.

Joe Biden, in a speech in Poland, made it clear what Washington’s goal is: it’s regime change. The U.S. wants to overthrow the Russian government, as it did in the Soviet Union in 1991, and clearly install a a pliant alcoholic neoliberal puppet like Boris Yeltsin.

So can you talk about, from an economic perspective, what do you see as the effects of this economic war on Russia?

And specifically in terms of the concept of decoupling, which you have talked about for years, and you have said that the Western sanctions on Russia and China were accelerating that process of decoupling. And this was before the financial shock-and-awe we’ve seen.

So you talked about a move away from this neoliberal globalization where everything is interconnected, or at least capital is interconnected globally, to the creation of a kind of, what you could say is kind of an economic iron curtain.

But how do you see that also in terms of integrating the Eurasian economies more deeply?

And also what is the effect on the European economies, which my impression is that Europe is going to become what you call an economic dead zone, more and more reliant on the U.S., whereas Russia, China, and Iran, and even potentially India, Pakistan, Bangladesh, Indonesia – we’re seeing much more economic integration of Asia, which is, of course, where the majority of humanity lives.

MICHAEL HUDSON: Well you have used the words shock-and-awe, picking it up from the U.S. statements of shock-and-awe. There hasn’t been any shock-and-awe; there’s been a self-defeating piffle, and laughter.

That’s not all. There was an attempt to grab $300 billion of Russia’s foreign reserves, saying, well, any country that leaves their reserves in American banks or in the American Monetary Fund to stabilize their currency, we can grab if we don’t like their policy.

So the idea was, now Russia is going to go broke. It can’t afford to buy anything without U.S. dollars. And the people are going to get so angry, they’re going to vote against Putin. And then we can pour in our money to twerps like Navalny and other right-wingers who have promised to be the new Yeltsins.

Well, it didn’t work that way. They did grab the $300 billion of Russia’s reserves. Russia immediately said, ok, we have our own money. We now, fortunately, have enough oil and gas that we don’t have to sell to Europe and Germany. If they want to freeze in the dark and let their pipes burst when the weather gets cold, that’s their problem. We’ll sell to India, and China, and other countries.

And there was, for a few days, the ruble plunged, by saying, uh oh, what is Russia going to do? So all the foreign exchange traders thought, you can trust Biden to have a really brilliant policies.

I think Paul Krugman, the Nobel Prize winner, said Biden is the greatest American president since Roosevelt, or since Truman, that he was so smart. Well, that’s why Krugman got the Nobel Prize, for making statements like that.

So immediately Russia said, well, obviously we can’t get paid in dollars anymore, or in euros, because, you’ll just grab them, so you’ll have to buy oil and gas in rubles. We’re going to price it in our own currency. Just like China had talked about pricing its exports in yuan.

And so what has happened is that immediately the ruble not only recovered, but is now selling at a higher rate than it was before the American sanctions. So there was no shock at all. The Americans felt shock.

The Americans are shocked. The Americans are awed. The Russians are laughing and everything is going their way.

So it’s almost as if – I would not accuse Biden of being on the pay of Russia, and I would not say that the leaders of Congress are the Russian agents, but if they were Russian agents, if they were paid by Russia, they could not have done a better job of helping Russia catalyzing its protectionism that it wouldn’t do itself.

The fact is that President Putin and many of the people around him still were neoliberals. I mean, they began as neoliberals, in the ’90s.

They began by hoping that they could make an arrangement with Germany and Europe, that Europe would develop their industry and make Russia as efficient an economy as Germany or the United States. Well, obviously that hasn’t happened.

All the same, they didn’t think of imposing protective tariffs as the United States did. They didn’t protect their agriculture. They bought grain, and cheese, and other agricultural products from the Baltics, and from other countries.

Well, now that, once the Americans put on the sanctions, beginning already under the Trump administration, all of a sudden Russia had to produce its own food.

And it did. It made the investment. It is now the largest agricultural exporter in the world, not a food-deficit country. It’s not importing any more cheese from Lithuania and the Baltics. It has its own cheese segment.

And the sanctions are forcing Russia to do exactly what the United States, Germany, and other protectionist countries did in the 19th century, developing their own industry by isolating it from low-priced foreign imports that would be priced so low that the Russians otherwise could not afford to make the investment in factories, plants, equipment, research, and development.

So what the United States has done is actually catalyze Russia moving together.

And also, for three or four years, I have been talking with Russians, and with the Chinese, and other countries about the need to de-dollarize. If you want to develop your own economy, you have to develop your economy in your own interest with public spending and planning, independent from the United States.

Well, now everybody thought that, well, in a few years it may take a decade for China, Russia, Iran, all these countries to break away from the U.S. But America said, we’re going to help you, we’re going to speed up the breakaway process. We’re going to isolate you. So you’ve got to band together against us.

So that’s exactly what it has done. You can just imagine how the Russians are crying all the way to the bank about this.

And how China is watching what the Americans are doing to Russia, and listening to President Biden saying, you know, Russia is not our real enemy, our real enemy of China. And when we’re finished with Russia, then we’re going to go against China and do the same thing to it.

Well you can imagine what this is leading the Chinese government to try to plan to be sufficiently independent from the United States, so that similar type sanctions will not hurt it.

And President Xi in the last few weeks has said we’ve got to make China as independent as possible. We’ve got to make our own computer chips. We’ve got to not depend on the United States for anything, except maybe Walt Disney movies. That’s basically about it.

So it’s as if – you know, I had mentioned earlier that finance lives in the short term. American policy, being financial policy, lives in the short term. And it’s looking at if it can make a quick, a quick victory, and forget about what’s going to happen next.

I’m told that, years ago, already from the war with Iran, and then Iraq and Syria, in the State Department, if there were Arab specialists who spoke Arabic, they were all fired. Because they said, well, if you can speak Arabic, you must’ve learned Arabic because you’re sympathetic with them. You’re fired. We won’t have anyone who can read Arabic here.

Well, now in the last decade or so, they fired all the Russia specialists from the the State Department and CIA, saying, well, if you can read Russian, why would you want to learn Russian? You must like something in Russia. You wanted to learn it. You’re fired.

So they have people who have no idea of what’s happening in Russia, no idea what’s happening in these other countries. And they’re blinded by their ideology.

And if anyone would say, wait a minute now, public planning and making education a public utility is actually making them more competitive, well, that’s against the ideology. That’s not the corporate type.

And they’re taught, well, we really can’t trust people, maybe they’re tending toward socialism, and they’re out the door.

So you’re having American policy pretty much run by the blind, and the Europeans are simply taking orders, and money in little white envelopes from the United States, to just show their loyalty, and basically are willing to spend three to seven times as much for their energy, for their liquefied natural gas and oil, by buying from the United States, than they are by a long-term contract with Russia.

Europe is willing to spend now $5 trillion on putting together ports that can handle shipping tankers for liquefied natural gas instead of relying on the Russian pipeline, the Nord Stream Two, that’s already there.

So Europe is making an enormous sacrifice. If it doesn’t have Russian gas, and it refuses to pay rubles, it says, if you don’t give us our gas and oil for free, you’re attacking us, because we’ve been getting all of your oil and gas for free, because all the dollars, all the money we pay, you’ve recycled to the United States in your foreign reserves. Thank heavens, the U.S. can grab it all. If you don’t continue to give it to us for free, then you’re attacking us.

To the United States, other countries protecting their economy, other countries trying to raise their living standards, and especially other countries undertaking land reform, are viewed as enemies of the United States, because they’re an enemy of the neoliberal American financial system.

And the idea of the unipolar world where the United States gets all of the profits, and rents, and interests of the world economy, just as ancient Rome stripped its provinces by getting all of their wealth and income for themselves, not producing it at home, while impoverishing their own domestic population. It’s just an exact parallel.

So Europe is willing to say, well, ok, if we don’t have a Russian gas, well, that means that our chemical companies cannot buy the gas to make the fertilizer to make our crops grow, and our agricultural productivity is going to fall by about 50%.

We’re also going to spend a lot more money on America’s military, NATO arms to support NATO. So higher food, higher military spending, higher energy costs.

This ends Europe as an industrial rival to Asia, and Eurasia, I should say, because now the Chinese Belt and Road Initiative and other spending investment, capital investment, throughout Western Asia is creating a new productive plant that is not only self-sufficient, but is leaving the United States and Europe without any industrial competitive power. They’ve priced themselves out of the world market. They’re no longer competitive.

So the world is developing. And I’m sure the only way that the NATO countries can fight against it is militarily, by threatening to bomb. But they can’t fight economically. They can’t fight financially. They tried by disconnecting Russia from the SWIFT system. It put it in its own system very quickly.

It really is left without a strategy, except that it’s done a wonderful job of controlling the public relations dimension of this war, making it appear as if somehow other countries are the aggressors, in not letting America exploit them, and making it appear as if Russia is the aggressor in Ukraine, instead of NATO prodding and prodding Russia to say, we’re going to capture your port at Crimea, and we’re going to attack the Russian-speakers if you don’t fight back, and we’re going to keep bombing them year after year, from 2014 on, we’re going to keep bombing them until you protect them.

So all of this is treated as if America is purely defending itself. Well, this is what the Nazis said in World War Two. Hitler and Goebbels said, we can always mobilize a population to support our war by saying it’s a war to defend ourselves.

And that’s how the United States in Europe are doing it. Not only are they pulling a strategy out of Goebbels’ Nazi book, but a few weeks ago, Germany went to the museums, the military museums, where they had the old Panzer tanks from World War Two, and they sent the Panzer tanks, the Nazi tanks from World War II, to Ukraine, saying this is symbolic, now we can fight Russia with the same German Nazi tanks run by the neo-Nazi groups, that Zelensky is supporting, the same Nazi fight against Russia. We can reenact World War Two with the same tanks, even symbolically, to show that this is a fight of Naziism, and neoliberalism, against Eurasia.

BENJAMIN NORTON: We’ve also seen Germany not only re-militarizing, but also boosting its relations with Japan. There are some terrifying echoes of of World War Two.

But you mentioned something that I want to analyze a little bit more, which is the strength of the Russian ruble. I talked about the concept of financial shock-and-awe that was waged on Russia. And President Biden said, “the Russian ruble has become rubble,” he joked. He said the Russian ruble has become rubble.

Well, that’s actually not at all what happened. This is the value of the dollar to Russian rubles, right now [showing a graph]. Russian rubles are at 69 to the dollar. A few days ago, it was at 64, or 65 to the dollar, which is actually better than it was even before the Russian war in Ukraine, which began in February 24th.

And it did spike, and there was a peak here, at which it was devalued to 139 to the dollar, about half the value it has now. But in the months leading up to the Russian military intervention, in November and December, it was around 75 to the dollar.

So the ruble has actually strengthened despite these sanctions. And here’s a report from Reuters from five days ago, that was May 4th: the “Rouble leaps to over 2-year high vs dollar, euro as EU ups sanctions.” So the ruble is doing quite well.

And you talked about the Russian mechanism to force Europe to buy energy exports from Russia in the Russian ruble. And this graphic here, for people watching, it’s in Russian, but really it just shows this mechanism in which a European firm that wants to buy gas from Russia’s state owned gas giant Gazprom, it has to send the money in euros to the Gazprombank, which is the obviously the bank that works with Gazprom, and then it puts it in a special account in euros, and then that is sold in the Moscow exchange for Russian rubles.

And then those rubles are put in another special account, called a K account, that belongs to that European firm. It has two accounts, two special accounts with Gazprombank, one in euros, one in rubles. And then this special ruble account sends that money to Gazprom. And then once the money reaches Gazprom, that’s when Russia considers that the payment officially went through.

So this is the mechanism by which Russia is getting paid in rubles. And much of Europe claimed at first that they would not do so, but eventually they gave in. So that’s an incredible development.

And related to that, what I wanted to ask you about, is I think another reason that the Russian ruble has strengthened and stabilized is not only because Russia continues to maintain constant exports of energy to Europe and other parts of the world.

You can talk about the central bank policies. But one of the policies is that the Russian central bank has basically put the ruble on gold, which I think is a very interesting and historic development.

And we saw that from the beginning of April until the end of June, the Bank of Russia says that it’s going to buy gold at a fixed price of 5000 rubles per gram of gold. And then the question is whether or not in July, when this policy ends, if it’s going to continue, and if the ruble will basically become fixed, it become pegged to gold like the U.S. dollar was up until 1971.

So you don’t think it will be? So talk about this policy. Do you think that that the gold standard is going to come back? Or apparently you don’t think so.

MICHAEL HUDSON: No, Russia is not going on on the gold standard. What it is doing is investing, its foreign exchange in the only way that is not grabbable. It’s investing it in gold; it’s putting gold in its reserves.

It is not setting its exchange rate according to the price of gold, but it is buying gold with what it has been getting.

I want to go back to your talk about rubble. You talked about, “from ruble to rubble,” what President Biden said.

There have been a lot of pictures of rubble in the news for the last few days. For instance, there are talks of, here’s a Ukrainian picture, and look at this picture of a Russian tank, we shot it down, it’s rubble. Turns out it’s a Ukrainian tank, that they just say it was the Russian tank we shot down.

So basically, they’re taking their own destruction, and they’re saying that, while they’re being destroyed, they’re saying, no, this is a picture of Russia being destroyed, Russian assets, not Ukrainian assets being destroyed.

Well, the similar thing is with the Russian ruble. America says, look, we’ve isolated the the ruble. Well, what has happened? If you isolate the ruble and you say we’re not going to export anything more to Russia, so it’s not going to be able to spend any of its rubles on buying American or European products.

Well, meanwhile, Russia can continue to earn rubles from Germany and Europe, and it can continue to earn foreign exchange from other countries that it’s selling its agriculture to at rising prices, its oil and gas at rising prices, too. So obviously, the balance of payments is going way up.

And they believe that what is in store is a new monetary system that is an alternative to the dollar IMF system.

And in this system other countries will hold their reserves in each other’s currencies. In other words, Russia will hold Indian rupees and Chinese yuan. China will hold rupees and Russian rubles.

There will be the equivalent of what Keynes thought of as something like artificial special drawing rights that the banks will be able to create to help fund governments to undertake capital investment.

But for settlements settling balance of payments deficits among countries, once they don’t have enough foreign exchange to make a swap, they will use gold as the means of settlement, because gold is a pure asset. It’s not a liability.

Any foreign currency basically is held in a foreign country that has the power to do what America did to Russia and just grab it all, and say, we’re just wiping it all out.

It’s as if you have a bank account, and the bank says, we’ve just emptied out your account to give it to one of our friends, and you don’t have it anymore. You can’t do that if gold is held in your own country.

Venezuela made the problem of keeping its gold in England, trusting England, saying that, even if there is war, they’ll never interrupt gold and finance. And England just grabbed Venezuela’s gold.

So, obviously, countries are not going to leave their gold in other countries. Even little Germany has asked America to begin sending back the gold that it has in the Federal Reserve Bank of America because it’s worried that what if it ever buys Russian gas again? America will grab all of Germany’s gold, grab all the German money, and it’ll be like World War One all over again.

So this act that America did of grabbing Russian money, Afghanistan’s foreign reserves it grabbed, this is telling all the other countries, pull all your money out of dollars. What are they going to put it in? There’s not that much they can put it in that it is absolutely safe.

So gold is a flight to safety today, because it’s one of the things that all of the world realizes as having an international value for settling balance of payments deficits, that is independent of world politics.

So that’s the explanation. Russia is not going on gold. It’s going on an independent standard from the United States with gold as an element of its foreign reserve, just as it’s holding Chinese yuan and Indian rupees.

It’s not going on the rupee standard. It’s not going on the yuan standard. And it’s not going on the gold standard. But these are elements of its foreign reserves.

BENJAMIN NORTON: I have a question for you. It’s kind of a more technical question that I’ve always wondered. And I’ve tried to do research on this, because there’s not much information.

So we know that that the U.S. and European Union have frozen over $300 billion from Russia’s central bank foreign exchange reserves. And of course they did this after doing the same to Iran, to Venezuela, to Afghanistan, which is now threatening a famine in Afghanistan that could kill more people than died in the 20-year NATO-U.S. military occupation of Afghanistan, which is another topic that really needs to get more coverage.

And I should add, by the way, that the US and the EU, they’ve frozen nearly half of Russia’s central bank’s foreign exchange reserves, and are now saying they’re not going to give it back. So they stole it. I mean, they stole half of its reserves.

My question is, what is the mechanism by which they effectively freeze and steal those reserves?

Because my understanding is that there is of course a physical element of those reserves, which you’re talking about, which is gold. But not all of the $640 billion in Russia’s central bank reserves is physical currency, right? A lot of it is just computerized? It’s number in computers and bank accounts.

So when when the U.S. and the EU steal this money from central banks like in Russia or Afghanistan – obviously in the case of Venezuela, as you mentioned, they physically stole the gold. But if it’s not gold, is it physical cash stored in Moscow, like physical dollars and euros? Or it’s mostly just numbers in a computer, which is why they can steal it?

MICHAEL HUDSON: Every country needs to manage its exchange rates, and there’s always like an up-and-down and a zigzag in the flow of payments for imports and exports, investment, capital movements, debt service, all of that.

So countries want to stabilize their exchange rate. How do they do that? Well, most of the big exchange markets are in New York and in London.

So countries would leave their money in correspondent banks. Like when Iran, at the time under the shah, kept that foreign reserve in the Chase Manhattan Bank. So when Iran, after the revolution and Khomeini came in, and Iran wanted to pay interest on the foreign debt that the shah had run up, they told Chase, please, here’s our bondholders, please pay them.

Well Chase was told by the Treasury, don’t pay them, just take the money and hold it. So Chase said, we put a freeze on your account. And so Iran defaulted, and then Chase and the State Department said, oh, Iran defaulted, it missed the payment. Now, all the money that it’s due for foreign debt has to be paid all at once. And Chase paid all of the bondholders off. No more money in the account. It was all emptied out.

Suppose you had an account in Chase Manhattan. And they said, ok, now you’ve done something really bad, you put Michael Hudson on the show. We’re going to grab your account. We’re going to give it to Mr. Guaidó, because he needs the money in Venezuela because the people still are not voting for him. So all of a sudden, you won’t have money in your account. It’ll go to Mr. Guaidó’s account.

Well, that’s what happened with Russia. They took the money. They grabbed the money from Russia’s account. And they said, half the money we’re going to give to, I think, to the 9/11 people, because we all know that it was Russia that bombed the World Trade Center on 9/11.

And we’re going to give it to all sorts of other people who suffered all over the world. It’s all Russia’s fault.

BENJAMIN NORTON: But Professor Hudson, when you say that they seized Russia’s assets, you mean the assets held by the Russian central bank in foreign bank accounts?


BENJAMIN NORTON: And these are not physical assets, these are numbers in a computer, right?

MICHAEL HUDSON: In Venezuela’s case, Venezuela had used some of its oil company earnings to buy oil stations and refining companies and the United States actually grabbed the ownership of the gas stations and the refineries and distribution system that Venezuela had in America.

BENJAMIN NORTON: It’s called Citgo.

MICHAEL HUDSON: Citgo, yeah. Russia doesn’t really have any capital investments in the United States. It did have bank accounts, and that was all that the United States could grab.

BENJAMIN NORTON: So when you say that, when Russia, at least for now, the central bank is allowing convertibility of rubles at a set rate into gold, that’s a temporary policy to make sure that they have a physical asset that their central bank can hold on to, because if they have dollars or euros in their reserves, my understanding is that’s not physical cash, it’s actually just numbers in a computer, so they don’t have it physically in their bank reserves, so it’s easy to steal that money.

Obviously, if they had billions of dollars worth of cash, of paper cash, it would be much harder to steal it, but if it’s just on a bank account, if it’s numbers in a computer, then they can just freeze it.

So I think this is also a reflection of a point that you’ve also made about the financialization of the economy, is it’s also just a lot of this capital is not even physical capital.

MICHAEL HUDSON: Yes. Savings take the form – one person’s savings is another person’s debt. So these are Russia’s deposits in American banks that it used to buy or sell rubles, or to buy goods from America, or to receive payments in, if Russia exports something such as oil. Americans buyers of Russian oil would put the money into the Russian bank account.

They never dreamed that this would be grabbed. But now Russia says, ok, you’ve grabbed our money, now that means that we get to grab all of your assets in Russia. This is great! All of your stock holdings in nickel, and Yukos, and all these other companies, ok, you’ve got the money, we have the assets, look at us as just buying the assets on the cheap.

And the Western investors in Russia have all been selling their Russian assets to show that they’re good American citizens in NATO, and the Russians are buying up these European and American assets on the cheap, largely by borrowing money from the banks, that get the money from the central bank, now that they’re so wealthy, and all of the foreign exchange reserves is a result of the American shock-and-awe statement, that’s sort of shock-and-awe in reverse.

So Russia is coming through just fine. And you can imagine how the American strategists are gnashing the teeth. They don’t understand how Russia was able to avoid being bankrupted by this.

They really are not economists. They’re not really financiers. They’re foreign-policy strategists. They’re ideologues that are not very well educated in how to think about the future and how to recognize the fact that the world can actually change from what it is today into something else. And sometimes that change is not in America’s interests. That is sort of not a permitted thought over here.

So essentially, Americans and Europe are operating in the blind, and Russia and China, and Iran, and India, are all looking at how are we going to restructure the world so that we come out of it more prosperous than we were before, not more impoverished. That’s really what the world is dividing into.

BENJAMIN NORTON: Professor Hudson, I don’t know if this is directly related, but it’s it’s something that’s always been a very curious question in my mind.

Germany, back in 2016 and 2017, it moved, physically moved, its central bank’s gold reserves, which had been stored in New York, London, and Paris, and it physically moved those reserves, those gold reserves, to Frankfurt.

Now this was before the U.S. and Britain stole Venezuela’s gold reserves and other reserves. But do you know anything about what motivated Germany’s central bank to move the physical location of its gold reserves into Germany itself?

MICHAEL HUDSON: I don’t think it’s all moved yet. It’s still going on. Gold is very heavy, as heavy has lead, basically. And America said, well, we can only do a little bit, trickle by trickle. So America has been returning the gold very slowly.

So I think Germany, with all of its history of hyper inflation, I think just realizes that, now that gold is not used to settle balance of payments deficits anymore – the gold that Germany had in America was all of the exports that it made to the United States during the Vietnam War. This is Vietnam War gold.

You remember that President de Gaulle would every month cash in, the dollars that America spent in Vietnam would all be spent from Vietnam to Paris, the dollars would end up there, the central bank of Paris would essentially buy gold on the London exchange and keep the gold either in New York or in London.

Well, Germany, because America defeated Germany, and it wasn’t going to keep its gold in Russia, that defeated it even more, it said, well, ok, we’re cashing in our surplus dollars for gold, but we’re going to hold the gold in America.

But now it says, well, America is never going to settle its balance of payments deficits and its foreign debt in gold again, because it doesn’t have any balance of payments surplus, any ability to do that.

It’s going to spend its export surplus and its investment surplus on war. So it’s never going to be able to pay. That’s obvious. Let’s get the gold back.

That was the calculation that every country was making already a decade ago. They realized that America can never repay its foreign debt, unlike other countries.

When other countries can’t pay their foreign debt, they have to go to the International Monetary Fund, that tells them, well, we’ll make you a loan, but you have to sell off your natural resource reserves to the Americans, or we won’t lend you the money.

Well, basically, that’s not going to happen anymore. They realized that America is just going to say, haha, we’re just not going to pay.

Well, now other countries are saying, wait a minute, if America’s never going to repay its foreign debt, why do the Global South countries have to pay their debt to the IMF and the World Bank, all this dollar debt to dollar bondholders?

If America won’t pay, we don’t have to pay. Let’s have a clean slate. Let’s start from the beginning. And we’re only going to have debt and credit relations with friendly countries, not countries that want to go to war with us like America did in Afghanistan, Syria, Iraq, Iran, and now Russia.

So that’s basically what’s happening.

BENJAMIN NORTON: Great. And just to wrap up here, I have another question. And I know your time is limited, so I really appreciate you being here.

I have a quick question about the decline in U.S. dollar hegemony. We were talking about the strength of the ruble, the economic war on Russia; we talked about the bilateral trade that’s growing between Russia and China using the Chinese yuan, between Russia and India using the Indian rupee. And Iran also is talking about doing business with a basket of currencies.

I want to point to a report that was recently published by economists who work with the IMF. And I published an article about this over at, “IMF admits US dollar hegemony declining due to rise of Chinese yuan and sanctions on Russia.”

And there is this report that was published by the IMF, by these economists, and I cite you, Professor Hudson, in this report. It’s a working paper from the IMF, published in March, titled “The Stealth Erosion of Dollar Dominance.”

And here’s a graph, for people watching, here’s a graph from the report. And it shows not a large, but a noticeable and consistent decline in the use of the holding of the U.S. dollar in the foreign exchange reserves of central banks around the world. So this is around the world.

And it has declined in the past years from about 70% of central bank exchange reserves to about 60%. So a 10% decline. That’s not massive, but it’s steady and I think it’s going to accelerate.

And at the same time they’ve also found an increase in the use of what they call “non-traditional currencies” in the foreign exchange reserves of central banks around the world.

And here you can see this graph. I mean it looks like a significant influence because if you look at the y-axis it’s only from 90 to 100. But there is a significant increase in the use of other currencies in foreign exchange reserves, aside from the U.S. dollar, the euro, the Japanese yen, and the British pound. And the currency that is increasingly popular is the Chinese yuan.

So that’s one half of my question. The other half is about this interesting report that was published in the Financial Times, and it’s titled “Russia Sanctions Threaten to Erode Dominance of Dollar, says IMF.”

And the FT interviewed the IMF’s first deputy managing director, Gita Gopinath, who acknowledged that the sanctions imposed on Russia over its military intervention in Ukraine could lead to what she says “fragmentation at a smaller level.”

And she did say that the dollar is eroding influence, but “would remain the major global currency.”

So, that’s a two part question. I’m wondering if you could talk about the decline in U.S. dollar hegemony and how the sanctions will potentially erode that. And then the other half of the question is, can you comment on the declining use of dollars in foreign exchange reserves?

MICHAEL HUDSON: Well, this is what my book “Super Imperialism” was all about. When I first published it in 1972, I could see how the whole thing was unfolding for the next 50 years. And we just published last year a third edition of it, bringing it up to date.

Dollar hegemony means America’s entire balance of payments deficit in the ’50s, ’60s, and ’70s was military. So the dollars that were being pumped into the world economy were the result of military spending.

But the dollars would end up in foreign central banks, especially from Asia to France, Germany, others. What were they going to do with it? Well after 1971 they could not buy gold anymore, so all they could do was buy U.S. Treasury securities. IOUs.

And so they re-lent to the Treasury all the money that America was spending militarily. And the more money America spent in waging its cold war militarily against the world, the more money central banks would lend to the U.S. government to finance the U.S. deficit that was spent largely on the military-industrial complex and foreign military operations.

So dollar hegemony was a free lunch financing America’s almost 800 military bases across the world, to fight against communism, defined as any country that doesn’t let American industry and finance buy control of its raw materials, agriculture, resources.

And this has now come to an end. Right now America has grabbed Afghanistan’s, and Russia’s gold. All of a sudden it’s obvious that, this summer, there’s going to be an enormous squeeze on Third World countries, on the Global South.

Their energy prices are going to go way up, and that’s going to hurt them just like the oil shock of 1974 and 1975 did.

They’re going to have to pay higher food costs, because of food prices are going to go way up now that the Ukraine war is erupting.

And a lot of their foreign debt, dollarized debt service, is coming due. And they’re facing a choice: if they pay the foreign debt, they can’t afford to buy the oil and energy that they need to run their factories and heat their homes. They can’t afford to buy the food to feed their people. Whose interests are they going to put first?

Well of course their leaders are going to put America’s interests first, and their own interests second, because their leaders, if they’re a client oligarchy, are put in power by the U.S. military, as sort of miniature Pinochets, throughout Latin America and other countries.

So suppose other countries decide, well, we’re going to feed ourselves and we’re not going to wreck our economy just to pay foreign bondholders. We’re a sovereign country. We’re going to put our national interests first.

Well, then the United States can say, aha, we’re going to grab all of your foreign assets in the United States.

Well, other countries can say, oh, they’re going to do to us just what they did to Afghanistan and Russia. Let’s move our money out of the United States quickly. If we don’t have dollars, well, it’s true, we can’t pay our dollar bondholders, but at least we can, in international markets, we can buy the food and the energy we need.

And so the tensions, the disruption of world prices, and inflation, and trade that is a result of the NATO attack on Russia, now threatens to drive all of the southern hemisphere countries into an alliance with Russia, China, India, and all the rest.

So America basically is creating a new Berlin Wall, but the wall is isolating itself from other countries, and driving other countries all together into what I hope will be a happy, self-sufficient, non-U.S. globalized economy.

BENJAMIN NORTON: Well, I want to thank you, Professor Michael Hudson. It’s always a real pleasure having you. I know you’re very busy, so thank you for giving us so much of your time.

I’ll say that the comment section here on YouTube has been very vibrant, with some interesting conversation. And what’s nice is there are people from all over the world, from the U.S., Latin America, Europe, and from Russia. So it’s good to see a mix of people.

And for anyone who wants to listen to this, you can check out the podcast version if you look up Multipolarista on Spotify, and iTunes, and all the other podcast platforms.

And I’ll just say, while I wrap up here, that today we were talking about, at the beginning of this discussion, a new book that Michael Hudson is publishing this week. It is called “The Destiny of Civilization: Finance Capitalism, Industrial Capitalism, or Socialism.”

It’s a very good book. I had the privilege of getting a review copy early. So definitely check out that book.

You can also find all of Professor Hudson’s writings at

Thanks, Professor Hudson.

MICHAEL HUDSON: It’s really good to be here. It was a good discussion.

المشهد الدولي والإقليمي في ظلّ المواجهة الروسية الأطلسية في أوكرانيا

الخميس 21 نيسان 2022

ـ مسار العملية العسكرية يدلّ بوضوح إلى أنّ النتيجة ستكون في منتهى السلبية للنظام القائم في أوكرانيا ومن خلال ذلك للحلف الأطلسي التي قد تكون ضُربت مصداقيته ضربة قاضية ـ كشفت جائحة كورونا التبعية للمواد الأساسية الموجودة في كلّ من روسيا والصين… والاتحاد الأوروبي منكشف تجاه روسيا في موضوع الطاقة ولا يستطيع الاستغناء عنها رغم التصريحات المعاكسة

زياد حافظ

لا يمكن أن نتصوّر تداعيات المواجهة المفتوحة بين روسيا والحلف الأطلسي في أوكرانيا دون التوقف على الأسباب. فهذه الأسباب التي دفعت إلى المواجهة هي التي ستلقي بظلالها على المشهد العالمي والإقليمي. فجوهر الصراع هو صراع بين مذهبين في منظومة واحدة. المنظومة هي الرأس المالية والمذهبان هما أولا الرأس المالية الريعية المالية التي تقوده الولايات المتحدة والحلف الأطلسي وثانياً الرأس المالية الإنتاجية التي تتماهى مع الاقتصاد الموجه التي تقوده الكتلة الأوراسية بقيادة روسيا والصين.

بهذا التعريف للمواجهة نضمّ الأبعاد الجيوسياسية والدوافع التوسعية لدى المحور الأطلسي قابلتها الهواجس الأمنية لروسيا والصين. وفي الإطار الأوسع للمواجهة هناك نموذجان من داخل العائلة الواحدة يتنافسان على قيادة العالم والنموذج الذي تتبناه الولايات المتحدة يخسر لصالح النموذج الآخر.

 يبقى علينا أن نستشرف ماذا بعد؟ والإجابة تتوقف على مسار العملية العسكرية القائمة في أوكرانيا ونهايتها. فالحلف الأطلسي وخاصة الولايات المتحدة غير متحمّسة على إنهاء الصراع بل على تمديده بهدف استنزاف روسيا عسكرياً واقتصادياً وفرض العزلة الدولية عليها. الهدف الأميركي بات واضحاً وهو تغيير النظام القائم في روسيا.

لكن الرياح الروسية لم تجر كما اشتهت السفن الأطلسية والأميركية. فمسار العملية العسكرية يدلّ بوضوح على أنّ النتيجة ستكون في منتهى السلبية للنظام القائم في أوكرانيا ومن خلال ذلك للحلف الأطلسي التي قد تكون ضُربت مصداقيته ضربة قاضية. فكيف ستكون تداعيات ذلك المسار على العالم بشكل عام والإقليم والمشهد العربي بشكل خاص؟

في هذه النقطة بالذات نريد أن نؤكّد أن قدرة روسيا على مواجهة الغرب لم تكن لتحصل لولا الصمود العربي خاصة في محور المقاومة. فالمقاومة في العراق أفشلت المشروع الأميركي واستنزفت قدراته بينما كانت روسيا تعيد بناء قواها العسكرية والاقتصادية. كما أنّ صمود المقاومة في لبنان منع تحقيق مشروع الشرق الأوسط الجديد بينما روسيا كانت أيضاً في إطار استعادة القدرات. كما أنّ صمود سورية في مواجهة العدوان الكوني ساهم في تعزيز الثقة بأنّ الغرب ليس قدراً على العالم. كما أنّ صمود المقاومة في فلسطين أفشل مشروع صفقة القرن والاتفاقات الابراهيمية وأنّ صمود اليمن ساهم في إعادة رسم الخارطة السياسية للأمن الإقليمي خارج النفوذ الأميركي. فهذا الدور العربي مكّن كلّ من روسيا والصين وحتى الجمهورية الإسلامية في إيران من تعزيز قدراتها وترسيخ تضمانها بل تحالفها والآن نرى روسيا تقف بوجه الهجمة الأطلسية في أوروبا الشرقية وتهزمها نيابة عن العالم. فلا بد للنظام العربي ان يتأثر بكلّ ذلك خاصة أنّ الجزء الخارج عن سيطرة ذلك النظام استطاع أن يقلب المعادلات التقليدية في الإقليم وبالتالي في العالم. هناك معادلة جيوسياسية بسيطة. من يريد السيطرة على العالم عليه أن يسيطر على الجزيرة الأوراسية لما لها من موارد وإمكانيات. ومن يريد أن يسيطر على تلك الجزيرة فالبوّابة لها هي المشرق بشكل عام والمشرق العربي بشكل خاص. هنا يبرز البعد الاستراتيجي لمحور المقاومة وما يمثله من دور في إعادة رسم التوازنات الدولية.

صحيح أنّ العملية العسكرية لم تضع أوزارها بعد عند إعداد هذا التقرير لكن هناك نتائج واضحة على الصعيد الدولي وبطبيعة الحال على الصعيد الإقليمي والعربي. أولى النتائج هو شبه إجماع على أنّ القوّامة الأميركية والأطلسية لم تعد كما كانت عليه. صحيح أنّ الولايات المتحدة لن تستسلم بسهولة إلى الواقع الجديد لكن ليس باستطاعتها تغيير موازين القوة والعوامل التي أدّت إلى ذلك التراجع. فهذه العوامل داخلية بالدرجة الأولى كما أنها خارجية تعود إلى التخطيط البعيد المدى الذي قامت بتنفيذه دول المحور الرافض للهيمنة الأطلسية والأميركية. فتقييم المشهد الداخلي لا يوحي بأن هناك إمكانية في تعديل الميزان. فليس هناك جهوزية عسكرية أميركية لمواجهة شاملة وحاسمة لكل من روسيا والصين كما أن قدرة اللجوء إلى الحرب بالوكالة عنها أصبحت شبه معدومة. فالتصدّعات داخل الحلف الأطلسي والاتحاد الأوروبي لا توحي بإمكانية حشد قوّات عسكرية تستطيع مواجهة روسيا وذلك رغم الكلام العالي النبرة لمكوّنات الحلف الاطلسي. ليس هناك من استعداد للتضحية في سبيل أوكرانيا. فالخطة هي فقط الاستنزاف عبر تحفيز الأوكرانيين والمرتزقة من الأوروبيين على مواجهة الالة العسكرية الروسية.

كذلك الأمر على الصعيد الاقتصادي حيث كشفت جائحة كورونا التبعية للمواد الأساسية الموجودة في كلّ من روسيا والصين. والاتحاد الأوروبي منكشف تجاه روسيا في موضوع الطاقة ولا يستطيع الاستغناء عنها رغم التصريحات المعاكسة لذلك. فالبديل للغاز الروسي هو الغاز الأميركي بأسعار مرتفعة تصل إلى أكثر من عشر أضعاف سعر الغاز الروسي ناهيك عن عدم وجود تجهيزات لاستيراد الغاز الأميركي قبل ثلاث سنوات على أحسن تقدير. فماذا تستطيع ان تفعل الدول الأوروبية طيلة الفترة غير الدخول في انكماش كبير أن لم يكن في كساد أكبر مما كان في الثلاثينات من القرن الماضي؟

أما على الصعيد المالي لن تستطيع الولايات المتحدة وحلفاؤها من منع قيام أنظمة مدفوعات دولية لا ترتكز إلى الدولار. كما أن التعامل بالدولار بدأ بالتراجع في دول واقتصادات وازنة كالصين والهند وروسيا على سبيل المثال. حتى بعض الدول العربية التابعة للقرار الأميركي بدأت تفكّر جدّيا بالتعامل مع الروبل الروسي واليوان الصين والروبية الهندية.

بناء على ذلك نستطيع أن نقول إن نتائج العملية العسكرية الروسية في أوكرانيا ستكرّس تراجع دور الولايات المتحدة وأوروبا في الهيمنة على مقدرات العالم.

اما النتيجة الثانية لذلك التراجع هو واقعياً بروز نظام دولي جديد متعدد القطبية يرتكز إلى القانون الدولي وقرارات مجلس الأمن واحكام المحكمة الدولية إضافة إلى الاتفاقات والمعاهدات بينما الطرح الأميركي ومعه الأوروبي هو نظام «أحكام قيم» لا قاعدة قانونية لها وملتبسة في أحسن الأحوال ولا تعترف بسيادة الدول. وهذا النظام سيشهد تجاذبا بين الدول التي تريد الخروج من الهيمنة الأميركية وبين الدول التي لا تستطيع الخروج عنها وعددها يتقلّص يوما بعد يوم ولن يضم في آخر المطاف إلاّ الحلف الانكلوساكسوني، أي الولايات المتحدة والمملكة المتحدة وأستراليا وكندا وربما نيوزيلاندا. أما أوروبا الغربية فهي عدة أقسام: المحور الألماني الفرنسي الذي يقود الاتحاد الأوروبي، دول أطراف أوروبا، ودول أوروبا الشرقية. ليس هناك من انسجام في المواقف داخل هذه الكتل الثلاث لأسباب عديدة تعود منها للتاريخ ومنها لبنيتها السياسية والاقتصادية لا وقت لنا شرحها. ما يهمنا هو أن عدم الانسجام سيحدّ من فعّالية موقف موحد. ولذلك سنرى أوروبا في تجاذب بين النظام المبني على القانون الدولي والمعاهدات وقرارات المحكمة الدولية وطبعا قرارات مجلس الأمن.

في ذلك السياق لا نستبعد إعادة النظر في تركيبة مجلس الأمن حيث الدول صاحبة حق النقض هي خمس فقط بينما قد تدخل إليه دول كالهند والبرازيل وجنوب إفريقيا ودولة عربية بالتداول مع الدول العربية وحتى الجمهورية الإسلامية في إيران. كما نتوقع تقليص دور ونفوذ الولايات المتحدة في المؤسسات العاملة والتابعة للمنظمة الدولية التي أصبحت ذراعا للسياسة الخارجية الأميركية. فهناك دول وازنة تستطيع أن تملأ الفراغ المالي الذي سينتج عن تخفيض مساهمة الولايات المتحدة في تمويل المؤسسة وربما خروجها من المنظمة ككل. لن يحصل ذلك في المنظور القريب بل ربما في فترة لا تتجاوز نهاية هذا العقد من الألفية الثالثة. كما أن منظمة الأمم المتحدة المعدّلة ستعمل بتنسيق واسع مع المنظمات الإقليمية وخاصة الآسيوية كمنظومة شانغهاي على سبيل المثال وليس الحصر. هذا يعني أن القضايا الدولية ستعالج من باب النظر بمصالح الجميع وعلى قاعدة رابح رابح وليس على قاعدة اللعبة الصفرية التي تفرضها والولايات المتحدة.

النتيجة الثالثة هو التحوّل إلى نظام اقتصادي عالمي جديد مبني على تكامل المصالح وليس على تصارعها أو تنافسها. فدول الجنوب الإجمالي أي كل الدول الإفريقية وأميركا اللاتينية والدول الاسيوية غير الصين والهند ستجد في العلاقات الدولية ما يساعدها على نهوضها والحفاظ على سيادتها بينما النظام الاقتصادي القائم مبني على تبعية الاطراف للمركز الذي هو الغرب بشكل عام والولايات المتحدة بشكل خاص وعلى حساب مصالح تلك الدول.

النتيجة الرابعة هي تراجع دور الدولار في المنظومة المالية الدولية. فعملات أخرى كالروبل الروسي واليوان الصيني والروبية الهندية وفيما بعد الراند الإفريقي الجنوبي ستكون ركيزة الاحتياطات النقدية الدولية كما أن تعاظم التعاطي بالعملات الوطنية سيخفّض الطلب على الدولار ليصبح عملة من بين العملات وليست أداة لتمويل الحروب والهيمنة على العالم.

النتيجة الخامسة تعود إلى تراجع المكانة الصناعية الأوروبية. فرغبة قياداتها في التخلّي عن الغاز الروسي سيقضي على القدرة التنافسية الأوروبية ما يجعل الدول الأوروبية تدخل مرحلة تفكيك التصنيع (de industrialization) للدخول في مرحلة ما بعد التصنيع (post industrialization) فتصبح تابعة لمراكز التصنيع الفعلية في دول الجنوب الإجمالي.

هذه النتائج لن تأتي بسرعة ولكن مسارها واضح وحتمي إذا ما كانت الإرادة الجماعية تهدف إلى تحقيق الاستقرار والأمن. فلا بد من التعديلات في المؤسسات الدولية ولا بد من تعديلات في التعاطي والعلاقات ولا بد من ترسيخ قاعدة الرابح رابح ونبذ قاعدة اللعبة الصفرية. وما يساعد على تحقيق ذلك موازين القوّة الجديدة التي تظهرها العملية العسكرية في أوكرانيا والتحالف الروسي الصيني ونهوض الكتلة الاوراسية وتعزيز منظومة البريكس.

لكن إلى أن تحصل تلك التحوّلات فالعالم دخل فعليا في مرحلة ترقّب ومراجعات في العلاقات حيث العديد من الدول تقوم بتقييم النتائج المرتقبة من العملية العسكرية في أوكرانيا. لذلك سنشهد توترات عديدة في الأسواق العالمية في الطاقة والمواد الغذائية وسلسلة المورّدين إلى أن تستقر الأمور وتستسلم الولايات المتحدة للوقائع الجديدة. هنا تكمن المشكلة لان حالة الانكار بين النخب الحاكمة وأو الطامحة للحكم في الولايات المتحدة ما زالت تعتبر أن القدر المتجلّي للولايات المتحدة واستثنائيتها يجعلها موكلة بقيادة العالم. النظرة التوراتية للأمور تتحكم في اللاوعي الأميركي وهنا الخطورة من الانزلاق نحو حماقات كارثية خاصة أن الهروب إلى الأمام هو السبيل الوحيد عند تلك النخب. الرهان لعدم حدوث ذلك هو على تيقّن العقول الباردة، وهي موجودة ولكن معزولة، في التغلّب على موجة الجنون الجماعي التي تتحكّم بتلك النخب. وبالتالي قد لا نستبعد حصول تغييرات داخل البيت الأبيض وفي منظومة الحكم بعد الإخفاقات الكارثية التي حققتها الإدارة الحالية.

أما على الصعيد الإقليمي فنتوقع تحوّلات كبيرة في الملفات الساخنة كفلسطين المحتلة وسورية واليمن. كما نتوقع ترسيخ قواعد لنظام عربي جديد قد يأخذ ما تبقّى من العقد الحالي حتى منتصف العقد القادم، أي منتصف الثلاثينات من القرن الحالي.

فعلى صعيد فلسطين فإن الكيان الصهيوني الاستيطاني المحتل يواجه أزمة وجود بحدّة لم يألفها منذ إقامته. فالخطر الوجودي الذي يشعر به بسبب فقدان الأمن وعبثية الرهان على تطبيع مع أنظمة لا تستطيع أن توفر الأمن للكيان يتلازم مع ارتفاع وتيرة المواجهة المسلحة من أبناء فلسطين. فتداعيات العملية العسكرية في أوكرانيا عرّت المواقف الغربية في توفير الحماية لأوكرانيا في مواجهة روسيا. والدرس بات واضحا للقيادات الصهيونية أن وعود الغرب لا تتجاوز الحبر على الورق وأن الغرب لن يقاتل في سبيل ما هو أهم من الكيان. فمستقبل أوروبا أهم من الكيان وتبيّن أن القادة الأوروبيين لن يقاتلوا في سبيل تصوّراتهم لأوروبا. فهل يعقل أن أوروبا ستقاتل في سبيل كيان تتشوّه سمعته يوما بعد يوم وتظهر على حقيقته البغيضة؟ وكذلك الأمر بالنسبة للولايات المتحدة التي أعلنت أنها لن تقاتل مع الكيان في مواجهة الجمهورية الإسلامية في إيران وأنها لن ترسل إلا السلاح للكيان وكأن مشكلة الكيان هي الضعف في التسليح. كما أن الولايات المتحدة لن تقاتل من أجل أوكرانيا وفقا لتصريحات قادتها. تداعيات الازمة الأوكرانية ستكون وخيمة على الكيان خاصة وان قادته كانوا مربكين في اتخاذ موقف من الأزمة. وعندما حسم الكيان تردّده ووقف مع الحكومة الأوكرانية ضد روسيا فإن لذلك تداعيات مباشرة على العلاقة بين الدولتين وخاصة في مقاربة المشهد العسكري في سورية.

من جهة أخرى نرى تحولين أساسيين في المشهد الفلسطيني. فنهاك تصاعد ملموس في المواجهة الشعبية الفلسطينية مع قوى الاحتلال تجلّى بتطوّر ملحوظ في طبيعة المواجهات. فبعد موجة المواجهات بالحجارة والدهس والطعن بالسكاكين برزت المواجهة بالسلاح الناري. لن نسترسل في مقاربة هذه التطوّرات لضيق المساحة بل نكتفي بملاحظة ظهورها مع العملية العسكرية في أوكرانيا ما يدل أن الشعب الفلسطيني يشعر بضعف الحلف المعادي له فيتجرّأ على الاقدام على عمليات لم تكن مألوفة.

أما التحوّل الثاني فهو تثبيت القوى الردعية لفصائل المقاومة في غزة ما يتيح الفرصة لانتفاضة شعبية ضد قوى الاحتلال في مختلف أنحاء فلسطين المحتلة. كما أن المقاومة وضعت الخطوط الحمراء فيما يتعلق بمستقبل القدس والاحياء العربية التي ما زالت تقاوم عمليات التهجير وأيضا فيما يتعلق بمحاولات المستعمرين لاقتحام الأقصى. أيضا القوّة الردعية للمقاومة تعزّزت مع الشعور بأن الحلف المعادي يعاني من الضعف ما يجعل آفاق النصر أكثر وضوحا وقربة.

ومن تداعيات العملية العسكرية في أوكرانيا الارباك في النظام التركي الذي تردّد بين مصالحه مع روسيا والشرق بشكل عام والتزاماته الأطلسية. لكن الضعف الأطلسي ستجعل تركيا أكثر استجابة للضغوط الروسية والإيرانية في الملفّ السوري خاصة أن أوراق الضغط الروسي ليست ضعيفة كصواريخ أس 400 والتدفق السياحي الذي يشكل خشبة الخلاص في الأزمة الاقتصادية التي تشهدها تركيا. فالخروج من سورية أصبح ضرورة لتجنّب التداعيات السلبية من رفض احترام السيادة السورية على أراضيها.

والتداعيات للعملية العسكرية في أوكرانيا تأتي في سياق أخفاقات كبيرة للسياسة الأميركية انعكست على سلوك العديد من الدول العربية المحسوبة على الولايات المتحدة والتي تدور في فلكها. ويمكن وصف الحال في تلك الدول بداية جادة لمراجعة العديد من مواقفها وتحالفاتها ومقارباتها للعديد من الملفات التي ساهمت في انقسام البيت العربي. نذكر في هذا الإطار الامتناع عن التصويت في الجمعية العمومية للأمم المتحدة لصالح قرارات تدين روسيا. كما نذكر عدم الموافقة على فرض عقوبات اقتصادية ومالية على روسيا. بل العكس نجد حكومات هذه الدول تفكّر جدّيا بالانفصال عن الدولار في تسعير براميل النفط التي تصدّرها وبدأت تدرس إمكانيات التعامل بالروبل الروسي واليوان الصيني. هذه الإشارات الصريحة لم تكن واردة منذ بضعة أشهر ونضعها في خانة تداعيات العملية العسكرية في أوكرانيا التي عرّت الأطلسي وأظهرت ضعفه وعجزه. فالدول العربية التي كانت تتبنّى نظرية ملكية ال 99 بالمائة من أوراق اللعبة الدولية بيد الولايات المتحدة بدأت بمراجعة لتلك النظرية.

وهذه المراجعة التي تأتي في سياق مشاهدة التراجعات الأميركية في أفغانستان وفي مفاوضاتها غير المباشرة مع الجمهورية الإسلامية في إيران في الملف النووي تدفع الدول المتخاصمة مع إيران إلى مفاوضات ما زالت في بدايتها والتي كانت غير ممكنة منذ سنة أو أكثر. كما أن المراجعات في الملفات المتعلقة بسورية واليمن والعراق ولبنان قد تصل إلى انفراجات ضرورية للنهوض من الحالة الكارثية التي تعيشها الدول. كل ذلك لم يكن ممكنا لولا وضوح الإخفاقات الأميركية في أوكرانيا التي لم تكن لتحصل لولا القدرات الروسية وحلفها مع الصين. فهذه القدرات كما أشرنا في البداية لم تكن لتقوم لولا صمود القوى المقاومة العربية في كل من العراق ولبنان وفلسطين وسورية واليمن.

الإخفاقات الأطلسية في أوكرانيا تتلازم مع التصعيد في المواجهة الشعبية في فلسطين ما يلغي جدوى التطبيع مع الكيان المحتل. فإذا كانت الأوراق بيد الولايات المتحدة غير فاعلة فإن البوّابة للحصول على الرضى الأميركي أي الكيان الصهيوني المحتل لم تعد ضرورة. هذا لا يعني التراجع الفوري أو القريب عن التطبيع بل سنرى اشتداد المقاومة الشعبية للتطبيع دون ان عوائق كبيرة ما يفرغ التطبيع من مضمونه.

أما في الساحة السورية فسنرى تصعيدا في المواجهة مع قوى التعصّب والغلو والتوحّش المحتشدة في إدلب وجوارها كما سنرى تصعيدا في مواجهة القوى المتحالفة مع الولايات المتحدة في شرق سورية ومواجهات متصاعدة مع القوات الأميركي التي ستخرج في نهاية المطاف في كل من سورية والعراق. الإخفاقات في أوكرانيا لن تمكن الولايات المتحدة في الاستمرار في العراق وسورية ومواجهات محتملة مع الحلف السورية الروسي.

وأخيرا فيما يتعلّق باليمن فقوى التحالف العدواني على اليمن مضطرة إلى إنهاء العدوان والتفاهم مع القوى اليمنية الصامدة. اما الحل السياسي للمشكلة اليمنية فهو في الحوار بين مكوّنات الشعب اليمني وليس عبر إملاءات خارجية سواء كانت دولية أو غربية أو إقليمية.

المراجعات والتحوّلات الميدانية في المشرق العربي وتراجع موجة التطبيع ستفرض حتما مراجعة للنظام الإقليمي العربي. من المبكر التكلّم عن شكل النظام الجديد بل نكتفي بالقول ان قاعدته ستكون المربع السوري العراقي الجزائري اليمني، وفيما بعد دول الجزيرة العربية بقيادة اليمن وبلاد الحرمين، ثم بلاد وادي النيل والتشبيك المتزايد بي مصر والسودان، وأخيرا دول المغرب الكبير محوره الجزائر والمغرب. وركيزة ذلك النظام هو التشبيك الاقتصادي والسياسي بين دول المجاورة في الأقاليم العربية ولكن لذلك حديث آخر في مناسبة منفصلة.

*باحث وكاتب اقتصادي سياسي والأمين العام السابق للمؤتمر القومي العربي وعضو الهيئة التأسيسية للمنتدى الاقتصادي والاجتماعي

Bridging China’s past with humanity’s future – Part 3


July 01, 2020

Bridging China’s past with humanity’s future – Part 3

by Straight-Bat for the Saker Blog

This will be presented in 3 parts and in 3 different blog posts

Part 1

Part 2

PART – 3


The financial crisis that started in USA in 2007 became global by 2008 which impacted countries and societies across the world. The year 2008 has already been identified as watershed moment for world economy. However, I would like to put forward a hypothesis stretching the arguments further on why 2008 will be remembered as historic moment that started new preparations:

a) Since 1990s, the latest version of capitalism – Financial capitalism – has been developing strong operations in Anglo countries USA-UK-Canada-Australia and west Europe on the back of Financial services-Insurance-Real estate (termed by economists as FIRE) sectors. That was in line with the political economy of ‘capitalism’ – capital, by definition, needs continuous expansion, the capitalists were/are always in search of new horizons which would provide them more profit that would continue the ‘endless accumulation of capital’.

Before the chapter on financial capitalism got initiated, the businessmen in USA and other Anglo countries carried out two rounds of well-planned outsourcing (by definition, outsourcing brings down the product cost on one hand, and on the other hand outsourcing relieves company management from mundane tasks to devote more time on core competences) of non-MIC non-Energy manufacturing activities: (i) in stage 1 during 1950s and 1960s, they outsourced such economic activities to Japan-South Korea-Taiwan in order to create an economic vassalage through which the living standards of the so-called east Asian tiger economies will be pulled upwards to show ‘miracles’ (happened due to western liberal capitalist democracy), (ii) in stage 2 during 1980s and 190s, they outsourced even larger part of such economic activities to China that in turn would provide massive employment opportunity in China (happened due to western liberal capitalism and technological superiority), which would entice the Chinese government to join the Zionist Capitalist camp.

During 2007 and 2008, all the financial engineering that designed and implemented the FIRE sectors came crashing down. Apparently, ‘financial capitalism’ wasn’t that fault-proof in the face of infinite greed of capitalists. The situation was salvaged through ‘socialising the losses’ suffered by the ‘too-big-to-fail’ banks and financial services companies in USA, and other Anglo countries – the government released trillions of USD to support the crisis-creators. But a much more significant incident was that, the Zionist Capitalist Deep State clique started introspection on how long they can depend on ‘financial capitalism’ to continue accumulation of capital, and as a natural corollary, it appeared to them that ‘industrial capitalism’ was a more secure version of capitalism that was sent abroad with much fanfare. Both the beneficiaries of outsourcing i.e. China and Japan-South Korea-Taiwan block were very well established in the nuances of complete business cycle of ‘industrial capitalism’. The Deep State headquarters (in USA) also remembered that most of the Zionist Capitalist elites of non-Anglo west Europeans were never very serious about outsourcing – as a result, even in late 2000s, Germany-France-Italy-Netherlands-Sweden could maintain a base of ‘industrial capitalism’ (though not a vibrant one under the competitive stress generated by east Asian industrialists)!

The fact that, the Chinese government steadfastly refused to carry out political reforms and to privatize state-owned enterprises came as addition of salt to injury for the Zionist Capitalist Deep State. There was unanimous consent – Chinese manufacturing ‘juggernaut’ would have to be rolled back, and along with that, the unfinished WW II task of destroying CPC would have to be completed.

b) If the Deep State elites were trying in vain, to create environment for Chinese top leadership to switch over to liberal capitalism, the same Deep State elites were dreaming about Russia being colonised by the London-based Zionist Capitalist businessmen and bankers. By the time when they woke up in 2008, Russia developed on all fronts including exports (USD 468 billion primarily from petroleum and natural gas) and Russian government was working all-out to improve the living conditions of the society. After 1991, the Russian capitalist-swindlers were in self-congratulatory mode about how they grabbed the resource extracting sector like petroleum, natural gas, aluminium etc. – with huge mineral and hydrocarbon reserves, using the Anglo-American technologies, the Russian capitalist-swindlers were confident to generate huge revenue and profit year after year. However, post-1991 ‘reformed political environment’ brought such a top leadership who would slowly but surely entrust the custody of most of the natural resources to the state-owned enterprises. Even more interesting event was that, Russian scientists and technologists were again engaged on research and development of military equipment. The military-industrial-complex of Soviet Union was decimated after 1991 mainly because no single successor country of Soviet Union had the entire production chain (it was distributed among different provinces like Russia, Ukraine, and Belarus etc.). Russian leadership intuitively developed the entire supply and production chain in their territory – as a result, very soon Russia became a potent force in arms export. It is not the total amount of export that mattered – the advancements in technology was far ahead in complexity and quality of armaments compared to the armaments owned by military forces of USA-5 Eyes-NATO, particularly in electronic warfare, missiles, and fifth generation military aircraft.

The writing on the wall was clear for the Zionist Capitalist Deep State – the resurgent Russia would utilise the energy export revenue to restructure its own military forces with such magnificent military machines, and Russia will curve-out a share of world-wide military arms export market. This entire cycle would create unwanted competition from technically strong Russia in energy sector and MIC sector, the only sectors of ‘industrial capitalism’ for which the Zionist Capitalist oligarchy still maintained their business portfolio. Again, there was unanimous consent – Russian energy export would have to be rolled back, and along with that, the Russian Federation would have to be dealt a decapitating blow to eliminate current leadership.

c) While all partners of the Deep State cabal were in agreement on the above mentioned points (a) and (b), there was complete lack of convergence on the long-term strategy and plan of action to achieve these objectives.

Such lack of strategic planning and coordination was evident after 2008. For the first time in five centuries the Zionist Capitalist Deep State cabal thought that, they need to include more ethnic groups – Barack Husain Obama (representing Afro-Americans) was selected as the President of USA for two terms from 2009 to 2016. It is doubtful, if that action really increased the strength of the cabal. The Zionist Capitalist cabal made a half-hearted initiative to create political-economic supranational blocks (through signing of TPP, TTIP, and TISA) that will impair all-round security of China-Russia and few other countries where governments were being run by anti-imperialist political parties. Such exclusive trade blocks, if materialised, would have (i) impinged on ‘state’ sovereignty of all member states where MNC business entities took priority over state, (ii) created ‘captive market’ for goods and services produced by MNC business entities owned by Jewish, Anglo, Dutch, French, German oligarchy plus Japanese and Korean oligarchy, and (iii) maintained US fiat Dollar as global exchange currency.

[ Link: ]

If such trade blocks would have been superimposed with EU and NATO, the world would have seen the birth of largest directly controlled empire in history spanning across east and south-east Asia, Europe, North America, most of South America. It is doubtful, if the Deep State elites ever pondered over the absurdity of such planning.

Donal Trump burst into the centre-stage in 2016 end without getting selected by the Zionist Capitalist Deep State cabal. But he was quick to get accustomed with the Deep State objectives and strategy – after all, the role of President of USA have been the façade of the Deep State since 1945 (replacing Prime Minister of UK who used to shoulder that ‘responsibility’ for previous couple of centuries). At the first place, Trump’s election as the President of USA itself showed the lack of coordination among the factions of Zionist Capitalist cabal. After Trump settled in, the policy appeared as ‘bring back the manufacturing industry from China any how’ without any arrangement for upstream and downstream supply chain. Any planning of this type of infantile disorder is bound to fail. On the other hand, Trump thinks that Russia would be immature enough to get mollycoddled by his words on how Russia is important in current world economy while maintaining the economic sanctions (which have been hitting Russian economy hard for past 6 years). Again, Trump alienated most of the west European partners through his repeated calls for increasing military budgets by west European NATO partners. Needless to say that, none of Trump’s action plans are backed by thorough study. Similar to immature strategic plans vis-à-vis China, the Deep State have been showing lack of ingenuity vis-à-vis Russia.

Across the world, the serious fact-based researchers and reporters are divided in their opinion – the larger group is of the opinion that the Deep State cabal is in deep crisis that have been brewing for decades (due to factors like ‘intrinsic crisis’ of capitalism, and ‘limitations’ of fiat US Dollar printing or QE, ‘limitations’ of imperial outreach etc.), while relatively smaller group feels that irrespective of such limitations, Deep State will continue to maintain its hegemonic hold over the world order through new tricks. I tend to side with the logic of the smaller group. Notwithstanding the obvious weaknesses of the Deep State cabal, they have wealth cumulatively built up for past five centuries and they have corrupted the educated group of people in all countries since the end of WW I – hence they would look to perpetuate their hegemonic world order in the foreseeable future.

d) Nevertheless the Zionist Capitalist cabal has made an impressive array of arrangements, even if that won’t be coherent enough to defeat either China or Russia:

i. USA Military forces through its regional commands across the world, along with the 5-Eyes military forces maintain high degree of military alertness and preparedness aimed at fighting at least two wars simultaneously at two different ‘theatres’. They have developed and deployed a ubiquitous comprehensive C4ISTAR system and standard operating procedure that will support ‘first strike’ to decapitate the adversary (with Hypersonic strike vehicles, Russia and China are the only countries that defy this). Among significant military assets, very strong naval force with 11 Carrier Strike Groups (CSG), largest fleet of nuclear submarines, largest fleet of ‘stealth’ multi-role military aircrafts, outdated Ballistic Missile Defence system (BMD) to strike down incoming (up to supersonic) projectiles through launching or midcourse or terminal stage, second largest stockpile of Nuclear warheads that can be delivered from land, air, and sea.

ii.  Apart from above mentioned weaponry (common across the world), USA possess highly sophisticated space based weapons like kinetic kill vehicle, and directed energy weapon which, apparently, can be launched by robotic orbital vehicle (X 37B); monitoring and surveillance of satellites sent by other countries to the high earth orbit (HEO) and low earth orbit (LEO) using four satellites of Geosynchronous Space Situational Awareness Program (GSSAP); special armaments researched by DARPA like robotic combat force, microsatellite-cum-drone, microbiological weapons, weather control techniques (HAARP etc.)

iii. USA (along with forces from Rest of 5Eyes, NATO, Israel, Japan) Deep State has been meticulously carrying out military encirclement of Russia and China around their geographical boundary for past two decades. Nuclear warheads in NATO bases in Turkey, Italy and other European countries, BMD system installation in at Poland, Romania, Japan, and South Korea, CSG in all the oceans, more than 700 military bases in Europe-Asia-Africa-Pacific Ocean-Indian Ocean-Atlantic Ocean, and agreements with dozens of non-NATO but pro-Deep State countries for sharing military facilities and logistics facility

e) The Zionist Capitalist oligarchy has been looking beyond the ‘industrial capitalism’ and ‘financial capitalism’. A set of new possibilities have appeared on the horizon – these are not completely ‘new’ because during past two centuries all of these formed a small segment of all-encompassing ‘industrial capitalism’. In the new century, however, any of these or a combination of these can grow into ‘opportunity’ of a new ‘version’ of capitalism:

  1. Exotic materials like Cobalt, Lithium, and Uranium etc.
  2. Genetic engineering and artificial life
  3. Climate engineering
  4. Artificial intelligence
  5. Surveillance and mind control
  6. Healthcare and medicine
  7. Space travel and settlement

Current geopolitical control-points of Deep State:

1. In East Asia, South-East Asia, South Asia, Pacific Ocean zone, Indian Ocean zone the key strategic control revolves around objectives like ‘All-round Containment of China’, ‘Military Partnership with India’ and ‘Creation of Indo-Pacific NATO’ through the programmes like:

  1. Installing Deep State followers as the ruling elites of Taiwan island who could declare formal independence from Chinese mainland
  2. Fomenting secessionist movements in Hong Kong, Xinjiang (East Turkestan), Xizang (Tibet) regions of China. The Deep State would utilize fault-lines of multi-ethnic and multi-religion society of China to tear apart the country into multiple vassal states
  3. Provoking trouble in South China Sea, East China Sea through mobilising the governments of littoral states like Vietnam, Malaysia, Indonesia, Philippines, Japan and nudging them towards confrontational behaviour with China
  4. Keeping the ‘Korean problem’ alive by manipulating successive South Korean governments to take aggressive stance towards North Korean government so that peace agreement (as logical settlement of Korean War armistice) never happens
  5. Keeping the ‘Kuril Islands problem’ alive by co-opting successive Japanese governments towards taking an illogical stand towards proposals of Russian government so that peace agreement (as logical end of WW II) never happens
  6. Keeping the land boundary dispute between India and China alive through co-opting the Indian ruling party leadership and nudging them towards confrontation
  7. Provoking Salafist Islamic terrorism in India, and then cozying up to the Indian government with offer for ‘generous support’, if India joins the USA-led multi-country military block mainly targeted against China
  8. Manipulating Indian leaders and bureaucrats to play a hegemonic role in the south Asian neighbourhood, which would seek to get elite followers of the Deep State camp elected as top leaders of countries like Sri Lanka, Nepal, Bangladesh, Maldives
  9. Forming an ‘informal’ naval alliance among India-Japan-Australia-South Korea which would keep navy of China and Russia under check, and if push comes to shove the ‘quad’ navy would block the Malacca strait to cripple Chinese trade
  10. Corrupting the political parties in Asia’s south-east and south region (countries like Vietnam, South Korea, Cambodia, Laos, Malaysia, Indonesia, Philippines, India, Pakistan, Nepal, Sri Lanka etc.) which had glorious anti-imperialist struggle for many decades to influence them against economic association with China and Russia
  11. Spreading concocted stories on global media identifying infrastructure projects under Chinese government’s BRI initiative as ‘debt trap’ and maligning Chinese manufacturing industry as ‘sweatshop’ to create a negative image

2. In West Asia, North-East Africa, North Africa zone, the key strategic control revolves around objectives like ‘Reorganize State boundaries’, ‘Turn the Region into Domain of Israel’, ‘All-round Containment of Russia and China’ through the programmes like:

  1. Destabilizing existing states through opposition political party (controlled by Deep State) who would manipulate the popular despair and anger against the autocratic rulers in North Africa, West Asia, North-East Africa;
  2. Creating multiple groups of Salafist terrorists by recruitment among the mostly unemployed and uneducated Arab youth from Sunni Islam communities living in the vast desert corridor stretching from Morocco to Afghanistan
  3. Portraying the army of Arab Salafist terrorists as army of ‘pan-Islamic Caliph’ through recruitment of non-Arab mercenary forces from Caucasus, Central Asia, South Asia to create a ‘legitimacy’ among the mostly unemployed and uneducated Asian and African Muslim population who have been brainwashed by religious preachers for generations about glorious ‘Islamic Caliphate’
  4. Mobilising multiple Salafist terrorist groups to bring down existing rulers and simultaneously creating as many fiefdoms by dividing the existing state boundary – thus existing ‘state’ would be converted into ‘statelet’ managed by the terrorist groups
  5. Positioning Israel as the de-facto politico-military leader for all governments in West Asia, North-East Africa, North Africa regions; Israel would act as coordinator entity for providing economic and military assistance to the series of satellite statelet
  6. Manipulating the Kurdish liberation forces spread over Turkey, Syria, and Iraq to break away from their parent countries and create new state of ‘Kurdistan’ that would be a NATO asset in west Asia
  7. Creating multiple power-centres within the Sunni Arab sheikhdoms which would be crucial to control the ambitious Saudi clan

Keeping Iran as a ‘pariah’ state in global affairs through sanctions and limited military strikes until the internal political situation would be ripe enough to be manipulated to overthrow the government of Shia Iranian revolutionaries

  1. Maintaining a high level of USA naval readiness in Persian Gulf through which would keep navy of Iran and Russia under check
  2. Spreading concocted stories on global media identifying Russian ruling party’s internal policies as corruption of ‘Putin faction’ to create negative image of Russian energy and defence industry

3) In Western Africa, Central Africa, Southern Africa zones, the key strategic control themes have been ‘All-round Containment of China’, ‘Military Partnership with Nigeria’ and ‘Transform Military Foothold into Large Bases’ driven through programmes like:

  1. Destabilizing existing state apparatus by arming various tribal warlords who are divided among religious lines (Christian, Sunni Islam) in central and western regions of Africa; state like Rwanda and Burundi would remain hotbeds for ever
  2. Deploying military detachments by USA, France, Israel citing old Zionist Capitalist rhetoric of ‘maintaining human rights, democracy and governance’
  3. Corrupting the political parties in Africa’s southern region (countries like South Africa, Angola, Mozambique, Namibia, Zimbabwe, Zambia, Tanzania etc.) where anti-imperialist struggle were in the global headlines for three decades (1950 to 1970) to influence them against economic association with China and Russia
  4. Building ‘client state’ in all regions of Africa where the entire spectrum of political leadership would follow the ideology and policies pushed by the deep State – countries like Malawi, Liberia, South Sudan etc.
  5. Keeping the ‘Katanga problem’ alive by manipulating the internal political parties, armed groups, neighbouring countries – either DR Congo would become satellite of the Deep State or Katanga would be curved out as ‘independent’ country
  6. Spreading concocted stories on global media identifying Chinese ruling party’s internal debates as ‘factional fight’ to create factionalism within the ruling party, and maligning Chinese manufacturing industry as ‘sweatshop’ to create a negative image

4. In West Europe, and East Europe zones, the key strategic control revolves around objectives like ‘All-round Containment of Russia’, ‘Every state under supranational EU’, ‘Create African-Germanic-Slavic Hybrid Society’, ‘Ruin the Slavic Civilization’ through the programmes like:

  1. Bringing all countries under ‘EU’ banner either as a direct member or as associate thereby diminishing the sovereignty of European states through shifting all governance and policy matters to EU – it ensures single point of contact for hegemonic empire run by Deep State
  2. Expanding NATO to the borders of current Russia through creating Deep State loyalist governments in ex-Soviet bloc countries like Poland, Romania, Bulgaria, Czechia, Slovakia, Hungary and creating USA army bases with nuclear missile installations
  3. Manipulating Turkey, Saudi, Libya political and bureaucratic leadership to mobilize millions of Arab Sunni Muslim low-skilled people into different countries of Europe
  4. Manipulating EU member states to take those ‘forced refugee’ and settle them in Europe to create a multi-ethnic multi-religion hybrid society in Europe – they will form the ‘working class’ people as well as form the backbone of a future European army
  5. Infiltrating the leadership of European political parties which profess ‘socialist’ ideologies (hence, ‘anti-imperialist’ but not Marxist) so that all these parties become ‘controlled opposition’ – in case Deep State supported elitist party loses election, the new government still maintain the capitalist and imperialist policies
  6. Staging false flag terrorist attacks in countries like France, Germany, Italy whenever the ruling leadership in those countries appear to deviate from policies of Deep State, particularly if these leaders try to develop economic relationship with China and Russia
  7. Spreading false propaganda in European media and academic institutions identifying fascist Germany’s territorial expansion and genocides as equivalent to communist Soviet Union’s defensive manoeuvres and administrative overbearingness, and vilifying present Russian government as authoritarian
  8. Provoking secessionist movements (using any fault-line – religion, language, ethnicity) in all geographical regions that come under erstwhile Yugoslavia and Soviet Union so that both these regions are destroyed beyond repair – thus, if ex-Yugoslavia now comprises of (say) 5 statelet, the Deep State would strive to make 10 splinters, similarly if ex-Soviet Union now comprises of (say) 15 statelet, the Deep State would strive to make 30 splinters
  9. Manipulating the political leadership and bureaucracy in all ex-USSR states towards taking government policy decisions/actions which will actively hurt Russian interests
  10. Creating hindrances for Russian access to deep sea ports in Baltic Sea and black Sea to not only restrict their economic activities but also to check the naval forces

5. In South America, and Central America zones, the key strategic control revolves around objectives like ‘All-round Containment of Russia and China’, ‘Creation of Latin American NATO’, ‘Keep Latin America as USA Playground’ through the programmes like:

  1. Bringing all countries under ‘OAS’ banner through which the Deep State will directly interfere in the governance and policy matters – in fact, this organisation coordinates the appointments to legislature, executive, and judiciary in all South American and Central American countries so that only Zionist Capitalist elites get into the top positions of political parties and bureaucracy
  2. Expanding NATO in South America so that the main anti-zionist anti-capitalist government of Venezuela can be directly invaded – to that effect, the Deep State has enrolled Colombia, Peru and Brazil governments to become host of the USA military bases
  3. Infiltrating the leadership of European political parties which profess ‘socialist’ ideologies (hence, ‘anti-imperialist’ but not Marxist) so that all these parties become ‘controlled opposition’ – in case Deep State supported elitist party loses election, the new government still maintain the capitalist and imperialist policies
  4. In case, political parties with Marxist ideology comes to state power through democratic elections, the Deep State will organise trouble within common people and Defence establishment and instigate them to seize power by overthrowing the elected government (Guatemala, Nicaragua, El Salvador, Chile, Brazil, Argentina, Venezuela, Ecuador, Bolivia etc.)
  5. Keeping Cuba under most severe economic sanction and blockade for over six decades – key objectives have been to wreck the Cuban economy and break the Marxist ruling party
  6. Creating a second ‘homeland’ for the Jewish elites and aristocrats, by acquiring very large tract of land and building townships in Patagonia region of Argentina – considering Israel, the first ‘homeland’ has been facing quite difficulty in accomplishing the target of direct control of the stretch of ‘Nile-to-Euphrates’ land, this move will ensure long-term control of Latin America
  7. Spreading concocted stories on global media identifying infrastructure projects under Chinese government’s BRI initiative as ‘debt trap’ and maligning Chinese manufacturing industry as ‘sweatshop’ to create a negative image

All dressed up, but nowhere to go!

As noted above, the Deep State has been making quite assiduous preparations for teaching China and Russia the final lessons on the consequences of violating the rules of “end of history” – the principles of capitalist market economy and electoral democracy. But nobody among the Zionist Capitalist oligarchy knows how such lessons will be taught – China and Russia together control the largest land area, together they house the largest population, together they store the largest reserve of natural resources, together they have most educated and most disciplined work force, together they process/ manufacture largest share of energy and manufactured goods, and together they deploy the largest and most sophisticated military forces. Considering only China, it has third largest land area, largest population, most educated and most disciplined work force, largest share of manufactured goods, and fourth largest military force.

The Deep State, within a span of 100 years forgot that, not only they became more sophisticated, but their biggest adversaries in ‘Eurasian Heartland’: Russia and China, also became more astute. This is not to conclude that Deep State would put to rest their final assault. They will, because ideology and political economy of the Zionist Capitalist oligarchy would compel them to do so. It is imperative that China (and Russia) plan and implement their strategy in the most opportune time.


Let me recall the first paragraph of the first section (INTRODUCTION) of this document. A question was put forward as “what would be the action plan of the global oligarchy who collectively own banking and industrial sectors and who maintain current unipolar world order through chosen members of the so-called Deep State”; most probable answer was “state policy and implementation of the same would be geared towards accumulation of capital in every country except the six countries”. If the global oligarchy remain busy in wealth accumulation, what would be the strategy and action plan of the local oligarchy (consists of industrialists, bankers, large landlords, leaders of main political parties, bureaucracy)? Answer to this question is complex – local oligarchy being directly integrated with the local society, they can’t act in a complete self-seeking manner like their global counterpart. Local oligarchy is bound to look after the arrangements for minimum subsistence of the citizens, and thereafter carry out wealth accumulation. Hence, there is a necessity of minimum economy and governance in every state in the world. With IMF, WBG, ADB banking institutions retreating into conservative procedures as well as USA, 5-Eyes, EU, Japan applying partial break on aids, at least 150 out of 194 UNO member countries would require loan, aid, other techno-economic help. China with largest GDP PPP, largest forex reserve, gigantic domestic market, and largest STEM pool of students would be in a position to fulfil this historic role, even if the leadership may not find it enviable.

Moreover, as noted in previous sections (CHINA IN DENG ERA, POST-DENG CHINA) China has been moving on a continuous journey initiated by Deng’s reforms and managed by successive leaders through tweaking some policy matters and effective coordination. Key statistical indicators during this entire period is given below:

[ Link: ]

Chinese government would have to reach a ‘logical destination’ in near future – CPC leaders have set their targets on what figure of common socio-economic indicators would be construed as ‘successes. Hence, China will stay on current course till 2028/ 2030 CE impacting global capitalist economy in fundamental way:

  1. Chinese companies will design and develop wide range of consumer products using Chinese patented technology and receive wide acceptance across the world;
  2. China will cease from being ‘factory of the world’ and develop relationship with Asian/African/ South American countries to spread the manufacturing activities there. A mix economy driven by domestic consumption plus exports in China will be healthy for the entire world
  3. Chinese government (along with Russian government) will develop an ecosystem across Europe and Asia in which Banking-Finance and Industry-Economy are intertwined
  4. The system of ‘capitalist market economy through state-owned and private-owned enterprises’ developed in China will evolve as a ‘model’ for many African and Asian countries
  5. Chinese government will continue with the BRI programme as a framework for investments in railways, roads, ports, electricity generation, communication network, mining, manufacturing factory projects in Asia, Europe, Africa, and South America
  6. While making investments in China or in any other country Chinese government will give due importance to environment and take necessary actions so that ecosystem is well-preserved
  7. Chinese government (along with Russian government) will establish an international monetary system to ensure that interests of the non-European and non-5 Eyes countries are maintained This should also include replacement of US Dollar as world’s reserve currency by a basket of currencies of world’s top ten economies (GDP in PPP terms) backed by gold/valuables

The quest for world-wide Zionist capitalist democratic empire (as noted in section GEOPOLITICS 1930 ONWARDS) will never end unless the oligarchy and aristocracy take such decision against their five century old collective psyche. So, it can be safely presumed that the Deep State will continue to look for destroying all sorts of resistance to their hegemony – it is simply immaterial whether the antagonist country profess liberal capitalist (Russia) or socialist (Cuba, China) or Shia Islamic (Iran) or nationalist (Venezuela) philosophy. For the Deep State, complete subjugation is the only way forward. Let’s go back to the first section (INTRODUCTION) again where I mentioned that, China (because of its large landmass and huge population) would be in ideal position to resist the unipolar world order and roll back the onward march of global capitalism in order to build a more equitable society (with crucial support from Russia). Current world order (even when Russia-China-Iran are putting up a brave resistance to the hegemonic Deep State) is anything but equitable. It is one thing to struggle against Zionist Capitalist world order to establish an order with cosmetic change, and it is entirely different thing to struggle to establish an ideal order that brings fundamental transformation. Whichever path Chinese leadership follow, there has to be a detail planning for the same. Let me play the role of a candid analyst.

Looking forward – Option 1:

Option 1 of simulation considers that CPC wishes to struggle against existing Zionist Capitalist world order to establish a parallel world order with cosmetic changes around 2030 CE, and there won’t be any change in ruling party in China during this journey when CPC top leadership maintains their current road – this road would lead the world into the following state of affairs:

  1. China will continue to grow in the path of ‘capitalist market economy’ which will result in further evolution of the private capitalist businessmen class – share of capital asset owned by private enterprises will crawl upwards and share of output by private enterprises will rise faster in GDP. Government will control corruption-inflation-unemployment strictly, will implement new policies to control the capitalist class, and will provide welfare schemes to commoners in order to maintain legitimacy of CPC within the society.
  2. Confrontation in South China Sea, Taiwan and North Korean border will continue to increase to such a level that the Deep State will find it completely embroiled without an easy exit – a ‘hot’ limited war will be fought between two sides: USA-Japan-South Korea and China-North Korea, which will end with effective departure of USA military from Asia region, and Chinese unification with Taiwan.
  3. Zionist Capitalist Deep State cabal would redefine their ‘territory’ by identifying core zone as Europe continent, North America continent, Australia-New Zealand-Japan (islands), and India-Israel (countries living with island mentality) – within these regions, the governance, the economy, the military, and socio-cultural affairs would be under sway of MNCs owned by the oligarchy clique.
  4. In Asia, Africa, South America continents, China will get accepted as the leader in economic and socio-cultural sphere, while Russia will evolve as the leader in military and energy sphere – within these regions, the governance, the economy, the military, and socio-cultural affairs would be more or less driven by the local political parties and local oligarchy who will have majority part of their business relationship with China and Russia; however the local oligarchy will also maintain minor trade and finance relationship with Deep State dominated regions.
  5. Fundamentals of capitalistic economy will remain intact in the China-Russia dominated regions with both state-owned and private-owned enterprises ruling the roost – the cycle of profit and endless accumulation of capital will continue, but under supervision of the state; also, general welfare and social security for all classes of citizens will be ensured by the state.
  6. 2050 CE onwards, the tussle between two ‘worlds’ will be reflected very badly in the realm of space and planetary exploration as well as environment of our planet – the Deep State-controlled ‘world’ will seek domination of space through advanced technology in the field of aerospace and defence, which may not become a priority for Chin-Russ civilizational combination.
  7. the Deep State-controlled ‘world’ will seek final revenge on the other ‘world’ by climate engineering during which weather manipulation in the form of substantial temperature rise, extreme cyclonic storm, long duration of drought, out of season rainfall etc. will be effected to destroy agriculture and urban society within a decade or so. Though the Deep State will attempt to become the uncontested hegemon the other world will continue to struggle independently as a block.

Looking forward – Option 2:

Option 2 of simulation considers that CPC wishes to struggle against existing Zionist Capitalist world order to establish a parallel world order with cosmetic changes around 2030 CE, and there will be unpredicted change in ruling party in China during which CPC will be replaced by a liberal capitalist political party supported by Deep State-led ‘democracy movement’ – this road would lead the world into the following state of affairs:

  1. China will continue to grow in the path of ‘capitalist market economy’ which will result in further evolution of the private capitalist businessmen class – share of capital asset owned by private enterprises will increase substantially and share of output by private enterprises will rise exponentially in GDP. Government will not be effective to control corruption-inflation-unemployment. The capitalist class will create political party with so-called nationalist ideology supported by local academia and media. CPC will move in the direction of legitimising such political party, which will seize power after election (it will be immaterial whether CPC really win or lose election – either way, the opposition will seize power).
  2. Confrontation in South China Sea, Taiwan and North Korean border will diminish after new political party form the government which will be completely under control of the Deep State. Without any ‘hot’ war mainland China and Taiwan will be unified – for USA Deep State this will be a revenge after a century. After all, Kuo Mintang was the favourite of Zionist Capitalist oligarchy from 1927 onwards when Chiang Kai-shek proved that he can fight against CPC ruthlessly. It has been USA’s economic and military support that kept Taiwan as viable ‘entity’ till now.
  3. Zionist Capitalist Deep State cabal will find the entire world (except Russia) as their ‘territory’– the governance, the economy, the military, and socio-cultural affairs, essentially everything under the Sun would be under sway of MNCs owned by the Zionist Capitalist oligarchy clique.
  4. Entire world (except Russia) will accept USA (along with Israel and 5-Eyes) as the leader in military, economic and socio-cultural spheres – everywhere, the governance, the economy, the military, and socio-cultural affairs would be more or less driven by the local political parties and local oligarchy who will be directly appointed by the Deep State; however the local oligarchy will also maintain minor trade relationship with Russia for energy import.
  5. Across the world capitalistic economy will remain intact through the cycle of profit and endless accumulation of capital – however, due to mismanagement of resources and brutal exploitation of common people, there will be wide-spread hunger. Population in Africa and Asia will decline. This will conform to the Zionist ideology which portrays earth as a settlement for the ‘golden billion’ – one billion of Jewish and Anglo population and their flunkies. Automated robots will be utilised for industrial and agricultural production – they neither require food, shelter and healthcare nor do they demand justice and equality!
  6. 2050 CE onwards, the tussle between the ‘one world’ owned by the Deep State and Russia will turn into a serious ‘hot’ war. The Deep State will seek final revenge on Russia by complete obliteration using military technology that apparently will confine the radioactive ashes and dust within the destroyed land itself instead of moving upwards to cover the entire atmosphere of earth – thus the Deep State will attempt to become the uncontested hegemon and will succeed, albeit with major losses.

Looking forward – Option 3:

Option 3 of simulation considers that CPC wishes to struggle against existing Zionist Capitalist world order to establish a parallel but new world order based on basic Marxist philosophy around 2035 CE, and there won’t be any change in ruling party in China during this journey when CPC top leadership changes their current track – this road would lead the world into the following state of affairs:

  1. China will continue to grow in the path of ‘capitalist market economy’ with restrictions on further evolution of the private capitalist class – share of capital asset owned by state enterprises will increase substantially and share of GDP output by state enterprises will surpass the private enterprises by a multiplier of two. Government will control corruption-inflation-unemployment strictly, will chalk out policies on transformation of economy into a Marxist economy in which private-owned and state-owned enterprises will be transferred to community ownership by 2035. However, both private capitalists (local, foreigner) and state capitalists (central, provincial, local) will have marginal share in the enterprises earlier owned by them – such benefits will construe as long-term compensation against the asset transfer, apart from an immediate compensation paid to the erstwhile owners.
    1. By 2030, the technology-based modernisation of the forces of production in China will be complete which can be interpreted as ‘creation of material basis is done’. CPC can plan with earnestness for achieving their original objective of achieving a Marxism-based society through a SINGLE-STAGE TRANSFORMATION. As Stalin and Mao faced socio-economic reality, two stage transformation has immanent difficulties – with completion of stage 1 (during which Capitalist society with bourgeoisie democracy transforms into Socialist society with dictatorship of proletariat), increasingly detrimental geopolitical and economic factors imposed by the opposing forces of monopoly capitalism will not provide opportunity or time for further progress into stage 2 (Socialist society with dictatorship of proletariat transforms into classless Communist society). CPC may make a thorough plan of action for a single-stage transformation with as minimum shock as possible – a point to remember: people never plan to fail, they fail to plan.
    2. While the planning for a single-stage transformation is undertaken by CPC, they need to make the fundamental action – replacement of ‘private ownership’ by COMMUNITY OWNERSHIP. Neither any citizen nor State will own any means of production (land, natural resources, machinery, real estate and other infrastructure, financial capital etc.) apart from their living houses/flats/bungalows/vehicles. Military Industry will be required for production of military machinery which should be owned and managed by the state. Rest everything will be owned by community. Only when the entire world has decisively transformed into an ocean of humanity without any presence of ‘private ownership’ anywhere, the ‘State’ will relinquish its ownership of MIC, and ideally, there should not be any necessity of the same. The cycle of profit and endless accumulation of capital need to stop for the sake of humanity.
  2. Confrontation in South China Sea, Taiwan and North Korean border will continue to increase to such a level that the Deep State will find it completely embroiled without an easy escape – a ‘hot’ limited war will be fought between two sides: USA-Japan-South Korea and China-North Korea. With major losses on both sides, China will reap the benefit of being ‘son of the soil’ while USA will bite the dust by acting as an invader to east and south-east Asia. At the end of such conflict, two of the WW II ‘problems’ will get resolved in favour of socialist and workers parties of China and Korea. This will also initiate the complete retreat of the USA military from Asia continent, North Pacific Ocean, Indian Ocean regions leaving Japan and India to reconcile itself with a new China.
  3. Zionist Capitalist Deep State cabal would redefine their ‘territory’ by identifying core zone as North America continent, west European region, Australia-New Zealand-Greenland (islands), and Brazil-Argentina-Chile-Paraguay. By then, Patagonia in Argentina would have become the second homeland of Jewish oligarchy and aristocracy – it will secede from Argentina to become an independent corporation (i.e. democratic capitalist country). Most interesting change will be in Europe – Germany, Austria, Italy, Hungary, Czechia, Slovakia, Poland, Bulgaria, Romania, and Serbia et. al will be left in the lurch by the Deep State. That action of the Deep State will be intelligent indeed – such ethnic groups who could be easily lured into any geopolitical activities that will finally result in their downfall, can’t be true ally! Since past three centuries the leaders of these countries proved time and again that, they will wreck their own economy and society (by unnecessarily fighting with Russian Slavic land) in lieu of hundreds of millions of Dollars credited into their offshore bank accounts. Within the ‘Anglo and Jewish enlightened world’ the governance, the economy, the military, and socio-cultural affairs would be under sway of MNCs owned by the oligarchy clique. A significant number of south Asians, Koreans, east Europeans will be given permanent citizenship because of their extraordinary greed, and socio-cultural servitude to the Zionist Capitalist ideology and Anglo/Jewish ethnicity.
  4. Across the world (excluding the zones of ‘Anglo and Jewish elite world’) China will get accepted as the leader in economic and socio-cultural sphere, while Russia will evolve as the leader in military and energy sphere – in these regions, the governance, the economy, the military, and socio-cultural affairs would be more or less driven by the local political parties and local oligarchy who will have majority of their business relationship with China and Russia; however the local oligarchy will also maintain minor trade and finance relationship with Deep State dominated regions. In the long run, most of the countries will follow the Chinese system of community-ownership of means of production within their country.
  5. 2040 CE onwards, the world will be the most safe and peaceful compared to the past five millenniums (during which conflicts used to be the rule rather exception). China and Russia will lead the way for research and development related to sustainable economy and environment. There will be significant use of technology in making the individual life and social life better and comfortable than before. New frontiers of space research and planetary exploration will open up. Human civilisation would proceed further in understanding the ‘reality’ of ‘universe’ – we will know how ‘life’ got created and what the ‘mystery’ of creation is!
  6. the Deep State-controlled ‘Anglo and Jewish elite world’ will seek final revenge on the ‘other world’ by complete destruction using military technology that apparently will confine the radioactive ashes and dust within the destroyed land itself instead of moving upwards to cover the entire atmosphere of earth. However, as history repeats itself, such research and development by the Deep State would be known to the leaders of ‘other world’ much before fruition – left with a choice between complete surrender and complete destruction, the Deep State will chose the former ‘to live and let others live’.


China and CPC are fortunate to get Xi Jinping as the paramount leader. I’m not saying this because of his achievements and successes in governance or economy or defence or any other sphere. My point is – a top leader who remembers the origin and mission of his party and his ideology, can do wonders. In 2017, while visiting Shanghai and Jiaxing building/site where 1st National Congress of CPC was held in 1921, Xi stated “only by remaining true to our original aspiration, keeping our mission firmly in mind, and keeping on striving, could the Party stay young and live”. Such ideological plain-speaking is a sign of very rare honesty and sincerity. Hope, CPC leaders and core group of members will provide required strength and support to Xi.

I wonder, if top CPSU leaders in post-Stalin era ever remembered original aspiration and goal of CPSU. The ideological decomposition initiated by Khrushchev was so effective, that it wiped out all lofty ideals steered by none other than Lenin. Shouldn’t the true patriots in the land of Lenin start their journey once again and join forces with their Chinese comrades in the final stage of the long march?

China Communist Party tells members to celebrate 'political ...

Short profile:

By profession I’m an Engineer and Consultant, but my first love was and is History and Political Science. In retired life, I’m pursuing higher study in Economics.

I’m one of the few decade-old members of The Saker blog-site. Hope that this website will continue to focus on truth and justice in public life and will support the struggle of common people across the world.

An Indian by nationality, I believe in humanity.

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