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Michael Hudson’s “TED TALK” on Economics

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This is the Michael Hudson “TED TALK” on economics. It covers everything you need to know about our failed global economic system and what to do about it, as featured in his book, J IS FOR JUNK ECONOMICS – A GUIDE TO REALITY IN AN AGE OF DECEPTION.

Transcript (edited)

Ross: The common refrain that you hear is that economics has failed. Blame that on the current economic paradigm: neoliberalism. In its own terms, it hasn’t failed. It’s worked perfectly according to the trajectory on which it aims: to steer society on behalf of the One Percent.

Michael: Academic economics has been turned into a cover story to defend a status quo steered by the wealthiest One Percent, mainly by the banking and financial sector instead of by governments and their regulatory or fiscal agencies. The essence of neoliberal economics is to depict a parallel universe that seems plausible, and seems that it would work very nicely if the world were really that way. But it doesn’t describe the real world. In practice, the function of neoliberal economics is to distract attention away from how the economy really works – why it’s polarizing, and why people are having to work harder and harder despite the fact that productivity is going up.

Yet explaining why the economy is polarizing between the One Percent and the rest of the economy should be at the very core of economics, because it is the leading characteristic of the world economy since about 1980. But today’s theorizing is silent about it – and says that in principle, it can’t (or “shouldn’t”) be happening.

So who are you going to believe? Your eyes and your experience, or what textbooks try to teach you?

Ross: That’s what’s called cognitive dissonance. It’s difficult for the 99 Percent to pierce through the charade, isn’t it?

Michael: That wasn’t the case a century ago, or even two centuries ago. There have been many economists who have explained the world. The classical economists, from Adam Smith through Malthus and Ricardo refined the basic concepts of value and price theory. John Stuart Mill got even more to the political point, by describing landlords and rentiers as receiving income “in their sleep,” not by working productively. He was optimistic about where capitalism was going, assuming that society’s major overhead – the landed aristocracy surviving from feudalism – would be taxed away.

Thorstein Veblen helped explain how the vested interests were financializing the economy to become the most important rentier class. Other leading economists are people that Americans haven’t heard very much about, like Simon Patton, the first professor of economics at America’s first business school – the Wharton School at the University of Pennsylvania. Patten became an intellectual mentor turning economics into sociology early in the 20th century.

There used to be an enormous amount of analysis based on history, on empirical and statistical analysis. But that is excluded from today’s post-modern curriculum, leaving no way to fit reality into the academic patter talk of neoclassical economics.

Ross: Without becoming conspiratorial about this, because that’s the charge often leveled at people, you’re talking about the amnesia, the selective amnesia that neoliberals have peddled, blocking out great swathes of economic history. Are you talking about a deliberate cover story?

Michael: It’s a result of lobbying by the vested interests that fund universities and their economics departments. As Veblen pointed out in The Higher Education in America, business interests want to promote an economic doctrine that celebrates them and rationalizes their behavior as being good for the economy (hence, “trickle-down theories”), not criticizes them. Certainly in the case of the University of Chicago’s “free market” monetarism and high finance, we have a case of special-interest pleading. Economic theory today has been turned into a public relations lobbying effort to depict the polarization of wealth and income as being perfectly natural, as if it is a survival of the fittest over mixed economies with progressive government regulation and income taxation. That’s why neoliberalism is post-progressive and post-modern.

Centralizing planning in the hands of financial interests – Wall Street or the City of London – instead of the government is held to be the most “natural” and efficient way to organize an economy. Hayek set the stage by claiming that any single step toward regulation or public infrastructure investment, is a start on the slippery slope to totalitarianism. This denies the fact that every successful economy in history, from Sumer and Babylonia onward, has been a mixed economy. Neoliberalism wants to “unmix” it, by gutting government. All infrastructure, land, bank regulation and property is to become “financialized” and managed by banks and bondholders. So in the name of preventing a government economy with “totalitarian” checks and balances, today’s free-marketers create a totalitarian rentier economy reducing the population to debt peonage.

Economists who criticize financialization – for instance, Modern Monetary Theorists (MMTrs) – find that they can’t get published in the major refereed journals. University of Chicago theorists have an editorial stranglehold to prevent any critique of their deregulatory equilibrium theories. It’s as if Ayn Rand were appointed Chief Inquisitor of this new Inquisition, with Ludwig von Mises or Frederick Hayek playing the role of Saint Dominic.

Without being published in these “respectable” tunnel-visioned journals, critics can’t get promoted within academia. This systematically detouring students away from economic reality. When I was teaching at the New School already 50 years ago, graduate students were dropping out of the field because they couldn’t fit reality into the curriculum.

Ross: But that’s the point, isn’t it? With their liberalism, you can’t shoehorn reality into these models. It’s impossible, however much they try. Take people like Alan Greenspan. Was there some point in your career when you sat there and said you were shocked?

Filmed insert:
Alan Greenspan: Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity, myself especially, are in a state of shocked disbelief.

Ross: He shouldn’t have been shocked should he? He shouldn’t have been shocked that his derailed the financial system so badly. Obviously he wasn’t actually “the man that knew.”

Michael: He had to say he was shocked. He couldn’t say, “I knew what was happening, but what the hell, they paid me to let it happen.” He plead incompetence, not admitting to being an opportunist up for sale. He thought history would judge him better if he just acknowledged being a useful idiot. But of course, we know that he killed Federal Reserve Board member Ed Gramlich’s attempt to regulate the junk mortgage fraud. Greenspan followed Hayek and von Mises in decriminalizing economic fraud, saying that in the end it was more efficient than having regulators. That’s still the Trump administration’s guiding principle, as it was for Obama and the New Democrats.

Ross: That is the point. He alluded to the fact that housing bubbles create this kind of social damage, but all that’s been hushed up.

Michael: Greenspan knew who paid him. When I worked on Wall Street in the 1960s, banks were afraid to hire him because he was known for saying whatever the client wanted to be said. So he’s a public relations person. And the fact is that’s what passes for the economics taught in the universities these days. It’s public relations for the financial interests and the corporate sector. Underlying this rhetoric is a happy-face view of how an economy would work without government playing any role. It’s as if society didn’t have a police force and the mafia were running things. In this case the gang is financial. Any governmental regulation or taxation is looked at as a burden.

The key is that there is no idea of how a mixed economy should best work. That idea was traumatized by Marxism pushing classical political economy to its logical conclusion – to free capitalism from the carry-overs of the feudal epoch of landlordism, predatory finance and the monopolies that money-lenders obtained from governments. Neoliberal evangelists of this revival of feudal privilege argued that economies don’t need a government – unless, of course, the financial sector controls it, as landlords did in feudal Europe.

In this view, if corporations run the economy, and banks run the corporations, everything will all turn out optimum. The “optimum” means no regulation at all. The idea is that any economy automatically will reach an optimum equilibrium, without any government regulation or investment in infrastructure.
The economy is to be financialized, not subsidized. The result, of course, is to build heavy interest charges, dividends, management charges and capital gains into the economy’s cost structure. This leaves financialized economies less and less competitive globally. They can survive only by passing their financial disease onto all other countries.

Ross: They’ve done a brilliant job at intellectual capture.

Michael: It’s intellectual capture, but it’s self-destructive in the end. It excludes any intellectuals who won’t follow the party line, so it’s a self-imposed tunnel vision.

Ross: Where does all this end?

Michael: In a crisis.

Ross: Oh sure. But we haven’t got out of the great crisis.

Michael: Right. We’re in a slow crash. For most people the economy is going down and down as their budgets are squeezed. Wages are not rising, but costs are – not for the products of labor, but for monopoly goods, from health care to rents, cable TV and the Internet. What is remarkable is that this is being accepted without a political backlash, because many people have come to believe that there is no alternative.

As long as people believe that the status quo is the product of natural law, they’ll blame themselves for the squeeze they’re in. They’ll think that it’s their own fault if they can’t afford to pay their rent, if they have to go deeper into credit-card debt and other debt, if they fail to save anything for their retirement or even for an emergency. It’s as if they haven’t evolved, or are not smart enough to have taken out a big enough student loan to be properly educated.

Ross: They personalize that failure.

Michael: Yes. They think that if the economy is really growing as the mainstream press tells them, why aren’t they doing better? More and more people are being left out, and think that they must be failures. So you have a psychological depression and low self-esteem along with the economic depression.

You see this especially in white working class people. Their death rates are going up, drug abuse and suicide rates are rising – just as occurred when austerity was imposed on Greece, or in Russia after the neoliberal 1991 reforms. Their fate seems to be the future of the U.S. and European economies.

Ross: The socio-economic indicators are all going in the wrong direction. But all profits and revenues for the One Percent are going up, as are stock markets.

Michael: Remember, rich people don’t actually like to make profits – or at least, to report them to the tax collector. If you make a profit, you have to pay a tax on it. The One Percent make capital gains, or they pretend that their profits are made by trading affiliates in offshore banking centers with zero or low taxes, from the Cayman Islands and Panama to Ireland. So ostensibly, the richest companies don’t have any profits to report to the tax collector. That distorts national and international statistics.

This is especially the case in the real estate and financial sector. I think that’s why Donald Trump refused to release his tax returns. It’s also why he is trying to give a tax holiday to Amazon, Alphabet and other firms that are holding over a trillion dollars in accounts of their foreign offices outside of the United States to avoid taxes. The money is all here in the U.S. under their names, but Trump is pretending that his ploy will bring the money “back” to the U.S. This is just a euphemism for a retroactive tax giveaway, as it was back in 2004, the last time this trick was played.

Ross: The problem you’re discussing comes from a seemingly innocuous act by a man called John Bates Clark over a century ago. He said that there’s no difference between earned and unearned income. When we’re talking about the One Percent of the elites, I’m talking about capital gains versus profits. That seemingly innocuous act – saying there’s no difference between earned and unearned income – has had catastrophic effects hasn’t it?

Michael: It wasn’t so innocuous. The focal point of classical value and price theory was to distinguish between the sales price of goods and the actual cost of producing them – their cost value. The difference was economic rent. Value + Rent = Price. This concept is the key to explaining that the landlord class, monopolists and bankers don’t really earn their income. As John Stuart Mill said, they just make money in their sleep. If they are in banking or finance, or have inherited wealth, they are coupon clippers. Their takings are charge on society. The production of goods and basic services does not need a hereditary landlord and financial class. It does not need to give away monopolies. It needs to regulate them to keep their prices in line with the cost of production.

This perception was the driving force behind democratic political reform throughout the 19th century, from Europe to America. But J. B. Clark broke away from this classical economic doctrine. He said that everybody earns whatever income or wealth they get, because whatever they do is defined as necessary and productive, ipso facto. It follows that whatever landlords and banks get should be added to the gross domestic product – because by definition, whatever they make is their contribution to some product.

This is egregious circular reasoning – what philosophers call a Successful Error. It implies that there’s no such thing as economic parasitism, no such thing as a rentier, because there’s no such thing as unearned income. It’s “assumed away.”

That was radical. But today’s national income and product accounts accepts this idea as if it is natural, and even in line with what Adam Smith, Mill and their fellow classical economists were saying. It’s actually the opposite. They were talking about rent theory. Today rents are reported as “profits” in the national accounts. So are financial “capital” gains, which are treated as “earned interest,” a fictitious accounting category to provide special tax breaks for Wall Street speculators and raiders.

Ross: One of the amazing things about being back in New York since I was here a year ago is the exponential rise in homelessness. And from what I can see, real estate has been absolutely battered, especially retail stores. There are vacancies all over. Even though this is anecdotal and only a feeling I have, inequality seems to be rising quickly. When you look around, what’s happening in the real estate market in New York is the division between the 99 and the One Percent.

Michael: The average rent in New York is forty-five hundred dollars a month. That’s the average. In order to pay that $4,500 a month, you have to be in the 1 percent. Not many people are. Or, you have to be a foreigner who’s come and just bought a house in New York to protect against when the revolution comes in your country, or when the law enforcers catch up with your family. There’s a lot of absentee ownership in New York – properties owned by people who don’t live here. So there’s really nowhere for industry, or for people who actually work in a field where they make products or exports that compete with those made in other countries. There’s no way a New Yorker can compete with people in other cities or elsewhere in the world when they have to cover rent of forty-five hundred dollars a month. Gentrifying the city has de-industrialized it.

Ross: That is what has driven the real wealth-creating industries out of town.

Michael: Yes, there used to be a manufacturing center in New York. There used to be an electronics center. New York was producing things. But for the last hundred years, real estate interests have deliberately deindustrialized the city in order to gentrify it to increase its real estate prices – and hence, the city as a mortgage market, a bonanza for bankers as well as real estate developers and landlords. Bob Fitch discussed this in his book The Assassination of New York. But this gentrification is euphemized as economic growth, as if it’s growth that has pushed up rents to $4,500 a month.

What it really means is that the city unable to be part of the production economy. It can only be an extension of the financial sector siphoning off the economy’s surplus.

Ross: Is it any surprise that your current president is a real estate magnate?

Michael: That has been the easiest way to make money. In fact, real estate has been how most of the middle class accumulated net worth after World War II. But homebuyers have ended up being impoverished by having to go into debt to buy their homes. Most housing prices are no longer rising in value to give them the free lunch of capital gains – that is, land-price gains – that occurred from 1945 to about 1995.

Housing has been fully mortgaged, that is, “loaned up.” A property is worth whatever a bank will lend against it, and as banks have lent a higher and higher mortgage loan against property, this has inflated the price – while increasing the home buyer’s mortgage payment. That in turn has created a protective umbrella enabling landlords to raise their rents. So wage-earners are faced either with borrowing or renting. This has increased the proportion of their income going to housing from about 25 percent a half-century ago to over 40 percent today.

And that rising proportion does not even include other debt service to the banks for credit cards, education loans, automobile loans, etc., or the 15 percent paid for health care, or state, local and federal taxes. No wonder the stores you noticed were empty. There’s only about a third of wages available to actually spend on what wage-earners produce. That’s why Europe and North America are suffering austerity, even while the financial sector is richer than ever before.

Ross: You talk about the role of the rentier in your new book, J is for Junk Economics. Describe the rentier for us.

Michael: A rentier is someone who lives on economic rent, either by being a landlord or a monopolist and charging a higher price than it costs to produce a good or service. Or, a rentier may be a banker or hedge fund operator or corporate raider. Bankers can simply create credit on their computers and charge interest for this monopoly privilege.

So a rentier class is not technologically necessary for society. For instance most societies have the same technology. Soviet Russia, the United States, China and Europe all have pretty much the same technology, but each nation has a different way of organizing, taxing and pricing real estate and banking. The major international differences in the cost of living – and hence, the cost of production – is rent and interest, along with anti-monopoly rules and whether basic infrastructure is public or privatized (which in practice means financialized).

As matters have turned out, the least regulated economies have become the most high-cost. They have a parasitic overclass that is basically extractive instead of really working to produce real goods and services. Most money is made by charging more for housing, for money management, for health care or privatized monopoly services. The upshot is that unregulated economies are turning into neofeudal economies run by a privileged financial class that is making itself hereditary.

Ross: What does neo-feudalism mean? I know you define it in your book.

Michael: Neofeudalism is an economy in which most families have to pay all of their disposable income to the people who possess property and credit. A feudal economy is based on rent and debt service. In medieval times it was run by the landlord class. But today, bankers and bondholders have gained ascendency. Even landlords and monopolists are indebted to the economy’s financial managers. For wage earners, the result is debt peonage: Whatever they earn, they owe to “the company store.”

Wall Street consolidated its rule under President Obama after the 2008 bank-fraud crisis. At issue was who was going to be saved: the banks, or the economy? Obama’s answer was to save his constituency: the bankers and bondholders. They’re the donor class that who paid for his political campaign. So he bailed them out, not the over-indebted homeowners or the debt-strapped corporations and their pension funds that were being raided. Obama left the debts in place – even the fraudulent loans. Not a single banker went to jail for the largest wave of financial fraud in modern history.

Obama made all this clear when he invited his Wall Street donors to the White House and reassured them that he knew what his role was. As he put it, his role was to stand between the banks and the “mob with pitchforks.” That’s what he called the people voted for him. He told the bankers not to worry, because he could bamboozle voters and deliver the Democratic Party to its “Third Way” Thatcherite-Blairite pro-financial agenda. That was his job and that of the Democratic Party.

When we remember this, we see that this is why people voted against Hillary. They saw that as bad as Trump is, he was the lesser evil.

Ross: That’s an incredibly damning indictment of Obama.

Michael: Just remember that Trump was viewed as the lesser evil.

Ross: What will Obama’s legacy be when we get far enough away, when history really reflects? Will it be that this is the man that bailed out Wall Street, not Main Street?

Michael: That’s certainly his most important economic legacy. He had made a campaign promise to protect the homeowners, but 10 million American families were foreclosed on. He broke nearly every promise he made. That’s why his political legacy is Donald Trump. Voters finally wanted to tear up the political system and “drain the swamp.”

Ross: It’s no coincidence that we are sitting here in Pete’s Tavern. In the Prohibition era this was a speakeasy. The front of this bar was a flower shop. People used to be able to come through the fridge to get into here, and then drink and talk openly. What you’ve done is to create something which allows people to speak easy again about economics, because you’ve actually cut through the crap.

Michael: Thanks, that was my intention.

Ross: The language that has been used to date has been Doublethink, which you reference a lot in the book – Orwellian doublethink and doublespeak reversing reality. It mustn’t have been an easy feat. Or was it?

Michael: I originally used most of the key words to explain my overall theory of how the economy works. But many people pointed out that I was using words in a different way than the public press uses them. “Rent,” “disposable personal income” and even “income.” I had to explain the difference between how the press uses these terms and what actually is happening. My aim was to pierce the euphemisms and misrepresentations that have made the neoliberal vocabulary a web of deception, a kind of Doublethink. As I said, it’s basically a lobbying effort by the banks and the corporate sector to convince people that it’s their fault if they’re poor, not the way the economy is structured and stacked against them by forcing them to “choose” to take on more and more debt simply to survive.

Ross: Is there a Stockholm syndrome in all this? Does the man on the street – or woman on the street – honestly think that if the One Percent keeps getting richer, it will all trickle down? Are they sort of falling in love with their economic kidnappers?

Michael: Not just the One Percent. What really lost the election for Hillary was when she came before voters and said, “Look at how GDP [gross domestic product] has grown in the last eight years. Aren’t we better off now than we were eight years ago, thanks to Obama?” The reality is that all the rise in domestic income had gone to the 5 percent. So 95 percent of the population was not better off. They said, “Who is she talking to? Who does she mean by ‘We’”? Her campaign contributors were the same as Obama’s: the 5 percent, not the 95 percent. So most voters, especially in the former manufacturing states of the Midwest (the “Rust Belt”), said, “If she thinks I’m better off after eight years of Obama, I’m voting for Donald Trump.” He promised to restore a lost world. But of course, that bygone economy can’t be restored without writing down the debt legacy that Obama kept in place.

Ross: She spoke about bubbles, but she lives in one, right? Do you think she should stay in the woods?

Michael: I hope so. And be devoured by the bears. Even her supporter Bill Maher gave a big monologue on his Friday TV show saying, “Hillary, please get back in the woods.”
But you have to get rid not only of Hillary, but the banking class behind her, the Wall Street class that controls the Democratic Party. It knew that it would lose with Hillary, but feared that it would win with Bernie Sanders. That’s not what they wanted. That’s why the Democrats are fighting against their pro-labor constituency to do to that party what Tony Blair did to Britain’s Labourites.

Ross: Let’s get back to this language of junk economics. I think one of the points at the heart of it is the euphemism “free market economics.” Can you untangle this?

Michael: It’s another Orwellian doublethink term. To the classical economists, a free market is one free of landlords, free of predatory bankers, and free of monopolists. It was supposed to be a market in which people would be paid according to what they actually produced. But now, over the last hundred years, Chicago School libertarians re-defined a “free market” as one without any government “interference” – by which they mean, without any government at all. The result would be a market free for the rentiers. It’s a market free for landlords to charge whatever they want; free for banks to charge whatever they want. So not a single banker would be thrown in jail for fraud, because fraud and crime is redefined as part of a free market, Chicago-style or Ayn Rand style. Today’s “free market” is a get-out-of-jail card free. It is free for the health insurance industry to make up to 13 percent of the whole GDP, by charging whatever they want as monopolists. So the most basic meaning of words has been reversed. We’re living in Orwell’s 1984 when it comes to economic terminology.

Ross: Going through this idea of TINA, There Is No Alternative. That is Thatcherite. Actually, I think it probably goes back to Pinochet.

Michael: That’s right. The neoliberals recognized that in order to have their particular kind of free market, they had to prevent any alternative. You have to prevent it by military force if necessary. That’s what the Chicago Boys did in Chile. There was widespread assassination of labor leaders, land reformers and socialist professors. They closed every economics department in Chile, except for the Catholic University that followed doctrinaire Chicago School thought. You can’t have real intellectual freedom with a neoliberal-style free market. You have to be totalitarian in order to impose the kind of free market that the Republicans and Chicago Boys want.

Ross: Let’s get to the illusion of choice, because if neoliberalism is going to die, you’ve got a red and a blue.

Michael: Or the choice is simply between “Yes please” and “Yes thank you.”

Ross: What does that mean?

Michael: The choice is between “Yes to your Policies,” “Yes please” to the existing status quo, and “Yes thank you.”

Ross: But as William Butler Yeats said, the center can’t hold.

Michael: The center isn’t holding. You’re having a polarization between the One Percent and the 99 Percent that are reduced into a state of debt peonage, where all the income they earn has to go just to break even, by paying the banks, the landlords and the insurance companies. Centrism is a myth. You can’t be for the One Percent and also for the 99 Percent by compromising. Policy is either/or. That means that the class war is still in business – but so far, only the One Percent seems to recognize this.

Ross: Here’s the point on rent seekers, rentiers. The reason why they fight so hard for their life is because they can’t innovate, they can’t create real wealth they can’t create products that add value to the real economy. So it’s logical that the rentiers will fight the dirtiest fight to keep that monopoly position.

Michael: They actually could use their money to add value and produce, but it’s much easier and more remunerative simply to do a rip-off, to make money by lending to people and making them do the work. Make money by buying real estate and just charge more. Make money by borrowing credit to take over a company and fire a lot of workers, outsource jobs and grab their pension funds. It’s easier just to take than to produce. So that’s their policy choice. They’ve lobbied to create a tax system that favors this taking and rent-seeking instead of actually investing in means of production or the environment.

Ross: When you look at the West, America it looks almost like a Roman tragedy.

Michael: It’s like Rome in the sense that the creditors took over. In 133 they killed the pro-debtor senators, the Gracchi brothers. For the next hundred years, Rome had a civil war. Then the creditors won and Rome’s economy shrank.
The Americans have maintained their role in Latin America by backing dictators by assassination squads. The oligarchs took all the money they made financially and put it into land and into monopolies – and into military power. In the end, all they had left was military power – mainly the power to destroy other countries, like they did in Asia Minor and the other regions they looted. Likewise today, the only real power America has left is military. We can bomb anyone like we bombed Libya, Syria and Iraq. But it’s impossible to invade a foreign country, because you don’t have a land army. All you can do is threaten and destroy. That’s the oligarchy’s foreign policy: to keep a rent-seeking neoliberal, neofeudal economy in place imposing austerity that will ultimately bring it crashing down economically.
Ross: Is there a Stockholm syndrome in all this? Does the man on the street – or woman on the street – honestly think that if the One Percent keeps getting richer, it will all trickle down? Are they sort of falling in love with their economic kidnappers?

Michael: Not just the One Percent. What really lost the election for Hillary was when she came before voters and said, “Look at how GDP [gross domestic product] has grown in the last eight years. Aren’t we better off now than we were eight years ago, thanks to Obama?” The reality is that all the rise in domestic income had gone to the 5 percent. So 95 percent of the population was not better off. They said, “Who is she talking to? Who does she mean by ‘We’”? Her campaign contributors were the same as Obama’s: the 5 percent, not the 95 percent. So most voters, especially in the former manufacturing states of the Midwest (the “Rust Belt”), said, “If she thinks I’m better off after eight years of Obama, I’m voting for Donald Trump.” He promised to restore a lost world. But of course, that bygone economy can’t be restored without writing down the debt legacy that Obama kept in place.

Ross: She spoke about bubbles, but she lives in one, right? Do you think she should stay in the woods?

Michael: I hope so. And be devoured by the bears. Even her supporter Bill Maher gave a big monologue on his Friday TV show saying, “Hillary, please get back in the woods.”
But you have to get rid not only of Hillary, but the banking class behind her, the Wall Street class that controls the Democratic Party. It knew that it would lose with Hillary, but feared that it would win with Bernie Sanders. That’s not what they wanted. That’s why the Democrats are fighting against their pro-labor constituency to do to that party what Tony Blair did to Britain’s Labourites.

Ross: Let’s get back to this language of junk economics. I think one of the points at the heart of it is the euphemism “free market economics.” Can you untangle this?

Michael: It’s another Orwellian doublethink term. To the classical economists, a free market is one free of landlords, free of predatory bankers, and free of monopolists. It was supposed to be a market in which people would be paid according to what they actually produced. But now, over the last hundred years, Chicago School libertarians re-defined a “free market” as one without any government “interference” – by which they mean, without any government at all. The result would be a market free for the rentiers. It’s a market free for landlords to charge whatever they want; free for banks to charge whatever they want. So not a single banker would be thrown in jail for fraud, because fraud and crime is redefined as part of a free market, Chicago-style or Ayn Rand style. Today’s “free market” is a get-out-of-jail card free. It is free for the health insurance industry to make up to 13 percent of the whole GDP, by charging whatever they want as monopolists. So the most basic meaning of words has been reversed. We’re living in Orwell’s 1984 when it comes to economic terminology.

Ross: Going through this idea of TINA, There Is No Alternative. That is Thatcherite. Actually, I think it probably goes back to Pinochet.

Michael: That’s right. The neoliberals recognized that in order to have their particular kind of free market, they had to prevent any alternative. You have to prevent it by military force if necessary. That’s what the Chicago Boys did in Chile. There was widespread assassination of labor leaders, land reformers and socialist professors. They closed every economics department in Chile, except for the Catholic University that followed doctrinaire Chicago School thought. You can’t have real intellectual freedom with a neoliberal-style free market. You have to be totalitarian in order to impose the kind of free market that the Republicans and Chicago Boys want.

Ross: Let’s get to the illusion of choice, because if neoliberalism is going to die, you’ve got a red and a blue.

Michael: Or the choice is simply between “Yes please” and “Yes thank you.”

Ross: What does that mean?

Michael: The choice is between “Yes to your Policies,” “Yes please” to the existing status quo, and “Yes thank you.”

Ross: But as William Butler Yeats said, the center can’t hold.

Michael: The center isn’t holding. You’re having a polarization between the One Percent and the 99 Percent that are reduced into a state of debt peonage, where all the income they earn has to go just to break even, by paying the banks, the landlords and the insurance companies. Centrism is a myth. You can’t be for the One Percent and also for the 99 Percent by compromising. Policy is either/or. That means that the class war is still in business – but so far, only the One Percent seems to recognize this.

Ross: Here’s the point on rent seekers, rentiers. The reason why they fight so hard for their life is because they can’t innovate, they can’t create real wealth they can’t create products that add value to the real economy. So it’s logical that the rentiers will fight the dirtiest fight to keep that monopoly position.

Michael: They actually could use their money to add value and produce, but it’s much easier and more remunerative simply to do a rip-off, to make money by lending to people and making them do the work. Make money by buying real estate and just charge more. Make money by borrowing credit to take over a company and fire a lot of workers, outsource jobs and grab their pension funds. It’s easier just to take than to produce. So that’s their policy choice. They’ve lobbied to create a tax system that favors this taking and rent-seeking instead of actually investing in means of production or the environment.

Ross: When you look at the West, America it looks almost like a Roman tragedy.

Michael: It’s like Rome in the sense that the creditors took over. In 133 they killed the pro-debtor senators, the Gracchi brothers. For the next hundred years, Rome had a civil war. Then the creditors won and Rome’s economy shrank.

The Americans have maintained their role in Latin America by backing dictators by assassination squads. The oligarchs took all the money they made financially and put it into land and into monopolies – and into military power. In the end, all they had left was military power – mainly the power to destroy other countries, like they did in Asia Minor and the other regions they looted. Likewise today, the only real power America has left is military. We can bomb anyone like we bombed Libya, Syria and Iraq. But it’s impossible to invade a foreign country, because you don’t have a land army. All you can do is threaten and destroy. That’s the oligarchy’s foreign policy: to keep a rent-seeking neoliberal, neofeudal economy in place imposing austerity that will ultimately bring it crashing down economically.

point on rent seekers, rentiers. The reason why they fight so hard for their life is because they can’t innovate, they can’t create real wealth, they can’t create products that add value to the real economy. So it’s logical that the rentiers will fight the dirtiest fight to keep that monopoly position.

Michael: They actually could use their money to add value and produce, but it’s much easier and more remunerative simply to do a rip-off, to make money by lending to people and making them do the work. Make money by buying real estate and just charging more. Make money by borrowing credit to take over a company and fire a lot of workers, outsourcing jobs and grabbing, taking their pension funds. It’s easier just to take than to produce. So that’s their policy choice. And they’ve lobbied to create a tax system that favors this taking and rent-seeking instead of actually investing in means of production or the environment.

Ross: When you look at the West, America it looks almost like a Roman tragedy.

Michael: It’s exactly like Rome in the sense that the creditors took over. When they took over, one of the things they did in 133 B.C. was to kill the pro-debtor senators. They killed the democrats – killed the Gracchi brothers, and for the next hundred years Rome had a civil war.

The Americans have maintained their role in Latin America by backing dictators via assassination squads by the special team. It’s polarizing because the oligarchs took the money they made financially and put it into land and into monopolies – and into military power. In the end, all they had left was military power – mainly the power to destroy other countries, like they did in Asia Minor and the other regions they looted. Likewise today, the only real power America has left is military. We can bomb anyone like we bombed Libya, Syria and Iraq. But it’s impossible to invade a foreign country, because you don’t have a land army. All you can do is threaten and destroy. That’s the oligarchy’s foreign policy to keep a rent-seeking neoliberal, neofeudal economy in place imposing austerity that will ultimately bring it crashing down economically.