An interview on Renegade Inc with Ross Ashcroft.
Ross: Michael, really good to have you back on Renegade Inc.
Michael Hudson: It’s good to be here.
Ross: Can you just give us a snapshot into what you’re seeing in New York? I know that you’re in quarantine at the moment. You’re holed up in your bunker. Just give us an idea of what it’s like over there.
Michael Hudson: Well, I’m in the epicentre of the epicentre, according to the governor of New York, I’m in Queens, in Forest Hills, right next to Elmhurst, where on television they’re showing lines eight hours long in the rain of people trying to get tested for Corona virus in the Elmhurst public hospital. It’s a disaster area there. They show the refrigerator truck backed up to take out the corpses. They’re wheeling them out of the hospital because there are no ventilators here. The doctors don’t have masks and they’re making them out of their own clothes. The stores are pretty much closed down. Most restaurants are closed. And on the street, people pretty much make a wide circle around each other to make sure they stay five or six feet away. But few have masks available.
Ross: Isn’t that incredible? I think he is sometimes referred to as the sage of Omaha, Warren Buffett said you know, ‘you only see who is swimming naked when the tide goes out’. Seems to me that this crisis has meant that the whole tide has gone out on the US and it’s very clear who’s swimming naked. And I’d put on the top of that list the president and the political class.
Michael Hudson: It’s not only the U.S. It’s a philosophy of corporate management that people are taught in business school. What’s taught is the Wal-Mart theory of inventory control – just-in-time inventory. If you’re dealing with food or toilet paper, the idea is that you only need enough for about one or two days, so that you can keep every little bit of your capital free of inventory costs and operate on a minimum. That works for grocery stores and for a lot of products, but it doesn’t work for basic public infrastructure. The whole idea in health management is that instead of having a steady and foreseeable consumer sales demand, you have spikes –for instance, when there’s a pandemic like there is today. So a public health sector should have something in abeyance to hold. Right now, for instance, you see the exponential growth of coronavirus in New York. That’s led Governor Cuomo to say that we’re going to need thirty five thousand or even one hundred thousand ventilators in about three or four weeks, because there is a doubling time of the Corona virus every two and a half days in New York.
Video clip (Governor Cuomo) [00:18:49] What am I going to do with 400 ventilators when I need 300,00? You pick the 26000 people who are going to die because you only sent 400 ventilators.
Michael Hudson [00:19:00] Trump doesn’t like the governor, and they haven’t liked each other since they met in New York City three decades ago. Trump says that New York has all these unused ventilators. “Look, we found there are 10,000 in a warehouse not being used.”
Video clip (Donald Trump) [00:19:19] ‘Hospitals, frankly, individual hospitals and hospital chains, we have them hoarding equipment including ventilators. We have to release those ventilators, especially hospitals that are never going to use them. They have to release them’.
Michael Hudson [00:19:32] Well, the governor said, of course they’re not being used now. They’re going to be needed in two weeks when the exponential growth requires them. But Trump says, “No, no. You only need them a day before you order them.” So his management philosophy – and this is the philosophy taught in the business schools, just-in-time budgeting – is guaranteed to create a rolling crisis. It’s going to get worse and worse. And this philosophy is what Europeans who come to America and study in the business schools are taught. It’s not how to handle the public sector. And of course, Trump says that we don’t want a public sector at all. When this is over, there’s not going to be a public sector, because the cities are going to have such low tax revenues. They’re not getting the sales tax revenues from the stores. They’re not getting income taxes from the people. They’re having huge responsibilities to pay unemployment insurance. They’re going to have to balance their budgets by privatizing all sorts of whatever is left in the public domain, from transportation to parks.
This is going to make the American economy into a grab bag. Trump says that we’re going to come out of this wonderfully. The stock market’s going to go greatly. So the Corona virus in this country is being managed as an opportunity to increase the stock market. The governor of Texas, for instance, said that we should really just go back to work. A lot of people will get sick, especially the elderly, who are most prone to die as a result of the virus. They should take it on the chin and sacrifice it for the economy. They should die off so that the economy can get back to work and the stock market can go up. The neoliberals have applauded this and the Democrats have been absolutely silent about it. Not a word from Biden, not even a word from Bernie Sanders.
Ross: Why aren’t they coming out at this time attacking that idea because of the absurdity and inhumanity within it and saying, hang on, this is not what we want?
Michael Hudson: But what you call inhumanity is putting the stock market first. Donald Trump says that the measure of his success will be how he can recover the economy, by which he means the stock and the bond market.
Ross: But why then isn’t he talking about the real economy? Because he can sign as many S&P 500 charts as he wants. But ultimately, if he’s starving or letting the real economy wither on the vine, ultimately, what’s the point of it all?
Michael Hudson: The point of it all is not the real economy. Look at the 10 trillion dollar package that he got passed through Congress with unanimous Democratic support.
Ross: Let’s call it a bailout. It’s not a package. It’s a bailout.
Michael Hudson: Yes. They call it a corona virus law. But only $2 trillion of that $10 trillion is about what you call the real economy and the people. Two trillion indeed, is going to go for unemployment insurance, a giveaway of twelve hundred dollars to each American family.
Ross: So what happens to the other eight trillion?
Michael Hudson: That will be given to the large corporations, to the banks. Five trillion will be given to the banks to lend to the large corporations, to buy out the small companies that are going to go under as a result of the slowdown and the austerity resulting from the three months of closure caused by the Corona virus. It’s not going to the closed-down part of the economy. That part isn’t doing business while the restaurants are closed, the stores are closed and people are laid off. Their rent is due. Their credit card money is due. Their student loans are due. Their mortgages are due. All this debt is accumulating. So let’s look forward, three months hence. Let’s look at what’s going to happen in June and July. All these debt arrears are going to come due, but the Federal Reserve has reported that one half of Americans can’t raise four hundred dollars in a crisis. How will they pay their arrears falling due in three months? The governor of New York can say there’s a moratorium and you can’t evict any renters for three months. But after three months, the eviction notices are going to come. The homeless problem is going to rise and the real economy is going to be sacrificed to the financial sector.
Ross: Ultimately, where does this end? Because if in 12 weeks time, people can’t afford to enter into the social norms, enter into the economy, live, put bread on the table, where does that logically finish?
Michael Hudson: With the American economy looking pretty much like Greece. It’ll be austerity. There will be people who don’t have jobs. They are going to be evicted from their apartments. They will have run through their savings. They will not be able to pay their credit card debt and other debts so arrears are going to rise. The banks would be squeezed, but Trump says that although we can’t save the people, we can save the banks. The Federal Reserve has enough money to keep all the banks afloat, even if they’re not getting the mortgage payments, even if they’re not able to collect on their loans. The banks can now make up for the money they’re not getting by having a huge new market: lending money to private capital and to the large companies to buy out these small businesses that are going under. It’s a bonanza.
That’s what the Republicans say will make the country rich again. Meaning the One Percent. Basically, you can look at the policy as pretending to help the sick people, the Corona virus victims. But the “bailout” is really a whole wish list that corporations and neoliberals have had on the books for a year working with lawyers and law firms. They’ve pulled this off the books and all of a sudden, packed it on to the Corona virus bill. Instead of calling it the great bank giveaway and a new power grab, they’re calling it the Corona virus law.
Ross: As we wind up, Michael, I know that your writing at the moment about the fall of Rome, also of Greece and its demise. What are the lessons that you can see if you’re going to give this some historical context to what happened in Rome and Greece and what’s happening at the moment within the American empire, especially with a guy who is flying so carelessly at the top?
Michael Hudson: What happened in Rome and Greece was that Western civilization broke off from the previous three thousand years of Near Eastern civilization. In the 8th century BC, Greece and Rome were underdeveloped areas. Near Eastern traders brought the practice of charging interest bearing debt. The West didn’t have any before. So Rome and Greece were the first large areas to develop that didn’t have a palatial economy. There was no central government. There was always a narrow oligarchy. There was a few places that had kings like Rome, and the oligarchy got strong enough to overthrow the kings. It really wasn’t democracy. What Greece and Rome bequeathed to Western civilization was not democracy, but oligarchy free of government regulation, above all “free” of the Clean Slates that prevented chronic debt bondage in the Near East.
Ross: Well, let me suggest that you were living in one of the most advanced oligarchies in the world at the moment. So how does this end?
Michael Hudson: Ha! The same way that Rome ended. In Rome the oligarchy always overreached itself, impoverishing the economy. In Rome that led to a Dark Age. We’re going to be entering something like that at the end of summer in this country, because you’re going to have many homeless pouring onto the street, many families losing their homes, small businesses who’ve had to go under, medium-sized businesses that have decided to sell out to the large private capital funds. The economy is not going to look very pretty.
Ross: Michael, thank you very much for your time.
Michael Hudson: Always good to be here.
Ross: That’s it from Renegade Inc. this week. We’d love to hear from you so email@example.com or tweet us at Renegade Inc. Join us next week for more insight from those people who are thinking differently. But until then, stay curious.