Multipolarity and Financial Capitalism

By No tags Permalink

Ross Welcome to Renegade Inc. However you look at it, 2020 was a train wreck. So as we look forward to 2021, we wanted to get political and economic insight from two friends of the show. Chris Williamson and Michael Hudson share their views on what we can look out for in the new year.

Ross Michael Hudson, fantastic to have you back at Renegade Inc.

Michael Hudson Good to be back, Ross.

Ross Michael, describe 2020 in one word.

Michael Hudson In one word? The pandemic, setting the stage for homelessness.

Ross Wow! what is the one thing? Because we focused hard on the negative throughout the year. What’s the one thing you think has been positive or been something that’s transpired from this pandemic which actually we should look at and think, you know what, that’s quite a good bit of advancement?

Michael Hudson Well, the pandemic’s been a bonanza for the stock market and for the wealthiest one percent. They’ve gained a trillion dollars since the start of the pandemic. Amazon stock is going through the roof. And with 70 percent of restaurants in New York City going bankrupt, this is made Doordash and other Internet firms make a fortune by essentially wiping out the restaurants, taking 30 percent of the receipts and the charge for the restaurant menu. Essentially, this puts most restaurants in America out of business.
That means that it’s a bonanza for the really big companies to pick up all the slack now that you’re wiping out the middle class. It’s a great prospect for private capital real estate companies like Blackstone, because they can buy a huge number of foreclosed properties and empty properties that can’t be rented out and Blackstone can pick up these homes that are defaulted on, buy them out, turn them into rental property and make a fortune by raising the cost of housing in the United States, all increasing the rent by the people who have lost the jobs. And it’s great prospects for the big restaurant chains, McDonald’s and the others. The big chains can survive, whereas the small individual restaurants have basically been driven out of business. So if you’re a billionaire, it’s been just a wonderful year.

Ross So we’re talking about the One Percent here as the late, great David Graeber termed?

Michael Hudson But if you look at Donald Trump, that is the economy. When he says the economy’s getting better, he means the One Percent is getting better. Is that what you’re talking about?

Ross But isn’t it the case in the US, your president and lots of others confuse the stock market and the real economy. We’re not in an industrial capitalist society in the US and the UK anymore. It’s a rentier financial capitalist society. And that confusion between the stock market doing well and the real economy, doing well. Actually, those two things are starkly different, aren’t they?

Michael Hudson Yes, of course. So if you say what’s been good, all the good is indeed for the rentier economy. All the good is for the stock market, for the absentee property owners, for the big chains, but not good for the 99 percent. They’re pretty much left behind.

Ross Is there going to be a lot of what is called jingle mail in the US, which is basically owner occupiers sending keys back, saying it is totally economically unviable for us to even consider reopening this restaurant, small business, whatever it might be?

Michael Hudson The only people who are going to voluntarily walk away from buildings are basically absentee owners of commercial buildings. There’s going to be a great shortage, a great downsizing, of our commercial properties, especially because so many businesses have gone out of business. Jingle mail was basically on private homeowners whose mortgage was far above the actual market value. The mortgages were not written down and so these were voluntarily walking away. But housing prices have gone up in the United States. So nobody’s going to want to voluntarily walk away from their home. If you’ve been unemployed, haven’t got a pay cheque and are not able to pay your mortgage, you’re going to want to stay there and put off eviction for just as long as you can. But if you’ve invested in a small office building that had a restaurant on the ground floor and its offices have now decided that everybody can work from home, we don’t need so much office space anymore. In that case the heavily mortgaged commercial owner may walk away. That’s going to affect primarily the smaller banks, the community banks that have made most of these small loans to small business owners. The big absentee owners have gone to the big banks, Chase and Citigroup etc. So you’re going to have a weakening of the small banks and the community banks and they’ll probably be absorbed into the larger banks as a result.

Ross What do you think was revealed in 2020 that we all intuitively knew but couldn’t actually see because it hadn’t crystallized?

Michael Hudson Well, it’s obvious that the economy never recovered from the Obama depression after he bailed out the banks, not the economy. So the question is, how long can the economy limp along without recovery?
Well, it’s obvious now that the debts can’t be paid, but the coronavirus only catalyzed that. It’s made it even clearer. So in a sense, the Biden administration is going to be picking up just where the Obama administration left off, namely with huge evictions. Obama evicted about 10 million families. Most of them were black and Hispanic, lower income families who were the victims of the chump mortgages. Biden’s going to start his administration by kicking out probably another five million families. Again, black and Hispanic families are going to be the big losers because they were the people who had the highest coronavirus or were the first to be laid off. So it’s going to begin with a large eviction.
This reverses the trend in homeownership going up to 2008. It’s been going down, and this is going to continue now. People somehow imagined that there was going to be a recovery, that somehow we could recover from the post 2008 breakdown. But now it’s obvious we can’t recover. You’re going to have the polarization of the economy that has been occurring for the last 12 years. It will simply accelerate.

Ross What do you think are the megatrends that we should be looking at in 2021? What do you think is the direction of travel, if you like, for so-called developed economies?

Michael Hudson Well, the big trend in any economy is the growth of debt, because the debt grows exponentially. The economy has painted itself into a debt corner. We can see that in real estate. We can see that for small business. There’s also almost no way to recover. The Federal Reserve has been printing quantitative easing to keep stock and bonds high. But for the real economy, the trend is polarization and lower employment.
The trend also is that state and local finances are broke, especially in the biggest cities, New York City, San Francisco and Los Angeles. They’re not getting income tax revenue from the unemployed or closed businesses. They’re not getting the real estate tax with so many defaults and mortgage arrears. In New York City there’s talk of cutting back the subways by 70 percent. People will be afraid to take the subways when they’re overcrowded with people with the virus. So you’re having a breakdown not only in state and local finances, but of public services that are state run – public transportation services, health services, education is being downsized. Everything that is funded out of state and local budgets is going to suffer.
And living standards are going to be very sharply downward as people realize how many services they got are dependent on public infrastructure.

Ross Which, of course, opens the door for vulture funds and predatory capital, whether it be private equity, VCs or whatever else to come in and do public infrastructure deals?

Michael Hudson Well, you’ll have privatizations. The American economy will be privatized because the states can’t support their transportation system and other systems. The pressure to privatize subway and transport system, schools are going to be more privatized, as jails have been in the United States. So you’re going to have a huge privatization trend.

Ross What is the one thing that has really surprised you in 2020? What have you laughed at? What has given you a chuckle?

Michael Hudson The surprise – that I really shouldn’t have been surprised at – is how naive Bernie Sanders supporters were in thinking that they were going to get a fair deal and that the elections were going to be fair. The illusion is that people were actually going to have a fair election when the last thing the vested interests wanted was Bernie Sanders or Elizabeth Warren or any kind of reformer. So what happened to Sanders is what happened to Corbyn in Britain and the Labour Party’s neoliberal leadership.
So what’s for laughs? I guess, Tulsi Gabbard’s takedown of Kamala Harris was absolutely wonderful. Everybody just broke out laughing, cheering for her. And of course, that’s why she was marginalized, and now we have Kamala Harris as the senior vice president.

Video clip (Tulsi Gabbard) Senator Harris says she’s proud of her record as a prosecutor and that she’ll be a prosecutor president. But I’m deeply concerned about this record. She put over 1500 people in jail for marijuana violations and then laughed about it when she was asked if she ever smoked marijuana. She blocked evidence that would have freed an innocent man from death row until the courts forced her to do so. She kept people in prison beyond their sentences to use them as cheap labour for the state of California. And she fought to keep the cash bail system in place that impacts poor people in the worst kind of way.

Ross Michael, one prediction or three, over to you for 2021. What should our viewers be thinking about looking at, and considering as we go into the New Year?

Michael Hudson What’s on the upswing is poverty, homelessness, crime. It’ll be very good to invest in crime prevention services, burglar alarms other things. You’re going to have a lot of bond defaults for tax exempt bonds for cities and states can’t pay. And the transportation costs are going to rise, I think. So the cost of living is going to rise as public services are privatized and cut back. That will all be good news for the stock market.

Ross You mentioned Bernie Sanders and Jeremy Corbyn. The current sort of divisive political climate is engendering needless sort of scapegoating, recriminations, witch hunts and all the rest of it. How does that logically end, in your view?

Michael Hudson With Sanders certainly, capitulation. He wants to remain a player in the game. So he’s jumped on the Biden bandwagon, and he’s denounced everything that he stood for. He’s all for the Obamacare now, postponing socialized medicine. He’s joined the flock.
He was a catalyst for a left wing movement in the United States. But a catalyst is not part of the reaction, the chemical reaction. So he’s put something in motion that he’s not a part of. We’ll just have to see whether there is a recognition in America that no progress can be made in the context of the Republican and Democratic Party. They’re the same party. It’s a duopoly that takes third parties off of the ballot. Unlike in Europe, where you can have in parliament all sorts of other parties, you’re having just a really a political lockdown in America to go hand in hand with the economic lockdown.

Ross So, the world is incredibly divided, as we know. But it’s divided on different lines now, isn’t it? Because this multipolarity is here to stay. However, in the Beltway in Washington, the Americans think that unipolarity is here, which is laughable. But this multipolar world is split between, let’s say, finance capitalism and everybody else, because the West, the developed west, wants financial capitalism, doesn’t understand that it’s sowing the seeds of its own demise. Just elaborate on this a little bit – the West and financial capitalism versus growth economies that create real value.

Michael Hudson Well, that’s exactly what’s happening. Countries are beginning to say no to the US demands that they neoliberalize their economies and follow the Washington consensus. So you’re going to have China, Russia and the Shanghai Cooperation Organization nations essentially going their own way, de-dollarizing and creating their own economy on non-neoliberal lines, as opposed to the United States. In United States, there’s going to be a lot of people losing their status. And when people lose their status and they’re impoverished, that’s the breeding ground for fascism.

Ross Why is it that the US as a political class, have never understood that meeting other nations halfway is way better than trying to throttle them into economic submission?

Michael Hudson Well, it’s a mentality. Donald Trump said America has to win every deal, that we won’t be a member of any deal that we won’t. The American mentality also for one hundred years, actually, since the beginning of the republic, says we will never follow what other nations tell us to do. We will not join the World Court. We will not join any international organization unless we have a veto power in it. So America has veto power in the International Monetary Fund, the World Bank and the United Nations, and it refuses to compromise with other nations because we’re the exceptional country.
“Exceptional” means that we don’t have to abide by the treaties we signed. We don’t have to abide by international law. We can do whatever we want, because we’re America. That spirit has increased, especially as people are impoverished, living on the street and homeless. They think, well, at least we’re exceptional and we can do whatever we want.

Ross That kind of hubris puts all the Greek heroes to shame. And you know what happened to all of them?

Michael Hudson That’s right. It’s wealth addiction. It’s an addiction to power. Hubris really is when you become so successful, it goes to your head and you think you can do absolutely anything. And after all, you never know when other countries will push back until they actually begin to push back. So America, after World War Two, expanded and expanded and expanded its power with no pushback. So it thought we could do this forever. And now there’s a pushback and it thinks this is not natural. “America is exceptional. Don’t countries get it?”

Ross Michael Hudson, always a pleasure to have you. Thank you very much for your time and happy New Year.

Michael Hudson Happy New Year to you, too, Ross.

Photo by George Pagan III on Unsplash