The Dumb Luck of Dollar Hegemony

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Support Michael Hudson’s unique perspective by joining his Patreon group, where we hold these quarterly discussions. Next is Thurs Dec 7th.

Karl: Welcome everyone to another quarterly session with Michael. We’ve got to come up with a good nickname with these (sessions). They’re great discussions and we like to have a fireside type conversation with Michael, who, of course, you all know, as one of the world’s leading experts of neoliberal era we live in. And yeah, Michael, we have with Patreon now about 270 supporters. So it’s absolutely fantastic that we’ve grown to that many. 

M: I’m glad you encouraged me to start it. 

K: Yeah, well, it’s been a nice way to get to know a few of your supporters and having these Q&A sessions certainly helps. So, yeah, a big welcome to anyone who’s joined the Patreon team in the last three months or so. But Michael, I wanted to start off. We’ve got lots of questions coming through and please use the Q&A section of the Zoom here. 

But I wanted to start off, Michael, with another interesting little chapter in your life. Tell us about your close encounter with the world of science. Your career almost took a big divergence at one point in time. 

M: With what? Into what area? In science. Science? Not really. As a little kid, I was interested in chemistry and I studied with Harold Urey, the Nobel Prize winner at the University of Chicago, a neighbor of mine. But then I got out of science and went into music very rapidly, already by late high school. And while I was going to the University of Chicago, I was also going for my BA. I was at the PhD level at Roosevelt University, which was the big theoretical university in Chicago at that time, and at DePaul University for conducting and actual performance. But my scientific friends convinced me not to go into science. I guess throughout the age of 18, I wanted to go and listen to symphonies. 

The employment agencies, because I did very well in intelligence tests, would get people to send me to whatever city. And one day I saw Demetri Metropolis was going to conduct Mahler’s First Symphony. So I arranged to be interviewed by IT&T in Nutley, New Jersey, and they brought me there. And I went to hear Demetri Metropolis at night, very excited. He said that I could come to New York and study conducting with him. And that was partly why I moved to New York in 1960. 

But then I went to IT&T. And the director of, I guess, hiring, one of the top people, he had a sign up in the back of his chair, two buttons. One was annihilation, and the other was total destruction. And I was explaining my unified field theory of how to explain the charge of the electron and proton within the atom. And I said, I believe that the universe has to be curved, and it’s polarized. And the charge between, I’m explaining antimatter, which is something I’d been discussing at the Livermore Labs in Berkeley when I was out there. And I said, I think that the charge is much higher at one pole. And as you get toward the middle, the relative charge between the proton and the electron is less. 

And he looked at me and said, well, you know, this is much too theoretical. You’re really not helping democracy at all. And you’re making the same mistake that Archimedes made. And I said, well, what mistake was that? And he said, 

“well, while his country was being attacked by, I guess, the Persian Navy, what did he do? He was sitting on the sand drawing diagrams to explain the universe. And that’s what he was doing instead of building weapons and fighting to defend his democracy. And we’re making the weapons to defend our democracy against the rest of the world. And you can do that. That’s what a scientist does. They don’t do this abstract research that isn’t going anywhere. The fight is right now.”

I could hardly believe it. And that’s what he said. I said, but wait a minute. He had been designing very important weaponry too. The principles of physics could be used for both. So maybe he was designing a catapult or something like that. And the man said, well, if we hire you here, we’re not going to hire you to do basic research. We want you to build bombs. That’s what he said. So then and there I decided, okay, my future lies in music, not science. Well, I was wrong. 

I went back to New York, and sat in on, I think, one of Dimitri Metropolis’ rehearsals and went back to Chicago and then soon moved to New York. 

K: And was that the interview that was linked to the Manhattan Project? 

M: No. When I grew up at the age of five, my father rented out the top floor of our house in Hyde Park to a Japanese physicist (Shuka Hayashi) who had been in a concentration camp in California and had married his nurse. And Shuka was part of the Manhattan Project. He would put me on his bicycle and drop me at school. I went to the lab school. He would put me on his bicycle and drop me off and work on the Manhattan Project. And when I was in first grade, he was explaining to me basically Heisenberg’s principles. And that was the other thing that got me interested in science. I’d forgotten all about that. And he explained the Heisenberg principle in a way that I’ve never heard it explained so clearly. 

He said, suppose there is a salt solution and you cool it. As you cool the salt solution in an aquarium, we had a fish with an aquarium, you’re going to have crystals form of different shapes. And there’s going to be a bell-shaped curve of these crystals. And we never know which crystals are going to be which, but it’s always going to be the bell-shaped curve. It will be pretty much the same. So what we know, it’s indeterminate in the sense of, you don’t know which crystal is going to be large and which is going to be small and where the size distribution is going to fall on the curve. But you always know that the shape of the curve will be the same. And I knew that just about at the same time I was learning to read. 

And I remember Marian came in and said, Oh, he’s too young for that Shuki. But I wasn’t, I understood it and I gobbled it all up. And that advice was why I’ve been able to understand statistics and spend so much of my life on Wall Street doing statistics, realizing that the key is the shape of the bell-shaped curve. And there are always going to be outliers there in one direction or the other. And sometimes there’s a fat end of the curve, sometimes a small one. 

K: Very good. Very good. Key tips from Michael Hudson. That’s what we like. And a big thank you going out to the Real Progressives for their hosting here on Zoom. Matthew Connors asked the question ‘to what degree of investment is the investment China has made in the USA by buying treasury bills, a kind of modern imperial tribute never to be repaid as opposed to invested funds that they can access when they want, need.”

M: I think people can access government securities. If you’re talking about treasury securities, people can access them unless the United States doesn’t like you, in which case they’ll just grab it. But under normal conditions, I think treasuries are the most liquid security, which is why so many people right now are moving out of the stocks and out of corporate bonds and out of real estate and especially out of the Eurozone. And they need some place to put their money safely. And the government now is saying we need even more deficits because we need a place for all these people who have accumulated wealth to put their money safely as the world economy falls apart this year and next. 

K: So talking that super imperialist type perspective, when you wrote the book, did you ever think that it will continue for as long as it has? When you wrote Super Imperialism, did you ever think that this dollar imperialism would last for as long as it has?

M:I didn’t even think how long it would last. I was concentrating solely on how it worked. And I, it looked like there wasn’t any opposition to it. If you can imagine I was a left winger and I’d published in Ramparts magazine and Catholic left wing magazines. But when I began to write it, and especially after Herman Kahn immediately hired me for the Hudson Institute to explain to the defense department and state department how imperialism worked. I soon realized that only the United States was interested in how imperialism works, but they wanted ‘a how to do it’ book. 

The last thing I thought I was writing was a ’how to do it’ book. I thought I was writing what people had to do to get rid of it. And instead people use the book, ‘here’s how to make sure it lasts forever’. So all I could do was watch and realize that there really wasn’t a left wing anymore that talked about economic factors. 

K: But surely,  you, you gave that insight to the Pentagon, you know, and to many insiders in Washington, but was it dumb luck? Or did you have a feeling of who actually was behind the whole systemic change and the process that accompanied that? I mean, surely it wasn’t dumb luck. 

M: No, but that, what, what, what wasn’t dumb luck? My being hired? The establishment of the dollar, dollar hegemony. You mean dollar hegemony wasn’t dumb luck? Well, yes, it was. Yes, it was. They absolutely did not understand it. In fact, in one of the newspapers in August of 1971, everyone thought America has dominated the world economy ever since 1950, when it had three quarters of all of the world’s monetary gold. 

It was the America’s holding of gold that enabled it to put England on rations, to enable it to dictate economic policies to other countries, because if they didn’t have gold, they didn’t have the backing for their domestic money in order to back the credit, to create capital investment and develop themselves. They were still tied to gold as a commodity basis of their money instead of modern monetary theory or realizing that money could just be created by greenbacks like the United States did in the civil war. 

So it was, nobody had anticipated how it would work. And since I was a balance of payments economist, I was able to say, well, what is the balance of payments going to look like and where are countries going to put all of these dollars that are being pumped into their economy? What will France do? Now that France and Germany can no longer cash in the dollars for gold, what will they do? And it was pretty obvious that they were going to buy U.S. treasury securities. And that’s exactly what happened. 

Well, at that time, balance of payments was not a topic that was taught in any university of the country, nor were statistics taught. And everything that I’d learned about the balance of payments, I’d learned by Chase Manhattan, sending me back and forth to Washington to meet with the commerce department’s balance of payments statisticians. And they walked me through balance of payments accounting, which is very different from normal accounting and all of the ideas of wash transactions and all of the ways in which the gross national product accounts distorted the actual financial flows at work. 

So I’d already written a monograph on translating the trade deficit and other parts of the balance of payments, foreign aid, military spending into the actual financial flows as opposed to just the nominal value of trade. American oil imports all came from American companies and only about 10% of the price of American oil imports ever left the country. The price was all paid in dollars, even though it was counted as an import and hence a trade deficit. It was counted as an inflow on other parts of the balance of payments, inflow of profits, inflow of exports that you’d use of equipment to produce the oil. 

I’d spent all of my time starting with the oil industry, which was the major element of American foreign policy and of control of the balance of payments, going over in great detail the accounts of every single individual company. And I was the only person in the country who did that. Chase had acted as the lobbyist for the oil industry to get them exempted from President Johnson’s balance of payments controls that were announced in January 1965. 

And the companies all agreed to let someone who wasn’t connected with any oil company or the industry to have a look at their internal reports. And since I was only 25 years old at the time, they figured I was innocent enough that I wouldn’t spill the beans on any country’s proprietary information. And I never did.

I had to lock all of the reports away. But by going through the micro statistics for Libya, for instance, they even had the money spent on typewriters as an expense, and whether the typewriters came from the US or another country. I mean, it was really, really very detailed. So I spent four years at Chase doing nothing but balance of payments accounting. So I began to think in terms of the financial flows of balance of payments. And nobody else studied this.

If you didn’t work for either the Department of Commerce putting together statistics or for a bank, you couldn’t learn this. And at that time banks actually had research departments, unlike today where there are public relations departments, but back then they had research instead of public relations. So that’s where I learned what I could not have learned in any university. 

K: Fascinating, fascinating insights into economic warfare. And during that whole transition from gold to the dollar, I was looking through my old copy of super imperialism last night and  you wrote something in here that had me, had me scratching my head that ‘as this new dollar system was established, the IMF economic advisors advocated that $75 billion in official US treasury debt to foreign central banks should be funded into the world reserve assets without any corresponding liability.’ In those days, that must have been a massive story. 

M: Yes, it was a massive story, but it wasn’t. It was a story that was not reported. Nobody cared. What this meant is that the United States would run up a debt of $75 billion and give it to the IMF and the IMF would hold it permanently and never cash it in. It’s as if you had a CD at your local bank, a savings deposit and said, well, I’m going to deposit the money there, but I’m never going to ask to take it out. You can use it. You can lend it out to mortgage borrowers, but here’s my deposit and I’ll hold it and that’ll be my asset. I can say on my network, I have a deposit at the bank, but it’s never going to……. it’s the bank’s roach motel. You can go in, but you can’t go out. And that’s what the US Treasury became for the IMF.

K: Karl Sanchez jokes, so was Ian Fleming onto something when he wrote Goldfinger?

M: He was a friend of the Democrat businessman in New Jersey, I forget the man’s name, who had a lot of gold, and he actually based a lot of that on his friend in New Jersey, who had an airplane whose stewardess really was called Pussy Galore. So I think Fleming just sort of picked up a lot of the stories that he came across in real life and put it all together. I just can’t remember the man’s name, I’m visualizing him, he lived in New Jersey, it was well known at the time. So I think all of the stories, actually they’re all realistic, all of this really happened. It’s easier to understand the world if you think that maybe it all really happened just that way. 

K: Okay, Michael, this next question may get you going, but our new major Patreon supporter Anthony Dimitri says, can Bitcoin play a role in international settlements? If not, what currency can play the role of the dollar in emerging markets, and maybe I should just say, how about blockchain rather than Bitcoin? 

M: It’s completely different. Blockchain, you know where the money is. Bitcoin and any cryptocurrency is like a mutual fund where you put the money in, but unlike mutual funds, you have no idea where the money is put. The whole philosophy behind Bitcoins is if you do peer-to-peer, then you can avoid the banking system, which you don’t like. You can avoid the government security system, which people don’t like. It’ll be peer-to-peer. Well, a peer-to-peer is you to the person who’s running, to Bankman-Fried, for instance. He’s your peer. The money doesn’t get put into a bank or a government security. It’s put into his own personal bank account, and he gives it to his friends and politicians or does whatever he wants, and you have no idea of what’s happening to it. That’s the problem, and if you look at Bitcoin going up and down, that is not a stable measure of value. You can see what happened when Ecuador tried to use Bitcoin, so it’s just not suited. It’s rife for criminal activity, and imagine what happens if you lose the special email address that you have to do. Then you’ve lost all of your national reserves. All that happens is the government building blows up, and Bitcoin gets billions of dollars, so no, it’s not an appropriate investment. 

K: So, yeah, we’ve got a few questions coming through on the Q&A. Keep them coming in. Matthew Connors, again, sort of trying to keep a theme to these questions, but he asked, do you see any positive developments in class consciousness in the USA? When people can’t afford housing, healthcare, or education, and their faith that our reps in Washington are really trying to solve these crises seems to be collapsing, are people starting to see things differently? 

M: Class consciousness among the 1%? They know that there’s a class war, and as Warren Buffett said, and… 

K: You’ve bumped your microphone, Michael. I think you’ve bumped your microphone. No? 

M: Can you hear me now? That’s better. Maybe I… You see, when I get excited, I moved it right away. You can hear me now? Okay. 

The class that’s doing the oppression knows what it’s doing, because it’s financed lawyers to go on to the Supreme Court to rule it, it finances the politicians. The classes that are oppressed still read the New York Times, and the one place where I found a complete lack of class consciousness is on the left. They think there’s only one class, or two classes, the employers and the employees. They don’t realize the importance of the role of economic rent of the landlords, of the monopolists, and the financial sector, because in a way, these are not really classes in the sense that people thought. 

There’s no hereditary landlord class anymore, but 80% of the population own their own homes. Does that make them a landlord? Well, not really, I don’t think, unless they rent it out, and that’s their main source of identity. Everybody has a savings account. That makes them a creditor to their bank. Does that make them part of the financial sector? No. The problem is that many of the wage earners today like to think that they can rise into the middle class, and the middle class – there’s no such thing as a middle class. 

Marx didn’t talk about there’s a lower class, a middle class, and an upper class. The class depends on how you make your money and what the conditions of labor are. There are different functions and layers of the economy, but not necessarily in the class form. If you think of the classes today, now that there’s no landlord class anymore, it’s just industrial employers and labor, then you miss out on the rentier classes, on the landlords, on the creditors, on the monopolists. You’re not able to understand that labor is exploited not only by working for an employer who sells its products at a markup of more than it pays the wages, but they’re exploited by their banks, they’re exploited by their landlords if they rent, they’re exploited as consumers by monopolists. There are many kinds of exploitation that do not fit what Marx talked about in volume one of Capital. 

K: And they’re exploited by their tax system. Okay, so you mentioned home ownership there. And yeah, let’s head into topics of recent times for you. What was the rate of home ownership back in antiquity and into the Roman Empire? Did people own their own homes? How did that work? 

M: Well, we’re talking about an agrarian economy. And so their home was the land. And the land was their means of self-support. And they were assigned land. The word for land is lot. And the word ‘lot’ literally is like drawing lots. It was like drawing a lot. 

… People were assigned a lot, a given plot necessary to support their family and enable them to pay the equivalent of a land tax. And what they had to do in exchange for being assigned this lot was they had either to work as a corvée labor during the non-planting season to build infrastructure, to build palace walls, to build pyramids, to dig canals and do other things, or in time to pay taxes. So the government would calculate, here is what we need in terms of labor or in terms of crops. And they would assign the land to people to provide this, let’s say, public labor. 

So it was taxes that created land tenure, not the other way around. And I explain all of this in my academic articles from my Harvard project that are going to be published probably in December, Temples of Enterprise, where I give the whole history of land tenure money and how all of this came into being. 

K: Gee whiz, Michael, you keep bringing out the goods. And they all sound like movies, these book titles, well done. So the next question we had coming up, Karl Sanchez, and debt forgiveness in the East, what can you tell us? 

M: Do you mean the ancient East? 

K: I think so, yeah. 

M: The rulers of Babylonia, Egypt, every Near Eastern ruler, when they took the throne, would want to start with a clean slate. Today, even in England, we have the practice of naming the year for the reign of the king or queen, like year of George III, 1, 2, 3, or whatever. Well, a new ruler in the ancient Near East was thought of as starting a new cycle, and the idea was to start the new cycle in balance. So they would all proclaim amargi in Sumerian, which meant return to the mother condition, meaning the basic condition, or andararum was the word that they used in Babylonia, or deror in the Hebrew, in the Jubilee year. 

The rulers realized that if they did not, that everybody who worked the land was going to have problems, especially if there was a crop failure. If you had a cultivator running up debts during the year to pay for animals, to pay the priest for various services if they got married, a lot of money in India today still goes for the marriage ceremony. If you had a crop failure and there was drought or disease, they would run into debt, usually to the tax collector as part of the public palace bureaucracy, or the temples, or wealthy people. 

If they ran into debt, it was very hard to get out of debt because the rate of agrarian interest was one-third per year. If they did not cancel the debt, then you would have the worker, labor, having to work off the debt for the creditor, and if he worked on the creditor’s land and property and built things for the house, then he wouldn’t be available to work on the corvée labor for the public project. 

If he had to pay the tax, the land tax, to the creditor instead of to the palace, then the palace fiscal balance would run into deficit, and they couldn’t afford to pay the army. If the creditors got richer and richer, they’d all get together and overthrow the ruler so that he couldn’t cancel the debts anymore. They would have their idea of free enterprise. 

A Margaret Thatcher would arise or a Milton Friedman and say, it’s all best just to get rid of government, let the rich get richer, it’s all going to be for the best, don’t worry. Rulers wanted to avoid that, and the West was different. The West, Greece and Rome, beginning in the 8th century BC, did not have a ruling class. 

They had local mafiosi to run the lands, and the creditors became the government, basically, the ruling oligarchy, and we all know what happened. They did to Rome what Margaret Thatcher did to England, basically, and you ended up with the Dark Age, at least in the West, not in Byzantium and in the Near East. 

K: It’s just so fascinating reading your work and grasping how the landed elite probably contributed a lot more back in those times than they do these days. 

M: There was much more of an idea of the economy as integrated instead of disintegrated, and there was no idea. There wasn’t any University of Chicago school to send advisors. There was no IMF to advise countries to, well, let all the debts [build so they] have to be paid. Let them be paid. All you have to do is make living conditions worse for labor. It’s okay if they go into debt to their creditors. A slave society can really be very productive, as Chicago has insisted, and that’s the whole essence of von Mises and the free market economics of the 20th century. 

K: Ken Webster asks, “asset manager capitalism, Benjamin Braun, Mark Blyth, etc. Will this spread from stock market dominance to other assets, controlling circulation of significant products, components, and materials, e.g. metals, or more land in readiness to getting paid to do sustainability duties like absorbing CO2, preserving biodiversity?”

M: Could you paraphrase that? I’m not quite sure what that means. 

K: Yeah, well, asset management, will it spread from the stock market to other assets such as the biosphere is, I think, what he’s talking about. All they want is-

M: Do you mean private capital taking out corporations? 

K:Yeah, yeah. And he’s asking, are governments going to de-risk their efforts, de-risking finance? What’s your take on that? 

M: Well, basically, finance capitals bind control of governments in the United States. They’ve commodified governments by letting the campaign contributors basically decide who’s going to be nominated and who the people get to vote for. That’s the whole principle of the Democratic Party here in the United States. You get to contribute to a candidate of your choice. The candidate will turn over part of his money to the Democratic National Committee, who will give it to the people that the committee heads decide. Once people are elected in Congress, the heads of each major Senate and House committee are basically auctioned off for who can give the largest campaign contribution to the Democratic Party. And the largest ones get to be head of the Finance or Banking Committee or Oversight Committee or something like that. So you’ve already had that privatized. 

The finance capital for companies is, in a way, there’s a parallel here. If you’re a private capital company and you take over a company, you buy it out, you borrow the money from a group of Wall Street banks, you buy out the company, you take it over, and then you say, whatever is in the reserves, you’re going to lend to yourself. You’re going to take the pension fund and you’re going to invest the pension fund in the corporate stock to push it up. You’re going to use 90 percent of your profits either for share buybacks or to pay out. But then, because you’re making money, you’re going to borrow as much money as you can. That’s what Thames Water did, for instance, in England. That’s a typical example, I guess Toys R Us here, Sears or other things. You borrow money for the company, as much as you can. You then pay yourself a special dividend, just to yourself as owner, out of this, and you leave the company bankrupt. 

You’ve meanwhile sold the stock, it’s wiped out, so you don’t owe the workers anything anymore, because they’ve done what they did with the Chicago Tribune. They’ve put their money in the stock and Sam Zell wiped them all out, and so the private capital company gets to walk away with the whole thing. 

Well, in a way, that’s what the financial sector does with the U.S. government. It buys control of the election process, puts in place politicians, senators, and representatives who will cut taxes on them, run an increasing budget deficit, subsidizing the wealthy contributors. Basically, Biden’s inflation reduction bill is really a huge giveaway to the computer, the information technology industry. Essentially, you end up emptying out the government and the social programs. You cut back Social Security, you cut back public health, you cut back Medicare, as Biden’s doing, and all of a sudden, you leave the government just as bankrupt as Sears or Thames Water or Toys R Us or the other companies that have been going under, and you end up looking like Rome looked in the fourth century. 

K: I think what Ken was trying to get to is this move towards true cost economics, this green economics and valuing the earth. 

M: What? I never heard of that. 

K: Well, you talk about resource rents of natural minerals. Biden’s talking about finance being, in a way, subsidized to provide the sort of carbon sequestration, the protection of rainforests as carbon sinks, those sort of things. How have you seen that whole movement develop over time? Because it’s a real pressure point for some people who don’t want to bring economics into protecting the biosphere versus others who can see that if there is a price on nature, it stops the plundering. 

M: I think the companies have already had their lawyers get all around it. The oil companies and the polluters are all for that because it ends up as a huge giveaway to them. I haven’t looked into the actual details for some, but it’s a distraction and a distraction that I just haven’t got into it. It’s a sink. I would sink into it and I wouldn’t have any time for anything else. It’s just not my department. 

K: Okay, fair enough. Jamie Brown asks, and this one, I’m hoping I get it right, Jamie.” If I were explaining why millenarianism (I think she’s talking about millennials – occurs in every generation – no, I don’t know what millenarianism is, hopefully you do Michael) – would it be appropriate to use the American Revolution, the US Civil War, and even the collapse of antiquity as examples of why this behavior occurs? Using events like the American Revolution as a positive, in the behavioral sense, example, and the fall of Rome as a negative example?”

M: It all depends how you use it. It can be used in one way or another, as you can see in the Supreme Court. I have to turn on the air conditioner for a second. I’m going to take a break for just one second. 

K: Well, whoops, hold on one second. Okay. It’s warm in New York. So yeah, lots of good questions coming through. I’m trying to get to them. I’d love to see some people come on camera. So if you wanna come on camera and discuss with Michael, it’s really lovely at the end of the last Q&A session, four or five people just having a casual conversation. We all sort of dropped the interview tone and just had a good fireside chat. So feel free if Jamie or anyone wants to come on screen and get to the nub of their questions. 

So yeah, Michael, she follows up and asks, what other examples of a failure to at least reform, led to collapse, what examples  would you give besides the ones you cover in your debt series?

M: Wait, an example of what? 

K: Of collapse. 

M: Collapse? Yeah. Well, my collapse of antiquity has collapse in the title. I mean, I described why antiquity collapsed. Forgive Them Their Debts described why earlier Bronze Age societies did not collapse. My The Bubble and Beyond and its sequel. All of my books are about various kinds of collapse, especially the Killing the Host is about the 2008 collapse and we’re really still in the Obama depression. 

So I guess Killing the Host is about the financial collapse that we’re in now and we still can’t get out of. And my The Destiny of Civilization is about where that collapse stands today, that there really is no way out of the West, especially Europe. You can see now that Europe is absolutely stuck. Now that the German industry has been destroyed by the sanctions, the Euro is going to go down and down and down. 

K: All right. Mr. Sanchez asks, it appears that the failure in Ukraine that the duopoly is splitting into two factions, nationalists versus imperialists, Republicans versus Democrats. What do you see being the fallout from the failed campaign to suppress Russia via Ukraine? 

M: Obviously the attempt to suppress Russia has been empowering it. It has not only driven Russia together with China and Iran and the BRICS Plus, but any kind of sanction to block trade with a country has the same effect as protective tariffs. It forces the country to produce goods for itself. So Russia’s pretty much either replaced Europe as a source of supply or it’s developed its own industry and is relying on its own industry as a source of supply. 

I think the focus on Ukraine is really the wrong thing. What this is, is a US-NATO war. It’s a US war against NATO. The effect of the war is for the United States to regain total control of Europe and to prevent Europe from the track that it was on, which was to trade and investment with the East, with Russia, with China and with other Asian countries and to put a wall around Western Europe and say, you can only trade with the United States. 

Well, let’s look at how this is going to collapse. Germany, which was the main supporter of the Euro’s balance of payments, now in the past had imported oil and gas and raw materials from Russia and it had obtained the foreign exchange to pay for these materials by exporting automobiles, washing machines and consumer goods to Russia. So there was a kind of circular flow, raw materials, gas to Europe and exports back to Russia. Now this is not taking place anymore. Instead, Europe has to buy its gas, its liquid natural gas from the United States at about six times as much and its automobiles can no longer be made in Germany because you need power to make them, you need heat, you need gas and oil in order to make fertilizer, in order to make glass, in order to make other industrial goods. So Europe has lost its ability to export its industrial goods. 

So instead of having a balanced trade with the East, it has a chronic deficit with the United States. The United States is not going to permit Germany and European countries to finance their payment for oil and food and fertilizer from the US by buying German exports, just like in the 1920s. Same problem. It’s going to be very protectionist and try to say, well, German industry can move its automobile companies to the South. It can produce its exports, its cars here, or maybe Germany can move to Iran or China or somewhere else, which doesn’t look very likely, but if the companies move to the United States, then they’ll be employing American labor. I don’t think the Americans are going to let Germans begin to cross the Rio Grande along with the Latin Americans. 

You’re going to really have no means of support for the euro when it’s going to fall probably below the dollar. I can see the euro falling to 90% or even 85% on the dollar in a year or two. 

So the effect of the war has been to essentially conquer the European economies and make them captives of the United States.

 The effect on Russia has been to create such a revulsion in the global majority, the rest of the world, that they say, my heavens, if we let Americans influence our policy, they would like Taiwan to die to the last Taiwanese. They’d like Pakistan or India to die to the last Pakistani or Kazakhstan to die to the last Kazakh. 

They’re all withdrawing and finally coming together to create an alternative to the dollar-based order. And I think historians will say, well, Biden has been probably the worst president in modern history, even worse than Obama. But it really isn’t Biden because Biden is just a front man for the whole deep state, for the whole neocon group behind him. And it’s really the neocon mentality, the sort of the last gasp of militant finance capitalism that is self-destructive of this whole American plan. And instead of cutting up, dividing and conquering Russia and other countries, they’ve isolated the United States, not Russia. They’ve isolated Europe along with the US dollar area. And they’ve integrated the whole rest of the world realizing they have a common future that lies in quite a different direction. 

K: What is your latest BRICS interpretation? The news coming through there as the alliance keeps growing. Any particular take on BRICS and alternative currency networks?

M:  It’s happening just week by week, I’m sure. I have a fortnightly broadcast with Radhika Desai, the Geopolitical Hour, where we discuss the BRICS and de-dollarization almost every two weeks where we go over it. 

Things are happening very rapidly. Even this week at the United Nations, African groups are meeting with Asian groups or everybody discussing how to create an alternative. And things are moving much more rapidly than anybody had realized because most people think that the world, if evolution happens slowly in a Darwinian kind of way with adaptation and small things, but evolution happens by quantum leaps and quantum leaps are very fast. And that’s what we’re seeing right now. 

K: Christopher Dobbie asked for a good take on the greenback continuing as the trading platform if energy inputs fell. It looks like the system is contingent on increasing fossil fuel use. 

M: I don’t understand. What’s the question? Can you paraphrase it? 

K: Yeah, the US dollar system, the greenback, is it going to continue to be the trading platform for international trade if energy inputs fell? Looks like the system is contingent on increasing fossil fuel use. What’s the relationship to the dollar? 

M: Certainly the US oil companies, the oil majors along with French, English and Dutch companies have been a major factor in the balance of payments. But now you’re getting oil from Russia. Iran will be back in the market, the Near East. They’re all shifting as rapidly as they can out of the dollar. They still hold a lot of dollars in their savings and the real issue isn’t what currency they’re going to use to denominate their trade. Obviously it’s going to be each other’s currencies. 

The question is, what are the oil exporting countries going to do with the almost trillion dollars they’re already holding in US treasury securities and American stocks and bonds as the result of all of the past oil and gas that they’ve sold? How is this dollar overhang going to be resolved? How is there going to be musical chairs who gets to jump on the chair first with the chair being take your money out and convert it into gold or convert it into some kind of property outside of the range of US grabbers to appropriate it and do to the Near Eastern countries, what it did to Iran or Venezuela or Russia and just simply grab their money. 

You’re having a phased slow walk out of the dollar. They’re afraid of doing it very fast or the United States will simply wipe out all of its debt in which case these countries would wipe out all of their debt to US bond holders and US corporations. And in a way you’d have a vast clean slate. And in a way that is probably the only legal way of resolving all of this process, just a whole new beginning debt-free with new relationships among different countries. That will mean that there will have to be a whole new set of banks in the West and also throughout Asia. So I think the countries that are discussing what the future will be realize the need to decide what kind of a financial system do we want? What kind of a property system do we want? 

Who’s going to own the oil and the gas and the mines that in the past were privately owned and who paid out all of their profits to France, and Euros or to the United States in dollars. All of this is going to be a whole restructuring of property ownerships and finance throughout the entire world. That’s really what de-dollarization is, not just using a different currency for trade. The big thing is the capital account much more than the trade account. 

K: Well, let’s hope Emperor Lachlan Murdoch allows that change of philosophy to emanate through the news. Karl Sanchez asked, I looked at the government’s figures for the nation’s balance sheet which shows a ratio of assets to debt at one to nine in trillions of dollars. Can this become a political issue or will negative equity continue to build at about 5 trillion a year? 

M: Well, for it to become a political issue people would have to understand it. So the answer is no, nobody can, the consciousness resists understanding the problem of this magnitude. A political issue is marginal. It’s, you know, what is the president going to wear? You know, that’s a political issue or, you know, this is too big an issue to be political. It has to be revolutionary. I don’t know whether you consider that’s political. 

It depends where the political process ends and becomes something explosive. It’ll be a crisis. And when a problem, it’s not really a problem. A problem can be solved. And this debt ratio that you talk about, the overhang of US dollars to foreign central banks is something that, and to the US population that cannot be paid. So it’s not really a problem. It’s a quandary. It’s something that can’t be paid. It can only be caused by, resolved by, a crisis. Well, is it, do you call a crisis political or is it something, do we need another word for a crisis that’s resolved on an emergency basis? 

Well, it might be political because you can be assured that the wealthiest 1%, the billionaires, are all\\ making their own plans. I’m sure they’re coordinated by the World Economic Foundation to try to figure out that they can come out okay. The question is whether the rest of the world that holds all of these claims on the government that will not be paid, whether they have the foresight to do it. And I think they’re afraid of even thinking about this. So the political solution will only be right now designed by the 1%, not by the 99%. I guess that’s why we’re having these shows to try to get maybe a constituency that’s willing to treat this as a political problem, not just leaving it for a crisis and kicking it down the road. 

K: Ah, it’s fascinating, Michael, thinking about how they’re going to have to clean the slate somewhere along the way. I hope we can work on a policy document around that because sometime in the near future, it’s going to have to happen across the board. 

But let’s switch gears. I wanna get onto one of your favorite topics and hopefully your heart rate handles this. But there was a great little discussion on the Patreon page. Maricata put in a comment about, “let us take the time to remove the name of Ludwig von Mises from any economic theory or rational thought.” Do I need to go any further? I mean, what’s your perspective on von Mises and that particular take in economic theory? 

M: Well, von Mises wrote in the 1920s and that was the voice of the financial and landlord ruling class. And imagine how the landlord class, the wealthy class, the bankers felt in the wake of World War I? They saw the whole move throughout the world as going beyond monarchies and moving toward democracy. They saw the whole world moving to a future of progressive taxation, especially taxation of economic rents, of rentier income, taxation of land rent, taxation of mineral rent, taxation of monopolies and turning the banks into socialized banking, socialized means of production. Everything that von Mises and the old ruling class saw in front of them was a threat to their dominance. They wanted to roll back the clock. They wanted to go back to before the age of capitalism. They wanted feudalism. They wanted Margaret Thatcher. They wanted Milton Friedman …. 

K: Michael. Audio. Michael, something’s happened to your audio again. Back to von Mises. 

M: Back to von Mises. There was a whole debate in the 1920s over whether Germany should pay reparations and whether inter-ally debts should be paid. Von Mises said all debts have to be paid and they can be paid if you just lower wages far enough. That was really today’s International Monetary Fund austerity plan. You had John Maynard Keynes in England and Harold Moulton in the United States explaining why this was junk economics. My book, Trade, Development, and Foreign Debt, has a number of chapters on this very debate. It goes all the way back to David Ricardo as a banker in the 1820s. Von Mises essentially started the political movement. Let’s just say it’s basically fascism. 

Von Mises wanted to get rid of government’s ability to tax or to regulate wealth. He wanted to create an oligarchy like there used to be before the democratic revolutions of Europe. He wanted what became basically fascism. Although he was attacking government and although his follower, Hayek, seemed to attack government as a road to serfdom, what they wanted was a strong government. They wanted the government that they got, Adolf Hitler. They wanted a government strong enough to block any democracy, to prevent labor from unionizing, to put all the power in the hands of a banking and creditor class and land and property owning class. So what pretended to be neoliberalism or old liberalism, what pretended to be libertarianism was liberty for the ruling class to have total power over the 99 percent, the liberty to do whatever they want without any government regulation, without progressive taxation, to shift the taxes on to labor, not on to the property owners and the rentier class. 

His naive followers, the Ayn Rand followers, the head of the Federal Reserve banks, they all are suckered into thinking that getting rid of the government is freedom but what they really want to get rid of is the government power to prevent the ruling class from destroying the freedom of the 99 percent. It’s Orwellian economics using an Orwellian vocabulary. 

K: Lots of good comments coming through on the Q&A. I think we’re going to have Flo join us on camera. Flo, come on through and ask your question and anyone else wants to, please come and say hello. Flo from the Real Progressives team, welcome. 

Flo: Hello, hi Michael, hi Karl. Thanks for doing this again, Michael. It’s always very fun. So kind of jumping off that last answer about von Mises, something that’s been on my mind a lot, you know, especially watching you and Radhika on the Geopolitical Economy report too, is the role of propaganda, especially now, in sort of covering or making up for capitalism and the US-led hegemon’s like material decline and deterioration. I feel like that’s somehow tied into the whole neoclassical sort of shift, I guess, in, you know, an economics model, but I generally tend to think about it as like capital’s last trick now. I mean, since the whole, you know, financialization and liberalization of financial markets and the little temporary boost that that gave to the imperial core, if you want to call it, it’s starting to wane now. 

It seems like they’re just doubling down on the propaganda, you know, with Bidenomics in the US, same thing’s going on in Canada. Oh, the economy’s great, unemployment is low, you know. Meanwhile, nobody can find housing and the cost of food, you know, continues to increase to completely just starvation levels. So what is the role of propaganda, I guess, or your thoughts on it, and maybe how it’s kind of changed since you entered the game? 

M: My J is for Junk Economics, is all about propaganda and how to frame what is really happening in a false way, to make people have a set of categories that they think in terms of that are not realistic categories, but are something with an Orwellian vocabulary that are really just the opposite. So right now with Biden economics in the United States, you have democratic hacks, like Paul Krugman, you know, saying, well, you know, why are people complaining? Everything is really, really great. They must be agents of Putin, if they say they’re not, great. 

Well, he’s denouncing 80% of the American population as agents of Putin. What he’s saying is, who are you going to believe, me with my Nobel Prize or your eyes? And the role of propaganda is say, you know, you may think that the economy is not doing well, but it’s doing well for absolutely everybody in the country, except you, you’re a loser, and it’s all your fault. You have not taken responsibility for your own fate and everybody else is doing fine. Just look at the statistics. So why are you complaining that you’re falling behind in your mortgage and on your credit card bill? You’re really a bad person and you’re not patriotic.

If you don’t vote for the Democratic Party and let us continue to make you feel even worse while telling you that this is really better, there’s joy in poverty. Think of the medieval saints who went into poverty and were shoeless and went into the desert. You know, you really can be, you’re doing much better off this way. That’s propaganda, to make them confused about what’s important in life. What really, are they doing better or not? Are they going to look at statistics or are they going to think that what’s happening to them is part of nature? Is the economy just making people poor because it’s part of natural law that just some people are smarter than others? And that the managerial class, professional managerial class is just plain smarter. And you know, we’re very sorry that you’re poor and that you’re behind, but you’re just stupid. You haven’t been educated in the right colleges because you were unwilling to take on enough debt so that you could get a good education and be smarter and not be the kind of loser that you are. But that’s nature. It’s just part of it. It happened to the dinosaurs. It’s happened to other species. You know, we’re sorry and sympathetic for you, but your time is over. 

And if people can believe that, well, I guess there’s nothing I can do about it. Let me take some opioids. Let me take some. And at least I won’t feel the pain. 

Flo: Yeah. It seems like it has a function of like kind of cooling class antagonism, because if people really understood what was going on and didn’t buy into the propaganda, then, you know, we’d have a lot more angry folks with pitchforks. 

M: Well, they don’t have an alternative. If you look at the New York Times and the Wall Street Journal and the television news, they don’t talk about the kind of things that we’re talking about or, you know, the interviews that I do or that we talk about on Patreon. We’re a very small minority and we’re sort of the people who must not be mentioned and the ideas that we must not talk about in polite company. 

You know, talking about economics and exploitation today is sort of like talking about sex in the 19th century. You know, it wasn’t done in public. 

Flo: Absolutely. Well, I have a couple more questions, Karl. Can I ask one? 

K:Yep. One more. Okay. 

Flo: This one should be fun, I think. So about Marxism and money. You know, we always hear the end goal of Marxism is a classless, moneyless society. And like the classless part I get, but the moneyless part, yeah, it’s always thrown me off a little bit. So what is your take on that? I can’t imagine. Marx’s volume three was all about money. Of course, there’s going to be money. Of course, Marx didn’t really talk much about the final stage of communism. He talked about what are the dynamics and the laws of motion of capitalism as industrial capitalism evolves into socialism in the interests of industrial capital formation itself. That’s what he talked about. 

So all of this idea of a moneyless economy, this is post-Marxist. It’s basically, I think, financed by bankers and the financial elites who want to confuse the issue so much that they would love people who would say, I want to be a left-winger, I’ll be a Marxist. And if they can convince you that being a left-winger and a Marxist, you don’t talk about money, well, then you’ve solved the problem of understanding how the money system works, as Marx explained it in volume three. 

Flo: Right. Well, that makes sense. Yeah. It’s also like the view of what money is and whether it’s private property or like a public sort of… 

M: Well, that’s what Karl Polanyi wrote about. Marx did talk about how money had been commodified as gold or silver. And again, my book that’ll be out in December on Temples of Enterprise shows the early evolution of money, that it wasn’t gold or silver, that money has always been administered by governments, as have interest rates and the credit system. They’re not a commodity, they’re a public creation. And Marx pointed out that money and the financial system is external to the capitalist economy of production and consumption. It’s imposed on the economy. And part of the destiny of industrial capitalism, he said, was to industrialize finance and make money part of the industrial economy as a public utility, not as a private means of exploiting people as it had been down through the 19th century. 

K: Thank you, Flo. Great questions. Great to have you on screen. And yeah, please come back and see us in December. Yeah, lots of good questions coming and we’ve probably got another 15, 20 minutes to go. So Sherry Wise asks, ‘in my work, I’m seeing increasing problems with our production of some commodities. In many cases, the production is being pushed by the IMF for exports. However, demand is not keeping up with supply to a large degree due to stagnating incomes. 50 years of focusing on the supply side has come home to roost. I hope any new organizations that come about due to BRICS have more foresight.’

M: Well, that’s what my Super Imperialism is about. It’s the World Bank more than the IMF. The World Bank has given finance infrastructure and tried to convince the global south countries not to produce food grains for themselves, but to produce an oversupply of plantation tropical crops. The whole idea is to make supply larger than the demand so that the price will be very low and so these countries will be impoverished. 

The aim of the IMF and the World Bank is to create poverty. That’s what they produce, poverty, because they produce an unequal exchange and want to make sure that the real economic surplus is taken by the industrial finance capital countries, not by the countries that actually produce the raw materials. So the result has been to drive all the raw material and the industrial production to other countries. 

Europe and the United States separated themselves from this production system and the rest of the world says, well, wait a minute. We don’t need the financial superstructure and the property superstructure and the private ownership infrastructure. Since we have all the raw materials and all the productive labor and all the manufacturing, we can support ourselves. We don’t need the West. 

So the jungle is taken over from the white people’s garden, basically. That’s what you’re having now. They’ve overplayed their hand of unequal exchange and that’s about to change, as you’re seeing in the revolutions in Central Africa in the last month. 

K: Now Armenia is mobilizing as well. It feels like the inequity is building and tensions are rising around the planet. Anonymous attendee asks, ‘I’m glad the rest of the world is shrinking away from USA domination and hopefully a more constructive, sustainable future. But for those of us here in the USA, what are the top projects or goals they should be working on for on-the-ground activists? Unionizing our workplaces, trying to push for a multi-party political system, other ideas. What should we do’ is his call. 

M: In order to get a multi-party political system, you have to end the Democratic Party. I think that that is a precondition. Even if that results for a transition period in only the Republican Party, at least if there were one party, which is how the American Revolution expected it to happen, everybody would run within a single party without factions. 

There cannot be any of your progress without dissolving the Democratic Party, which is really the party of the deep state and the 1%. So it’s not simply that you want to add a third party. Of course you can fight and get Cornel West on the Green Party ballot, so you can actually have an alternative vote. But it’s even more than a third party. You want to end the Democratic Party no matter what. That’s the only way that you can starve the beast. 

Politically, I think that has to be the main aim in the United States. The Democratic Party wants to blow up the world. They’re totally unreformable, and you have to realize that. The Republicans and Democrats are funded by the same class, the same people. The job of the Democrats is to prevent any left-wing criticism of the Republican Party so it can move further and further and further to the right. You have to break that duopoly, and the only way to do it is by breaking either one party or the other. The Democratic Party is the most dangerous party to break because it’s the best at the propaganda, and it’s the most willing to undertake political assassination and all of the other dirty tricks that we’ve seen.

K: Wow, that’s a big few lines there. It’s good to see John Chadwick in the Q&A here today and he asks, ‘exactly one year ago today, Noam Chomsky spoke with Nika, David Graeber’s wife. I was fascinated by his role in the Occupy movement and understand you knew him well. From your historic perspective, do you think the Occupy Wall Street might be revived? The key, it seems, is sustained process, being peaceful and class protest against financialization. What do you think?’

M: Well, David Graeber was really the whole spirit of that. He was a great, great organizer and I was very depressed and also very angry at him for getting COVID and dying. He was one of my closest associates. The problem is that you had Obama put in place a vicious police state and we’re still in the vicious police state. Here in New York, Obama had the police go by Occupy Wall Street, the encampment there. Any occupier who had a guitar or anything, the police would smash the guitar, break it up, beat up the people. 

You had Obama put in place, with the FBI and with the National Security Agency, basically a terrorist organization. To look at any kind of revival of the Occupy Wall Street movement is something even more dangerous than the Black Power organization. It’s very difficult to do anything when you have,….. if the Democratic Party is in power, or even Donald Trump, I don’t want to leave that out, you would have very quickly a police state response. They’re not going to let it happen again. 

K: Yeah, good. Virginia Cotts points out in the chat that Occupy pointed people’s attention away from D.C. and towards Wall Street. That alone was valuable. 

M: Yes, that was indeed valuable. That was the whole point. I mean, that’s what everything David and I were working on. We’re showing that Washington is Wall Street, that it’s the arm of Wall Street, and that the objective of neoliberal economics is to shift economic planning away from government officials into Wall Street as the central economic planner of society. That was our whole point. 

K: Yep. Yeah, good. So let’s go back to Jamie Brown. That tongue-tier of a word before, no one can pronounce millenarian. 


K: Yeah. ‘You know how every generation thinks the end times will come in their lifetime? Well, in a lot of cases, it could have been true, if not for major events like revolutions. The American Revolution would be a positive example, even though it barely changed anything. And the fall of Rome would be a negative example. So if someone tries to use a thought terminating cliche like every generation thinks their generation will see the fall of society, isn’t that actually true?’ 

M: I don’t think we’ve ever been closer to the end time than we are today. That’s why I have a whole chapter of that in my book, and forgive them their debts, where I go through what it is. We’re in that kind of a collapse. The good thing is that the end time that we’re in now is the end time of the garden. It’s the opening of the jungle. The jungle now gets to the rest of the non-white global majority of Asia, and the southern sphere are going to be able to create a new, basically a new civilization that is not based on the privatization and the financialization that’s occurred in the West. That’s what my Destiny of Civilization book is all about. 

K: Beautiful, good. Okay, we’re getting close to the end. Yeah, we’ve been running nearly 90 minutes, so yeah, lots of good discussion coming through, and Virginia Cotts, who behind the scenes holds this all together. Virginia, you had a good question you wanted to ask Michael. Come on in, mate. Hit him, hit him hard. 

Virginia: Michael, we’ve often heard you say that Marxists only read volume one of Capital. You mentioned volume three a little while ago, but why should they read volumes two and three? What is important about each of them? 

M: Well, when Marx wrote Capital, the last century, from the Physiocrats to Adam Smith to Ricardo, the great task of industrial capitalism in Europe was to get rid of the landlord class. The essence of classical economics was to distinguish market price from actual cost value and to say the excess of price over intrinsic cost is economic rent. You had a century of analyzing economic rent as exploitation. If price is more than the actual cost value that ultimately is resolvable to the cost of labor, then this is exploitation. 

You already had had a century of discussion of land rent, natural resource rent by David Ricardo, monopoly rent, and financial exploitation. But in the wake of the 1848 revolutions, Marx said, but there are other forms of exploitation, too, that economists haven’t been talking about. And that’s the exploitation of wage labor by their employers. It’s a different kind of exploitation. Employers don’t make economic rent and just live off. They’re not coupon clippers. They don’t make money in their sleep, like John Stuart Mill put it. But they actually play a role in hiring labor, in organizing the means of production, to produce a product, to organize the marketing of it. And what Marx added to the classical political economy was to add the analysis of industrial capital to the critique of land rent, monopoly rent, and predatory finance. 

Well, Marx wasn’t going to just begin at the beginning and say, no, I’m going to retrace everything from the Physiocrats to Adam Smith and Ricardo and John Stuart Mill. He actually did that in what he thought might be the first volume of Capital and then thought might be the fourth volume. His theories of surplus value was his history of economics. But his book on Capital, he said, I’m going to begin not by saying what other people have said, but let me tell you what I’ve thought of that is original. 

His original contribution was the relation of wage labor to its employers, to industrial capital and the concept of industrial profit as organizing industry and labor to sell the products of labor at a higher price than it actually costs. Well, after he finished volume one, he said, once you solve that problem of capital, you’re still going to have the problem of landlords. That’s still a fight that’s going on in the 19th century. You’re still going to have the problem of monopolists. You’re still going to have the problem of predatory banking. 

Germany is beginning to break away from the Anglo-Dutch-American predatory banking and it’s industrializing finance. But this is going to take the destiny of industrial capitalism and this industrial capital that I’ve talked about……capitalists are going to compete with each other by trying to lower the price of production. They’re going to undersell their rivals. 

Schumpeter adopted Marx’s concept in his idea of creative destruction. The capitalist tries to reduce prices to gain markets from his rivals, both at home and internationally. And Marx said, in order to gain the markets and lower the price, they have to get rid of the landlords. Because if you have a landlord class extracting economic rent, then the workers are going to have to make enough money to pay the rents. If you have a monopolist class, like the United States has in its Obamacare, its public health, 18% of GDP, if you don’t have socialized health, like the conservatives in London under Benjamin Disraeli said, health is everything. Health is everything in the 19th century. We’ve got to have a healthy workforce. Otherwise, it’s going to cost more to employ the labor. 

So the destiny of capitalism was to get rid of the rentier class and to replace a predatory English-type banking and American-type banking with German-type industrial banking. And that seemed to be actually happening in Marx’s day. So Marx’s volume two and three were about rent and about the financial system and said the economy is more than just labor and capital. It’s employers’ capital. It’s about finance capital, and it’s about land and the rentier class. And you have to realize that the economy is multilayered and there are internal dynamics. And this is what is causing the economic war. And the question before civilization in Europe at that time was, who’s going to win? Well, Marx thought that industrial capitalism was going to have its interest in freeing economies from rent, from the landlords, from the bankers. And it was going to do this by socializing health, socializing education, raising wages, raising living standards. There would be higher labor productivity, and that high-wage labor would undersell pauper labor. And that would give the industrial capitalist himself the leadership in evolving into socialism. And that’s exactly what was happening in the United States. Simon Patton was the first economics professor at the first business school, the Wharton School of Economics in Pennsylvania. I have articles on this on my website. 

He said the job of public government infrastructure capital formation isn’t to make a profit. It’s to lower the cost of public utilities so that the industrial capitalists can make more by not having to pay labor enough to pay monopolists for health care, for monopoly goods, not have to pay landlords for economic rent. 

So to try to stop your study of Marx at volume one is not to say the economy is an overall multilayered system. That’s not Marxism. That’s a vulgar Marxism. And pretty much that’s what swamped the market after World War I with the Russian Revolution and Stalinism.

Stalin trivialized the Marxism into this labor versus capital idea. And the result was very destructive for the Russian economy itself because when finally the Soviets realized that Stalinism didn’t work, they didn’t understand that finance capitalism didn’t work either. They didn’t understand that the final stage of Stalinism was going to be kleptocracy by rent seekers because they didn’t read volume two and three of Capital. And in fact, they did everything to discourage the readings of volume two and three of Capital and especially to discourage Marx’s theories of surplus value, his history of economic thought, so that people wouldn’t have the intellectual tool to understand the destructiveness of Stalinism in Russia. 

V: So let me ask you something. In the US, we don’t need an industrial working class anymore. 

M:Well, we actually do, but we don’t have one. The bankers think they don’t need it. 

V: That’s what I mean. The finance capitalist class doesn’t need a healthy… they don’t need us, as far as I can tell. 

M: Well, that’s what Bill Clinton said. He said the task of the Democratic Party is that we don’t need an industrial class. Let’s have all of our goods made by inexpensive Chinese labor and Asian labor. Who needs American labor? Fuck the working class. And the Democratic Party’s aim is to essentially wipe out the working class, make them all go the other way over the Rio Grande River, make them go back to Guatemala and Mexico and Venezuela. That was Bill Clinton’s discovery, and so they’ve got rid of the working class. 

You’re having Biden do everything he can to fight the labor unions, for instance, the railway union. He didn’t stand up for the railway union. He still didn’t do what he and Obama promised, card check, to promote unionization. The Democratic Party is doing everything it can to fight unionization, just like its funders have funded gangs to beat up the labor organizers to make sure that the gangsters are in charge of the key labor union. 

That’s why you’re having the auto strike right now. There was a fight over, as you know, union leadership. My father was part of that in the 1930s and was sent to jail for trying to get rid of the Democratic mafia leadership at that time. They think they don’t need industrial labor, so now you’re going to have the rest of the world’s real industrial labor and mining and production take place in the jungle. 

How will America and Europe get by? There’s no way they can, at present, create a new industrial labor class when the workers have to pay what they have to for health care, for housing rents, for monopolized consumer goods. It’s a quandary. It’s not a problem that can be solved without a radical change. 

The job of the American government is to prevent that everywhere. 

K: Lovely. Good work, Michael, as always. I don’t know. We’re about at the end, I think. Questions have dried up and we’ve done well over 90-odd minutes, but I think that would be fascinating, Michael, to see an article on the Physiocrats. We haven’t seen you write about them of recent. 

M: You’ll have to transcribe this. If you transcribe it, then I can elaborate it, but without a transcription, I will have a drink and forget everything that I’ve said. The other one is the academic reaction to revolution. I think some of Jamie’s prodding there and you’re answering. That would be fascinating to see. 

M: When I was at the New School, I remember during the Vietnam War, I was going around giving speeches. I remember some students of mine drove me out to Princeton and I gave a speech. One of the faculty members came up to me, a philosophy faculty member, and he said, I was told a rumor, or I hope it’s not a rumor, Professor Hudson, that you said something that no professor at the New School could have said. I said, well, then I couldn’t have said it, could I have? That ended the discussion. They could not have said. In other words, it couldn’t be discussed in polite company. I was really glad to leave the New School. Under Hal Bronner, it had descended into Stalinism. 

Okay. All these anecdotes and more on another Hudson discussion session here with our Patreon team. Again, thanks so much for your support. It makes Michael’s life and all the team behind the scenes, helping him bring out all of this incredible work so much easier. A big thanks to the Real Progressives again for hosting us here. 

M: Well, I like the discussions. We could even have a more active. They always give me ideas. I get ideas in the process of discussing things. If people don’t ask me questions, I spend all my time writing about the Crusades and the medieval history I’m writing right now. 

K: Yeah, fantastic. Well, the next one will be in early December. So yeah, let’s keep the discussions going on the Patreon page. Yeah, always learn a lot, Michael. Incredible. I feel like I know every corner of your life, but then a new angle will come through. So yeah, thanks again. And thanks to all the participants.

M: Thank you. Thanks both of you. 


Photo by Masood Aslami on Unsplash