Hudson Patreon Q&A 2023Q4 – Dec 8

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KARL FITZGERALD: All right, well let’s get into it. Okay. Welcome everyone to our final Q&A session for 2023. Always good to be with you. My name is Karl Fitzgerald, I am an economist and Michael’s webmaster of about 14 years now so always good to have our patreons here. And just so good to be with the prolific Michael Hudson, who has yet another book coming up. I hope everyone’s speed reading skills are improving, because they’re just coming out one after the other, Michael.

MICHAEL HUDSON: “The Temples of Enterprise.” It’s all of my academic essays on the origins of money in the ancient Near East, the origins of interest rates, and especially the origin of land tenure and cities. This is how the first land tenure,— 

[For instance,] it was taxes that created land rights, not the taxes that intruded into land rights. Everybody was assigned land according to how much tax they could pay to support the army, to support themselves, working on infrastructure and corveé labor, and then money was created in order to pay the tax, what you owed in the tax debts.

So money was created essentially to pay the public sector, not individuals bartering, going to the market and bartering what they did. Money was only used part of the year at harvest time to pay all the debts, all the early economies, Stone Age through medieval Europe, operated on credit.

You’d only use money when you’d harvest the crops and then money would just be used to settle what everybody owed everybody else for, during the year, and what they owed in taxes and to pay the church.

KARL FITZGERALD: Yes, tax as the base of the point of validity for credit and money creation is something we need to be reminded of. Just another reminder to patrons here to put your questions in the Q&A section.

And Michael as we start from that point, I wanted to start the discussion off today, looking at one of the many incredible but hidden economists that not too many people know about, and that is Michael Flürscheim (1844-1912). How does his understanding of money and the commercial exchange systems he set up relate to this importance of having some credibility behind the money?

MICHAEL HUDSON: Well, Flürscheim actually is a great, great economist of the late 19th century, who nobody’s heard of. He was a German iron maker, a manufacturer, who moved to America, and then was intrigued about land rent and the land tax. He became a very close associate of Henry George (1839-1897). Henry George as you know was such a loner, such a narcissist, that he really needed a manager, and so Flürscheim tried to bring him to Europe and spread the idea of a land tax. But Henry George was afraid to go out of his room very much and [was] very shy, and it was all sort of a disaster.

So Flürscheim came back to America and actually became the most logical economist explaining the tax system and the land tax. But there was one problem, and he said that Henry George and the followers of George said that a land tax will cure everything. Bad weather, a land tax will cure it. He watched George run for mayor of New York, and George was run as a celebrity candidate by the labor unions and by the socialists, thinking, well, if anybody wants to tax the railroads and get rid of the railroads as landlords, tax the landlords, that sounds like socialism to me.

But Henry George said, well, now that I’m running for New York, I’m going to throw out your program. I hate socialists. I hate Karl Marx. I’m a libertarian, and all you need is a land tax. You don’t need consumer rights. You don’t need renter’s rights. You don’t need pro-labor things. All you need is a land tax. And, of course, everybody thought, well, this guy’s going crazy. 

So what Flürscheim said was, well, behind all of this takeover of land and real estate, there’s finance. And Flürscheim wrote a book called “[Clue to] The Economic Labyrinth” (1902) that was published in Perth, Australia. He came to Australia. He gave up with America. Because the Americans and essentially the Henry Georgists were such unpleasant sectarian people that the socialists stopped talking about land taxation. They said, okay, we’re going to leave the land tax to the nut crowd, and we’re going to talk about labor-capital relations and workers’ relations and labor unionization. 

Henry George hated labor unions. He said that that was a monopoly. He backed the banks. And Flürscheim said, but it’s the banks that are backing the landlords. It’s the banks that are turning land speculation into a financial game.

Of course, Thorstein Veblen (1857-1929) described all of this in his wonderful book “Absentee ownership [and business enterprise in recent times: the case of America]” (1924).

Well, what Flürscheim did was say [that] the real problem of rent collection is money. It’s compound interest. 

And back in the 1960s, when I used to go around bookstores, there were still a lot of antiquarian book dealers in New York. And I’d look for books by people who I’d never heard of. And it’s a grand bookstore, and these economic specialist dealers like Sam Ambaras or Gus Kelly or Sidney Millman. I think it was Sidney Millman’s in Brooklyn that I found this book, “Clue to the Economic Labyrinth”. And I bought it, and I thought, I read it, and I’m just absolutely flabbergasted at what a wonderful book it was. I discussed Michael Flürscheim in my book, “Killing the Host” (2015), where I discussed compound interest.

But Flürscheim said, if you don’t deal with the tendency of debt to grow exponentially, much faster than the economy, then this is the most serious problem. And Leo Tolstoy (1828-1910) in Russia came to exactly the same conclusion. He said, well, he was a supporter of Henry George. He was all a supporter of the Land Pact. But he said, if we don’t deal with the financial problem of privatized credit and interest-bearing debt, that’s just going to swamp the whole economy, too. And he wrote quite a bit about that.

And what happened is, together, they were describing a symbiosis between finance and real estate into what we now call the FIRE sector, finance, insurance, and real estate. And that was exactly the part of the economy that the anti-classical reaction stopped talking about. And it was Flürscheim, more than anyone else, that tied everything together. And he became really the promoter of the idea of land taxation in Australia, and at the same time was trying to push for the fact that money is a public utility. Banking should be a public utility, just like communication is a natural monopoly that should be a public utility. And public health, education, he wanted all that to be. But obviously, the power of England sort of overwhelmed Australia, and they backed the banking, as you know. And Australia ended up in the same position of most of the other countries. 

But Flürscheim wrote a whole series of books on economics, and he’s just one of the great economists of the late 19th century that really, they’ve been written out of the history books. The economic history is very much like the Hollywood star system. You know all the stars, but you sort of ignore everybody who’s not a star. Same thing in music. There are a lot of really good musicians around, but people somehow only want to go and hear the very top people. But there are other people. 

For instance, I was asked to write an introduction to another German, Heinrich Scherz, who was really the first economic anthropologist. And he wrote a book on the origins of money in tribal indigenous societies. And he was dealing mainly with the German colonies in Africa and in the South Pacific, and talked about essentially the origins of money and how the origins of money began in anthropological tribes as part of the credit system, a part of the mutual support.

But most of the money in primitive tribes is personal adornment. They’re seashells to wear as necklaces. They’re forms of money that you can wear. They’re for conspicuous consumption. They’re not the kind of thing you would barter at the market for between shoes and just going to the marketplace. 

But when money came in, he said, this foreign money is very different from domestic money and international money. The kind of money that you get in foreign trade breaks down all of the domestic protection that you have, and economies begin to polarize. And so here you have, he was very well known in Germany as an anthropologist, but not many people anymore read German. His book’s being translated into English and published in February, and I’ve written the introduction to it. 

You see a whole flowering of economic thought that occurred in the 19th century leading up to World War I, and the whole world was going in such a positive direction. And then World War I interrupted the whole momentum. People stopped talking about socialism. They stopped talking about public infrastructure. They stopped talking about land and finance, and everything became a trade and goods that people exchanged— “exchange theory”. “Price theory” was: no concept of unearned income, no concept of money, wealth being different from actual, tangible capital formation. 

Economics really has gone downhill ever since World War I, and so I’m trying to popularize what classical political economy really was becoming in the 19th century. Way beyond— in addition to Marx, there were many other great people, and they’ve all been pretty much ignored. So Flürscheim and Scherz are just two of the people who were really pretty great.

KARL FITZGERALD: Yes, well, let’s make sure we get the “Clue to The Economic Labyrinth” on your website, because you can find that PDF online. Excellent, excellent book [incredibly poetic writing too].

And Matthew Connors mentions, you talked about Sidney Millman. Was he any relation to Seymour [Melman]? 

MICHAEL HUDSON: No, [Sidney] M-I-L-L-M-A-N, and he later moved to Chicago. Seymour Melman was one of the three Columbia Group. I wasn’t at Columbia, although I took courses there. Seymour Melman, Terence McCarthy, and myself were the three economists called the Columbia Group, going over how the Vietnam, opposing the Vietnam War, and showing how the cost of the Vietnam War was going to distort and ultimately drive the United States economy off gold in the 1960s. And we went around New York, and really around the country, giving speeches. We were essentially the anti-Robert McNamara group.

When McNamara would come out with statements about the economy, it was Seymour Melman who talked about guns and butter, that you can’t have both. And it was Melman who developed the idea of “Pentagon capitalism” [as in his book “Pentagon capitalism: the political economy of war” (1970)].

[In] “industrial capitalism”, you’re supposed to succeed by cutting costs and underselling your rivals, and your country is supposed to promote cutting costs, so that America, in principle, won in the 19th century by underselling Britain, Germany, and other countries, largely because it had public utility, the public sector picking up many of the costs that private people had to pay in Europe.

Well, Melman talked about, he said, Pentagon capitalism is the opposite. The Pentagon contracts— (and this is why they’re making so much money today. This is why there’s so much money to finance the war in Ukraine and in the Near East). 

Pentagon capitalism is “cost plus”. In other words, the military industrial sector will agree to produce aircraft, or submarines, or guns, or toilet seats at cost, and they’ll add 10%. So the idea, if you’re a military industrial producer and making toilet seats that you can get for $20 at the local hardware store, there was a big scandal in the Pentagon when they paid $250 for the same toilet seat, because that enables the military firm to make a $25 profit at its guaranteed profit. 

So this is engineered across the board. The idea of making the F-16 airplane was to over-engineer it. What is the most expensive way that we can make every element of the aircraft, every element of the submarine? Because the more expensive it costs to make an aircraft or a submarine, or the kind of tanks that are sinking into the ground now in Ukraine, now that it’s the rainy season and the heavy American tanks are just going right into the mud, well, you just make them as expensive as you can. And that’s why Russia and other countries are able to do so much more with one-tenth of the budget for arms that the United States spends and charges its European satellites for when it forces the Europeans or Australia to buy this over-engineered American submarine instead of, say, the French submarine. I guess it’s in your news recently. 

So, yes, anyway, that’s Seymour Melman, bringing back fond memories. He was teaching at the Harvey Mudd School of Industrial Engineering at Columbia, and so was Terence McCarthy. And I took all of Terence’s courses there, because he was my mentor. And this Columbia Group, really, we were going to churches and giving talks. We were on the radio a lot. That was really the only economic opposition there was to the war. Most of the opposition just said it’s wrong to kill a whole country. It’s wrong to do what Kissinger is doing. But they weren’t saying this is economically wrong. 

And I remember at Chase, Manhattan, when there was an argument between David Rockefeller, the incoming CEO of Chase, and George Champion, his predecessor. And George Champion said in the early 1960s, that the Vietnam War was fiscally irresponsible. We shouldn’t do it. And David Rockefeller’s economist, my boss, John Deaver, said, well, but that’s the “merchants of death” argument, saying that you’re going to decide whether or not to fight a war, according to how much it benefits the economy. And he said, so you shouldn’t argue that it’s bad for the economy, because if the war fight is right, then we should go and kill them all and do it because it’s the right thing to do, not shy away from bombing Vietnam and Laos and Cambodia, because it’s bad economics. 

Well, right now you have Biden making sort of the merchants of death argument. Biden says, look at how many military industrial producers there are in every small town of America. He went to Pennsylvania and said, look at Pennsylvania here. Your people are making guns. You’re making parts of the tanks. The war is good business for you. And Biden, in speech after speech recently, has been saying, war is good for economy. That’s what’s supporting our employment. If we didn’t have a war, we wouldn’t have so much employment. So give us more money for Ukraine, because all that money is really paid to the military industrial complex, meaning to you, the American working man, to be employed making these weapons to kill other people. So if it makes money for higher wages and for profits, that’s all the justification we need for war. Forget the moral issue. 

And in today’s Wall Street Journal, you had the former president of Harvard come out and saying, universities should stop teaching philosophy. If you teach philosophy, you’re going to do things like oppose the war in Israel. You’ll support the Palestinians. And look at all these campus protests. They’re all because students are studying philosophy and the humanities. We’ve got to stop them from being taught in the American curriculum. That’s the top of the editorial page of the Wall Street Journal today on December 7th. It’s just amazing. 

Maybe I should post that on the Patreon group, just because it’s so unbelievable that the former president of Harvard, the nephew of the awful economist, Paul Samuelson, should come out with this kind of garbage. I mean, this is the economics and this is the politics of fascism. 

KARL FITZGERALD: It is. And Diana DiRienzo says, USA motto for the last 60 years, plenty of money for war, no money to help the poor. And Michael, here in Australia… 

MICHAEL HUDSON: And Biden says, making war will help the poor. Yes. That’s what it is. 

KARL FITZGERALD: Well, what a monopoly market the military-industrial complex have. And I noticed John Cardaman mentioned in America, and of course, I’m not across this, but government spending, public spending is 40% of GDP. Is it really that high, Michael? Australia, we’ve got a limit of around about 24%. 

MICHAEL HUDSON: It costs a lot of money to bail out insolvent banks. It costs a lot of money to wage war. It costs a lot of money to pay off the Ukrainian kleptocracy. They’ve given $300 billion, I think, to the Ukrainian kleptocrats just to steal. And put offshore. So if you take the Cold War spending that America has, more than all the other nations put together, all that’s part of GDP. And also, we’ve had a lot of hurricanes here, that pushes up GDP. And the government has to spend for that. 

Government spending on interest is now going to go way, way up. The government was spending 0.1% on its federal debt, and it’s now issuing 10- and 30-year bonds at 5%. Two weeks ago, it was 5%. Now, it’s down to 4.3%. But all of a sudden, you’re having this huge government debt, and it’s going to be huge interest payments. You can just imagine why the government is so great. This government spending is not really on GDP that produces goods and services. It’s creating financial wealth. It’s paid basically to the upper 10% of the population and to the financial sector and the military sector. That’s not really what most people think of when they think of GDP, but that’s what it is in America. 

KARL FITZGERALD: The crowding out of private sector investment in productive areas must be immense if government spending is so high. No wonder inflation has such a tendency. 

MICHAEL HUDSON: No, it’s not crowding out. It’s tearing it down. You’re not crowding out factories. Let’s fire all the workers, sell the machinery, and let’s turn the factory into gentrified housing. 

New York City used to be a manufacturing city until maybe the 1940s. In the 20s, 30s, 40s, and 50s, it was. When I came to New York in the 1960s, there was still a cheese and dairy section in lower Manhattan, in NoHo, in Tribeca. All of this production has been replaced by a real estate promotion project. You’ve turned the whole economy from an industrial economy into a real estate promotion project that has really been organized by the financial sector. 

My friend, the late Bob Fitch, wrote a wonderful book, “The Assassination of New York”, showing how the real estate lobbyists ended up de-industrializing New York City as a model for de-industrializing the whole American economy. It’s a great book, “The Assassination of New York”. It was Bob Fitch, who I’d known since the 1960s, that convinced me to pay more attention to the FIRE sector and to real estate 50 years ago. 

KARL FITZGERALD: Another one of these books we’ll put on our reading list. Don Burns asks,— 

DON BURNS: where in the FIRE sector do lawyers fall into? 

MICHAEL HUDSON: Mainly in the financial sector, but also real estate. 

For instance, Donald Trump made his money by cheating people. He would promise to pay labor or to pay, let’s say, somebody was going to send him 30 pianos for one of his gambling projects. They borrow the money from the bank, produce the piano, sell to them. Then Trump would say, well, you know, I really don’t like them. I’m only going to pay you 50%. That was an answer to everything. I’m only going to pay you 50%. 

In America, it costs about $50,000 to bring a lawsuit against somebody. The lawsuits usually take three to five years to work out. The judges are appointed by the banks and the real estate contributors to their election campaigns. It’s the FIRE sector that determines who the judges are going to be. In essence, the lawyers are an extension of the banking, financial, and real estate sector who appoint them. It’s so expensive. 

That was there in a way from the very beginning of the United States, before it was the United States. Back in the colonies of the United States, you had British moneylenders coming to New England and the South. They would look at farmland they wanted. They would make a loan to a farmer who had some piece of land they wanted. 

At that time, in the 18th century, you could call in a loan at any time you wanted. They would call in a loan just before harvest time. Of course, the farmer couldn’t pay because he hadn’t done the crops yet. They would try to take over the land. The colonies, and this became U.S. law, did something in America that was very different from every other country. In America, each side has to pay for the plaintiff and the defender. They have to pay for their own lawyers.

So, if one of the victims of Donald Trump said, look, this man cheated me. He only paid half of what he owes me. It’s been three years. It’s overdue. He still has to pay his own lawyer. As under European law, and the law of most other countries, if you win a case against a crook, the crook has to pay your legal costs. That’s not the case in America. If you’re a crook, you want a lawyer up, as we say in America. The crooks are all lawyered up. The crooks are the FIRE sector. The crooks are the banks, the landlords, and the monopolists. It’s very hard to get any kind of economic justice. 

For instance, when I was buying my loft on Murray Street in Tribeca, this goes back almost 50 years ago, a lawyer tried to cheat us and bought the building for himself. We agreed to buy a building. The lawyer took the money and bought it in his own name. When we went to court, the lawyer and the judge all of a sudden began talking Hebrew. The judge, needless to say, postponed it. Then I had an English-speaking judge. The lawyer for the real estate firm, Scanlon Arts, said, I have another appointment. I have to go immediately. I said, no, I can’t do it now. He wanted to get back to the Hebrew-speaking judge where they talked again. It just went on and on and on. The landlord-tenant court in New York is notorious, to make a long story short. 

KARL FITZGERALD: Well, we’ve talked a bit about some of the unknown economists of yesteryear. This question from Steve M gets me excited because we can talk about Matt Stoller, one of the current-day economists. I hope everyone’s following on his Substack page. He’s also got a Patreon, I think, as well. Matt Stoller, releasing all sorts of incredible- Stoller, make sure it’s S-T-O-L-L-E-R. Yes. Steve asked,— 

STEVE M: Michael, you previously stated the lack of antitrust enforcement and the enabling of monopolies by the current administration is leading to widening inequality and economic dominance by the corporate sector. The current chair of the FTC, Lina Khan, has been going after private equity in the healthcare sector and is currently going after Amazon for illegally maintaining monopoly power. What do you make of these aggressive actions on monopoly and antitrust by this FTC chair as far as making any sort of impact? 

MICHAEL HUDSON: I’m a direct victim of Amazon’s monopoly. All of my books are self-published. That’s because no commercial publisher wants to publish them. I self-publish them, and I have print-on-demand through Lightning Source. The print-on-demand, I give a discount. When you fill out the, what are you going to price the books, you say, what discount will you give? Well, for the last 10 or 15 years, I give a 20% discount. Most bookstores have high overhead, and they want a 40% discount. Amazon all along has offered a 20% discount because of print-on-demand and because they don’t have to have a bookstore. They don’t have to pay rent and have a knowledgeable staff help you. I’ve been able to price my books at a fairly low price that doesn’t yield much because I’m trying to popularize them. 

Well, about six months ago, the company that I work with, Lightning Source, is owned by, I won’t go into the names right now, but they said our clients, meaning Amazon mainly, now insist on a 40% discount rate. Well, that means that out of the retail price of every book I sell, instead of giving 20%, as I have for the last 15 years, I now have to give 40%. Well, that doesn’t leave any,— that means virtually I’ve reduced the book at a loss, unless I raise the price. Well, it’s very hard for me to do the, I’m not a high-tech person, and I’m relying on my publisher to do the repricing, but she’s very sick right now, and I haven’t been able to reach her, and I don’t have anyone to act as someone who can upload books. 

If there are any people who want to upload books or play the role of a publishing tech person, I would welcome their bit, but now all of a sudden, Amazon has just doubled its take from the former 20% to 40%, and I don’t have a choice, because who else, now that Amazon has become the book market, there are a couple of other sellers, like Abe Books, and there are maybe three or four, but there are no longer bookstores, like there used to be, so they’ve used their monopoly power to take 40% instead of 20%, and so the monopolist gets much more money than I do, because I have to pay for the type setting, I have to pay for the book design, the cover design, I have to pay for the printing costs, and then the guaranteed profit off the printing costs and the commission costs, so you can see how the effect of the Amazon monopoly is basically stifling small businesses, and if you’re not big enough to really set up your own distribution network, you’re at the mercy of the monopolist.

And the one good thing that the Biden administration has done, Matt Stoller has just explained, was appointing the lady that he’s appointed to be in charge of the anti-monopoly to try to take on Amazon and also the drug companies, for vastly overpricing, and right now you’re having a lot of the health care companies all wanting to merge to get into what’s probably the greatest rip-off in recent history, Medicare Advantage, which is pretending to be Medicare, which is the government program, but privatizing it, and it’s how Margaret Thatcher would have run the economy if she were in charge of the government, or how Milton Friedman would have, it’s a total rip-off. And the one good thing that Biden has done is appoint this.

But he’s very embarrassed about this, he’s afraid to say it in his campaign speech, the last thing he would ever say is I’ve done something good for labor against the monopolists, because the monopolists are his campaign contributors, and so he’s not even going to pretend to take credit for the one good thing he’s doing to protect consumers and labor, because all of his money comes from the FIRE sector, and the military industrial complex, and Amazon and the monopolists.

KARL FITZGERALD: It’s so sad, Michael. It really is. I don’t know how you stay sane, mate. You must listen to some loud music. 

MICHAEL HUDSON: Well, I’m writing my book about the Middle Ages. I’m writing my book about the Crusades and modern finance. Most of my day is spent working on my history of debt. 

KARL FITZGERALD: One entertaining aspect is seeing Trump being bailed up for his over-the-top real estate valuations and trying to rewrite the laws there. 

Michael, I haven’t seen enough commentary on the inner detail of how important this case is and how fundamental it is to property rights and that link through to our credit system. 

MICHAEL HUDSON: I don’t think it’s important at all. If I wanted to borrow from a bank, I’d say, well, my apartment’s worth $10 million. Will you give it to me? They’re on to me. They’d say, no, no, we’re going to send out an appraiser, and we know what it’s really worth, and it’s nothing like that at all. We’re going to give you a mortgage based on what we value the property. 

In 1980, I decided to move out of the Lower East Side in Manhattan, the slum area. Actually, I wanted to refinance my mortgage. I bought the house for $45,000. I asked Chase, I think the house is worth maybe $125,000. Chase sent out an appraiser. I guess I can say this over the phone. He said, only a n*** would live in this neighborhood. He kept running out to see— it was a more Puerto Rican neighborhood than Black— he kept running out to see if his automobile tires had been stolen. He said, it’s not worth it. It’s only worth $80,000. So I put it up for sale. I put an ad in the New York Times on a Saturday, and people came over. I was asking $150,000, and then people said, well, I want it. Then someone else said, no, no, let me buy it. I said, well, let’s have an auction right here in the kitchen. They bid it up to $225,000, and they threw in for $20,000 where I lived on Murray Street that I sold for $520,000.

Under the law, the attack on Trump, Chase could have tried to say that, hey, you’re overvaluing your house. You think it’s worth $150,000, and when that’s only half of what, I was wrong. I’ll show you how much I know about real estate. Everyone who wants to borrow a mortgage or needs money is going to say, hey, my thing has worked. At NYU, for instance,—

You can go now on Zillow on the computer system in America, and you can type in any address you want in the United States, and it will tell you what the appraised value of that address is. The banks know what property is worth if they’re making a mortgage against it. The bankers who Trump dealt with said that Trump didn’t cheat us. We knew what the property was worth, but we also knew that he was going to pay us, or we had the illusion that he was going to pay us. He probably paid the money under the table, because the bankers in America, if you really want to be a successful criminal, you want to go into banking. I’m sure the bankers were paid off to make a much larger loan, but they said, we knew that we’d do our own valuation. For us, the important thing was to lend money and get interest on it. Of course, if somebody’s dumb enough to overvalue their property and promise to pay us more income, and then pledge other property against it, of course, we’ll lend them the money. The more, the better, the more interest we get. 

All of this case against Trump for financial fraud, it’s the banking sector that’s a fraud, not the mortgage borrowers. It’s the lenders that are the fraudulent people. That’s why we had the collapse in 2008 for the junk mortgage fraud. Nobody went to jail in the collapse called junk mortgage fraud, and now they’re trying to say, well, maybe one person from the whole 2008 fraud may be prosecuted, and that’s Donald Trump. No banker, no borrower, not a Countrywide Financial that was writing the false mortgages at much more than the value. It was the banks that were overvaluing the property, not the borrowers. 

I’m surprised that Trump hasn’t come out and said, this is selective prosecution. You don’t want me to be president. He’s not handling the campaign very well, or his legal case, he’s not handling it very well. He doesn’t have good public relations people, because the last thing he’s going to say is that his colleagues are all part of the fraud system, and fraud is how business works in America. That’s not his defense, but it should be. 

KARL FITZGERALD: Michael, I was trying to point towards this overvaluation phenomena as a real estate strategy that was prevalent in 2008 when Goldman Sachs was busted with the list of appraisers that would always add plus 20% to a valuation so that those sites could then be leveraged upon through the banking sector for the next investment. That’s obviously what Trump’s play was, real estate 101, and he’s trying to defend that. 

MICHAEL HUDSON: No, Trump intended to default. He thought he could outsmart the bankers, and he did default again and again and again, and when he defaulted, the banks would lend him the money because they realized bankers are not competent in running a business. They can’t even run an apartment building. They depend on someone else to do all the work. That’s why, as John Stuart Mill said, they make their money in their sleep. That’s what rentiers do. They make money in their sleep, not by working. 

So Trump intended simply not to pay and say, well, I’m only going to give you 80% of what I owe, and the banks still ended up making money because what they did in 2008, they didn’t end up holding these bad mortgages. They found suckers, and we all know who the biggest suckers in the world are, the Germans. I mean, they’re so dumb that they let America blow up their gas pipeline and their chemical companies, BASF, are now moving to China. They were so dumb that they were the only people that believed the American banks selling them these packaged junk mortgages.

And I knew some of the local Landesbankers in Germany, and they all said, well, America wouldn’t cheat us, would they? I mean, where is your mind at? Do you read the newspapers? So the banks overvalued because they found a sucker, and they found pension funds in America that would buy. The pension fund managers, they’d take them out for dinner. They’d buy them prostitutes and give them a good time, and the pension funds would end up losing all the money. You didn’t have to be a mafia-run pension fund to be corrupted and incompetent in America. 

KARL FITZGERALD: Okay, let’s switch back to the multipolarity sort of discussion. John Douglas asks,— 

JOHN DOUGLAS: Most folks in America say BRICS doesn’t have a chance to catch up with the West in terms of capital formation due to the asset hoarders. However, if they have the natural resources, cheaper labor, and industrial base, what means will they be able to fight back against the financialized EU-US? 

MICHAEL HUDSON: I don’t think they’re going to fight back at all. You don’t have to fight back. You just have to go away. Go your own way. There’s not any fight between the West, the “garden”, and the “jungle”. Eurasia, China, Russia, the whole global South, the whole global majority doesn’t have to fight with America and NATO. It can simply go its own way and do its own thing and have its own alternative to the neoliberal-type economy. 

So we’re seeing the world divide in two. It doesn’t have to fight. You know, the last fight we’re having, I guess, is for America’s fight to control Near Eastern oil by arming Israel to essentially try to conquer all of the Arabs on behalf of America and England and NATO. I don’t think there’s any other interface between the global majority and the rest of the world that is going to be so far. 

You have Italy now saying it doesn’t want, under the neo-fascist leader that they elected, they want to withdraw from China’s Belt and Road Initiative. You’re really having the world break into two parts. Not a rivalry, just two parts going their own way. 

KARL FITZGERALD: With the BRICS currency being backed by gold—

MICHAEL HUDSON: What? What?

KARL FITZGERALD: Well, is that what’s happening? What’s the BRICS currency going to be backed by? 

MICHAEL HUDSON: No. There’s not going to be a BRICS currency. It’s not a word that should be used. There will be a means of settlement among central banks for the international balance of payments, imbalances between surplus and deficit countries. 

But a currency is what you spend at the grocery store or you have your bank account in. Individuals won’t have BRICS currency. 

This is an accounting system to evaluate if India and Russia are buying oil from Russia or Russia is selling oil to China and there’s an imbalance, how are you going to settle the imbalance? Well, in the past, the countries would simply say, oh, we’ll buy dollars with our economic surplus because America owes so much debt that this debt has become a vehicle to hold our savings in. But other countries now don’t want to finance America’s debt because of military debt. And that’s what’s financing the war of NATO against the global majority. They’re just going to create what John Maynard Keynes called the bancor back in 1944. 

My book, “Super Imperialism”, describes the bancor idea. “The Destiny of Civilization” also discusses this. So essentially, it’s going to be a means of central bank settlement, but not really a currency. Nothing like gold. Countries are going to buy gold with their balance of payment surplus because they don’t want to lend money to the U.S. government by buying treasury bonds. And if there’s not enough bond, each other’s government debt to buy, then gold is something that people at least have agreed on for the last few thousand years as a kind of neutral, pure asset that’s not a liability. They’ll probably use gold for their own internal reserve, but not as a kind of money or currency. 

KARL FITZGERALD: Okay, keep the questions coming through on the Q&A channel if you can. 

Michael, are there any more recent updates in the BRICS space as the de-dollarization movement builds? 

MICHAEL HUDSON: I’m sure there are, but it’s been a secret for the last two days. We know that President Putin has gone to the Arab countries for one day and then flew back to Moscow to meet the Iranian prime minister. So I’m sure that Russia, the Arab and the Islamic countries, and China have all drawn up their response to the American and Israeli attack on the Near Eastern oil and gas countries. But we have no idea. They did not have a press conference saying this is what we’ve decided. But I think there’s something that they must have decided, and I’m sure it has to do with how they’re going to restructure the international economy in their favor. 

KARL FITZGERALD: Yes, how are those Palestinian gas fields looking, you think? Israel’s ripening up to claim some of those. 

MICHAEL HUDSON: How’s the Palestinian what field looking? 

KARL FITZGERALD: Gas fields. 

MICHAEL HUDSON: I don’t understand. Somebody said there was an agreement between Lebanon and Israel, but I don’t see what’s going to happen there. You’re going to have Turkey playing a role in that. Everything is up for grabs right now. I know that Israel would love to say, well, now that there are no more Palestinians, I guess the gas fields are part of Israel, because there are no more Palestinians in Israel. They’re only us. So, of course, the gas fields are Israeli, because there isn’t any Palestine anymore. That’s their position. But what will the position of Turkey and the Arab countries be? 

KARL FITZGERALD: Yes, the pass-the-popcorn question of the day is David Benton asked,— 

DAVID BENTON: With Argentina opting out of BRICS, what South American country is likely to replace it? 

KARL FITZGERALD: And my little take on that is, you know, what’s your perspective on Javier Milei, the new Argentinian president and his radical take? 

MICHAEL HUDSON: Nobody, nobody can figure out what’s happening in Argentina. It has been a failed state for 100 years. 50 families control the whole state and all of Argentina, almost all of Argentina’s foreign debt. And indeed, all of it, back when I was dealing with that in 1990, is owed to the leading families. And this is the dollar debt, the U.S. dollar debt. The Argentinians have moved their money offshore into offshore banking centers and re-lent the money to Argentina and to their own companies in dollars so that they can essentially not have to pay any income tax and can move all of their earnings offshore. 

Argentina is a totally corrupt country that cannot function without a revolution. So it’s not a problem that I or anyone can solve. It’s a quandary and a quandary is a problem that can’t be solved. 

KARL FITZGERALD: Conrad Salem talks about— 

CONRAD SALEM: Yanis Varoufakis talking about rich people in BRICS countries are against replacing the dollar as they have so much wealth in U.S. dollars. 

MICHAEL HUDSON: What’s the question? 

KARL FITZGERALD: What do you think about that? Does he have a point? Will the Chinese government take care about the interests of wealthy Chinese billionaires holding dollar wealth or wouldn’t it matter to them at all?

MICHAEL HUDSON: They certainly don’t. They don’t want dollars. Right now they have capital controls trying to minimize the capital flight from China. And obviously right now there are a lot of people who’ve made money in real estate and they want to get their money out of China because if you make a billion dollars in China, China is likely to come and say, well, you really should give some of that money back to China. That’s more than you need to live on. So China doesn’t want dollars particularly to flow into the economy, but it doesn’t want its own currency to flow out. It wants to more or less isolate the economy financially from other countries so that it can avoid the kind of disruption and speculation that the Westerners would love to make in China.

The Westerners would love to lend money to the Chinese, buy control of their industry, privatize their infrastructure, and then send their monopoly rent back to America. But China doesn’t need foreign currency inflows. So if you don’t need dollars, if you don’t have a balance of payment deficit, but have a balance of payment surplus, and if you see the dollar going down in exchange rate like 4% in the last few months, why on earth would you want dollars? 

Basically, this is a non-problem. China is trying to prevent capital flight because if there is capital flight, it’s probably by transactions that the government would prefer not to occur. At some point, I think China is going to be restructuring its financial and real estate sector. 

KARL FITZGERALD: Yes, it’s certainly been, they’ve fallen into the Western trap, haven’t they, of following property and all those ghost apartment blocks all over the place. It’s such a tragedy. And yeah, for me, I was, you know, we’re so worried about the influence of property on democracy, but to see President Xi also delay the taxation of land and real estate, obviously because interests are too powerful in that society as well. 

MICHAEL HUDSON: Not really, it’s a little more complicated than that. 

I think, 30 years ago, 40 years ago, China decided, let’s, we’re not going to plan the economy. Russia tried that and it didn’t work. So we’re just going to let— free up the economy and let each locality pretty much govern itself. And let’s see what kind of self-government operates the best, and then we can pick the winners and that will form an example for us and we’ll see what’s happening. 

So what happened was that there’s very little,— China does not have what America has.

[America has] federal revenue sharing with the localities, where the federal government in Washington will contribute money to the state and budgets of the United States. 

China doesn’t have the Bank of China making the federal budget include the support to the local cities and towns and villages, in China. They’ve, they’ve let everything go its own way. 

Now what this did was, essentially, it wasn’t that they adopted an American model. It was the line of least resistance. If you were a mayor of a small village in China or a town, how are you going to get the money, to build water and sewer and infrastructure and schools and all the other things that you expect the city to provide? What they did was sell off land, and they sold off land to developers, and the developers then would borrow from banks, although, I would say central banking, but it’s really the treasury, of China is a public utility, not like in America where, the Federal Reserve is, acts on behalf of private banks. The government bank would extend credit to “near banks”, to intermediary banks that would lend money to real estate developers. 

And so you can imagine if a developer were building one of the gigantic buildings that they have right next to each other, right in a row in China, they would borrow the money, sell it, and people would want to buy it not only to live in themselves, but they’d buy it for speculative purposes. Many Chinese are moving into where I live in New York, in Forest Hills, buying buildings, buying apartments, or even buildings, with all cash that they bring from China. 

So, here’s what I would recommend that China should do. Obviously, a lot of people who borrowed to buy buildings, right now a lot of the properties they bought can’t be sold because some of them aren’t even finished. Evergrande and some of the other companies have not finished building. How could China avoid this happening for the future? Now it’s had 40 years of experiments to see what works and what doesn’t work.

Here’s what they could do. Suppose that you’re a developer or real estate investor, you build a building, you put it up for sale, and in America and in the West, you’d have people bid against each other, and the leading bid would be the one to buy the building. Well, how did the family in the West make the winning bid against a rival? They borrow from the bank, and so property is worth whatever a bank is going to lend. 

Well, here’s an alternative that China could do, and I think you will love this, Karl. I just actually thought of it this morning waking up. The, the developer, will, we know what the developer paid to build the building. He’ll be permitted to make a given profit on the investment, whether it’s 10 percent or 25 percent, whatever the rate of profit, that’ll be the price of the apartment, and, suppose the people be, and the apartment cannot be, basically sold, over that price. 

So, how are people going to decide, compete with each other to buy it? Very simple. What they will bid against will be the carrying charge for the land tax on this building. And, gradually, not only at the very beginning.

You’ll have an auction that’ll set the price by whoever is willing to pay the most carrying charge for the land tax. The price of the property will not go up. Property will not be an investment good. Property, no one will buy property for speculation, saying that, oh, it’s going to rise in price. Because, if it rises in price, the land tax will increase to absorb the price rise, so there will continue to be an equilibrium with the original price of the building, but the carrying charge, representing the land’s rental value for the site, will be reflecting the current market conditions.

What do you think of that? 

KARL FITZGERALD: Interesting way to bail developers out again, but, yeah, I’d love to see that written up. Need to think about it a bit more, but it sounds like a good, you know, plausible policy in a down market. 

MICHAEL HUDSON: Or any market. In a growing market, it’s an even better policy in a growing market, because as areas are built up, as a town fills up, more communication, more transportation, more schools and parks, the people will bid up what they will pay for tax. That’s how they will, if people decide, oh, I can’t afford to live in such an expensive neighborhood anymore, then, they’ll move and somebody else will buy it.

You keep the market relationship, but it’s a fiscal relationship, and you don’t have the benefit of the increasing land price ending up in the hands of private bankers.

KARL FITZGERALD: Um, must be time. We got some people on screen. I see Flo’s trying to ask a question here. Um, whilst we get to that, um, Don Burns asked another good question—

DON BURNS: Michael, have you ever met Milton Friedman? Have you debated him?

MICHAEL HUDSON: I never went anywhere near the business school, when I was in Chicago in the 1950s. It was just another world. So no, I, I never did. And I think we’re talking about different things. I mean, I’m talking about reality and he’s talking about fantasy. It’s like NATO and the global majority, they’re just two different worlds. 

KARL FITZGERALD: Okay. Well, and I thought there might be another incredible story, similar to the Alan Greenspan story, but no.

MICHAEL HUDSON: You can’t argue with these people. You really can’t. The mind goes clank, clank, clank. And that, just, I’d rather talk with thinking people. 

KARL FITZGERALD: Okay. Well, does anyone want to come on screen and ask Michael questions? Probably should have asked that earlier. Here we go. Over to you, Flo. 

FLO: Okay. Hi, Michael. Hello. I can hear you. Okay. Um, yeah, I was wondering if you could explain for us, like we’re in, you know, a low level kind of class, the difference between a trade deficit and a balance of payments deficit and the significance of this, cause I do hear you mention it quite a bit and I’m not sure I fully understand. I hear lots of people talk about trade deficits all the time.

And one thing just on that note too, I remember in one of the previous Q&A’s, you had mentioned that some MMTers like [Stephanie] Kelton don’t really fully appreciate the balance of payments deficit or incorporate it enough. So I was wondering if you could elaborate on that.

MICHAEL HUDSON: Well, the trade deficit is so complicated that it takes a long time to walk somebody through it. I wrote a whole monograph on this, in 1969, on a payments flow analysis, it was published by NYU business school. 

Let’s take the case of oil. People would think that America had an oil deficit back then of, let’s say, a hundred billion dollars, that it cost to import oil, but, all of American oil, 100%, by law, was only imported from American oil firms. And the [money] that would actually be paid to foreign countries was only 17% of this.

What was most of the money that you paid to the foreign countries for oil just stayed in the United States. It was paid to, say, Standard Oil. And Standard Oil would say, well, we have to pay the Arab countries, maybe, 10% of the cost of oil is what it costs them for production. So, that 10%, then this oil is not sold by Saudi Arabia to [Standard Oil], it’s sold to [a Standard Oil] “affiliate” in Liberia or Panama.

[Now,] Panama and Liberia aren’t real countries [in the sense that] they use the American dollars, not their own currency. They don’t have an income tax.

So, the [Standard Oil affiliates,] Panamanians or Liberians would then have a marketing office. It could be just a little office, and they would then sell the oil [that they had just bought from Saudi Arabia] to [Standard Oil refineries in ] Europe or to America at let’s say 70 cents, 70%, of the price.

And, all of the profit that they made [(that is, 60%, or the sale price of 70% minus the purchase price of 10%)] would then be kept in dollars and then remitted to the head office [of Standard Oil], in [US] dollars. [All of the profit would be retained because Panama or Liberia don’t have income taxes, so the Standard Oil affiliate there would not have to pay any taxes on that 60%.]
[Meanwhile, the Standard Oil refineries that purchased the oil at 70% would sell it at 100%, but only after expenses of 30% to actually refine the oil.]
[In other words, the purchase price of the oil, at 70%, plus the tax-deductible expenses of refining the oil, at 30%, would equal the 100% sale price in the domestic US market of the refined oil.]
[To sum up,] the price would be so high, of oil that was sold to [refineries in] Europe and America that the refineries couldn’t make any money at all. So they didn’t have to pay any income tax [since they wouldn’t record any profit.]

All the money was made at the producing end [(e.g. in Saudi Arabia)] and the oil companies didn’t have to pay any tax on that.

And because they organized their oil wells in Saudi Arabia and other countries and consolidated with the parent company on the same balance sheet, not affiliates, but as branches, they got the depletion allowance on all of this.

[The depletion allowance is a tax deduction that allows owners of natural resources, such as oil, gas, and minerals, to recover the cost of extracting those resources over time. It is based on the idea that these resources are finite and deplete as they are extracted, so the allowance helps to compensate for the gradual loss of the resource.

There are two main accounting methods for recording the allowance:

• Percentage depletion: A percentage of the gross income from the sale of the resource is allowed as a deduction. The percentage varies depending on the type of resource.
• Cost depletion: Alternatively, the actual cost of acquiring and developing the resource can be deducted over the life of the asset.

The depletion allowance significantly reduces taxes on resource extraction companies. —ed.]

So, there was an illusion that the trade deficit in oil, let’s say, would cost a hundred billion dollars. And that actually would cost maybe 17 billion dollars. All the rest stayed in the United States.

Now, in the 1930s and early 1940s, this is how the balance of payments used to be produced, but then they changed the whole concept of, how do you calculate the balance of payments. And they invented the growth concept of gross domestic product.

And they said, let’s treat the trade deficit as if it were barter. Remember if you’re an economist, you don’t believe in money. There’s no such thing as money. There is no such thing as debt. Everything is barter ever since the stone age, there never was any debt. Debt cannot cause a problem because we owe it to ourselves. 

So they say, let’s assume that all of our trade is barter. And, this is the value, market retail market price in America of, the trade, and oil and, the manufacturers, everything else. So there’s an illusion of a trade deficit that actually is in surplus, but the GDP formatting doesn’t show that. And again, my monograph goes all the way through this and made out the whole point, for that.

Regarding MMT, the basic principle of MMT is that governments don’t need to borrow from the private sector. They can simply create their own money instead of having wealthy people just let the banks create money or just lend money to the government, the government can print it. 

So then some people say, well, then why does America borrow from China and other countries?

America doesn’t borrow a penny from China or other countries. America spends money militarily abroad. The whole balance of payments deficit is mainly military spending abroad. It gets into the hands of foreign central banks. What are they going to do with the dollars? Well, America won’t let China buy, or any other country, buy important American industries because we’re nationalistic.

So it essentially says, well, fortunately we have such a big government debt that, China, we won’t let them buy our industry. they’re not going to be suckered enough into buying our real estate like Japan did when it bought Rockefeller Center and golf courses that they lost their shirts on. We’ll let them just buy U.S. government debt. The government has to create a vehicle for countries to spend all the dollars that we’re pumping into the world economy by running up our military spending. And now, to be sure, our trade deficit, now that we’re not producing anything at home.

So America doesn’t have to borrow from these countries. All of that is quite true. But it does have to give them an opportunity, a dumping ground for all of the dollars that they’re getting that now are so large in volume that there’s no way America can ever repay it [for instance by contriving a cumulative balance-of- trade surplus equal to the value of the US treasury securities held by foreign central banks —ed.].

Think of America like Argentina. It’s also controlled by 50 families. It also can’t pay its debt. It also has crazy monetary theorists, running the country. But, there are a lot of similarities there and that’s why the world is splitting into two parts, right now.

So MMT is really focused on the domestic budget deficit and the fact is, that as Dick Cheney and Donald Trump said, deficits don’t really matter. We can run anything we want, printing it, and borrowing it, has exactly the same effect on inflation, asset prices and other financial effects. Did I make that clear? 

FLO: Yeah, yeah, for sure. 

MICHAEL HUDSON: Other people, you know, you have to do it. If I wouldn’t have been working on this every day, you know, for four years, at Chase, on Wall Street, if you don’t work with these figures, it’s very hard. It’s only an abstraction to people, and, this is something, there’s no balance of payments course. There are no statistical courses that are taught in American universities. You’re taught theory, but you’re not taught statistics, and so you’re not talked about what the categories mean. So you’re taught about words and philosophy, but not about what the numbers mean.

FLO: Thank you.

KARL FITZGERALD: Oh, no follow-up questions, Flo? 

FLO: Well, I don’t want to take up too much time, but Virginia’s on.

VIRGINIA COTTS:  Yeah, because, Michael, um, I’ve heard you say this before, and I’ve, I’ve talked with you about it before, but when you say that the U.S., like recently on a video, you said that when the U.S. “deficit spends”, it has to borrow from private capital.

MICHAEL HUDSON: What? It doesn’t have to borrow. America? 

VIRGINIA COTTS:  Exactly, exactly, but I swear you said it in a recent video, and let me just tell, it was, it was, oh, no, if the government doesn’t spend enough money into the economy, it will have to borrow from private sector banks. I think what you mean, because, because you talk like a banker, “selling treasuries” is “borrowing”. Am I right about that?

MICHAEL HUDSON: Yeah.

VIRGINIA COTTS:  So it’s confusing to ordinary people like me.

MICHAEL HUDSON: America doesn’t have to borrow. It can just print, just like China doesn’t have to borrow. China prints the money. The Federal Reserve can create the money, and the Federal Reserve creates the money for the bank, so there’s no need at all, but America wants to give wealthy people some place to put their savings that’s not in the stock market or the crooked bond market, so they essentially do it, but—

And you’ve had propaganda, of course, ever since the 19th century, the Austrian school, they want private banks, they want the rich people to decide what the government can spend. They want to prevent the government from creating a single penny. They say, well, remember the German hyperinflation, or do you want Zimbabwe? If you don’t want Zimbabwe, then don’t print, leave it all to us, and what they’ll create is the 2008 financial bubble. They want to run the economy, not the government. They don’t want any government at all, and that’s why they’ve written this false view of history that I’ve spent so many years on, controverting.

VIRGINIA COTTS:  But don’t they want “government” when it comes to funneling money into the military industrial complex, for example. That’s when they like the government.

MICHAEL HUDSON: As long as the government borrows from them and pays interest for it, instead of [the government] financing it themselves without paying [the financial class] interest. [The financial class] doesn’t want governments to be independent. 

VIRGINIA COTTS:  You just said borrowed again, but you mean selling treasuries, right? 

MICHAEL HUDSON: Yes, that “borrowing”, “selling treasuries” means: we’re selling something and now we owe you. Everything is a balance sheet, and my whole approach, the financial approach, is looking at the economy as a balance sheet. For every asset, there’s a debt. For all the debts that Americans have, that 99% of the Americans have, there’s a 1% that have all the assets of the claims on these debts. 

VIRGINIA COTTS:  Right. Okay. Well, I don’t know if I’m crazy, but to me, that’s, it’s very confusing to use that language of borrowing, I guess.

MICHAEL HUDSON: The economic profession has not helped you by clarifying the vocabulary. 

VIRGINIA COTTS: Thank you. Okay, perfect. Now, if other people want to come on camera, just, just raise your hand and I can do that if you want, Karl. Yeah, yeah. 

MICHAEL HUDSON: Yeah, I might as well know who you are. Come on. 

KARL FITZGERALD: Yeah. Well, we’ve got a related question here from Christopher Doby—

CHRISTOPHER DOBIE: Can it be assumed that the expanse of the US dollar was the token used by the world to trade and grow due to the growth of the world economy?

MICHAEL HUDSON: What, what, the end, if? You spoke too fast at the end. 

KARL FITZGERALD: Okay, the US dollar was the token used by the world to trade and grow and that expanse was due to the growth of the world economy. 

MICHAEL HUDSON: The balance of payments, international debt, does not have to grow with the international economy. The economy could triple or quadruple and as long as it’s in balance, there would be no need for governments to hold each other’s debt. The ideal would be not to have any reserve. The ideal, just like in an economy, is you don’t want billionaires and multi-billionaires to end up with billions of dollars. You want the economy to be in balance. 

And the international economy, it would be good if every country could somehow interact in a way that they’re all self-supporting and you don’t have some countries being debtors to other countries. There’s no need for the debts to grow. And the dollar debt has grown not because the international economy has grown, but because American military spending has grown and because America is de-industrialized. 

This is a warped, one-time historical event that I don’t think can ever repeat itself. 

KARL FITZGERALD: One day we’ll get to meet Kimberly Mims on screen, one of our good Patreon supporters. Great to see some comments on the app there from you. And she writes— 

KIMBERLY MIMS: The effects of de-dollarization are being played down now that Americans are becoming a bit more aware of the global breakup. What is a good way to make our compatriots understand how radical this shift is now rather than later? If we try to re-industrialize the US, how can we also stop the re-monopolization of industry by the financialized economic interests? 

MICHAEL HUDSON: Well, it can’t be done. That’s why we’re not going to re-industrialize. There’s no way that the United States can re-industrialize now because it’s already priced itself out of the market. I’ve said this before in our discussions here. If Americans were given all their food, all their clothing, all of their physical consumption goods free, they still couldn’t compete with labor earning a dollar a day because they have to pay so much for their privatized health care, so much for their education debt, so much for their rent that it’s all paid to the rentier sector. There’s no way that America can re-industrialize without wiping out the debt and without replacing an absentee-owner economy with an owner-occupied-housing economy. 

The American economy is so malstructured that it would take an economic revolution to change it, and there’s not going to be. America would rather see 80% of the population just die off and starve to death, and I think that’s what the Microsoft Foundation is trying to do, to back policies for them, than to give up. 

The financial sector and the property-owning sector and the monopolists will fight like anything to maintain their privileges because they know that they didn’t create them. They know that these privileges are completely parasitic and there’s no reason for them. Whereas the 90% of the population that are suffering as a result of being renters and debtors and consumers of monopoly goods don’t realize that all of this money they’re paying is purely for parasitism and is economically unnecessary, and the rest of the world is realizing this and is trying to create economies without this unnecessary rentier overhead.

FLO: I’m part of the 90% and I figured a lot out from listening to you, and I understand what you’re saying. Of course, it is the obvious answer, but in lieu of having something just horrible and bloody and having people become more aware and more educated about a way of looking at things that is along the lines of the way you look at things, obviously you’re trying to do that, but I guess, have you thoughts about how to spread that around a little more at different levels? Not at the university level, but say in your neighborhood with people, just your regular people, so to speak, around you. How do you talk to people if you’re in your neighborhood? 

MICHAEL HUDSON: I have a fortnightly broadcast on Ben Norton’s network with Radhika Desai in Canada, and every two weeks we talk about this and we bring it up to date. That’s a discussion program. I’m on all sorts of— Karl puts up at least one YouTube discussion that’s transcribed a week. I did a very good one yesterday with Dima and Richard Wolff on this, so all I can do is go on as many talk shows as possible.

Obviously, they’re not going to ask me any more to write editorials for the New York Times or the Washington Post like I used to, but all I can do basically is talk and write my books and have discussions. I’m hoping that you guys, I mean, you guys are supposed to be, you know, here I’m talking to you, presumably you’re doing something with the ideas and spreading them out. I don’t know what more I can do than what I’m doing. I am an economic advisor.

FLO: Not you, I meant us. You’ve spent years doing this. I mean, there’s just no way. That’s a really tall— 

MICHAEL HUDSON: But all I can do is write my books or find politicians. I was the economic advisor to Dennis Kucinich, and now I’m the economic advisor to Jill Stein on the Green Party. 

FLO: That’s great. No, I think it’s getting out, and that’s great. I don’t want to take up any more of your time. I’m just, I’m very glad that you do what you do, and I appreciate it. So, thank you very much.

KARL FITZGERALD: Good on you, Kimberly. Thanks for coming on screen. Good to put a face to the name. And hello, Conrad.

CONRAD: Hi, everybody. Okay. One thing I would like to ask you, Professor Michael, is about modern monetary theory, a government deficit. I think as far as I have understood it, there’s not even a difference technically regarding money supply. If the government would borrow the money from the private market, or if the government would just print, not print, but create the money via central bank book accounting, because is it right? It would, anyway, the money supply will increase because government bonds are literally a part of the money supply. So, what would you say? It doesn’t make, it will anyway, the money supply will increase the same, right? 

MICHAEL HUDSON: The function would be this. The effect on prices would be the same, but it depends whether the government or the Federal Reserve creates the money. 

A good statistician can make anything appear any way they want. It’s completely flexible. I mean, most of my professional life was designing accounting formats to describe things.

The whole idea of a money supply that Milton Friedman has is basically irrelevant. It’s probably the most misleading idea you could ever have. The important thing is the debt and credit balance. The important thing is the balance sheet. The money supply really is only one way of statistically reflecting this, and the definition of the money supply depends on how much of [the] debt are you going to count as money, and how much you’re going to [count as] bank credit, and how much is government credit. How are you going to count this? 

But look at the overall debt and asset balance. Who owes what? What groups owe what to whom? Private, public, 10% versus 99%. 

The money supply is a fictitious accounting number, and if you’ve ever worked for a corporation and you know that accountants are hired to falsify the balance sheet and make it appear as if they’re not making any money and end up doing what Donald Trump has done, then you know that all this focus on money is purely a distraction to get people to stop talking about debt and credit or anything that really is financial. The money supply has nothing to do with the financial system as a whole, but it’s a product of the financial system, and it means don’t look at the overall financial system. Let’s look at this accounting number. 

That’s why they have M1, M2, M3. The economists have all different kinds of money supply. Do we want the dollar bills in actual physical currency? Do we want bank demand deposits, checking accounts as part of the money supply? Do we want savings accounts on money supply? What about money that could be money supply? What about all the Federal Reserve advances to the banking system that Wall Street on Parade is always talking about? 

So you have to look at the economy as a system, not as if it’s a one dimension that you have your public relations accountants popularize.

CONRAD: Excuse me. I think maybe it was a little other direction. I didn’t mean, of course, I don’t buy that stuff like money supply, like it leads to inflation or something like that’s the (unclear) stuff. I don’t buy that. What I mean is the direction that I think as I got, I think from some German economists are close to MMT and also from Steve Keen as if I understood him right is that there is no difference like if the government directly creates the money or borrows, because anyway, if the government spends more when it earns, and my money supply will more than it takes taxes, the money supply will grow when it takes less, it will like take money out of the economy. So basically, there’s no difference like you can borrow it or not. But for money circulating growth, it doesn’t even make a difference. Like when they have all these debates about that, like the government spends deficit, they wouldn’t have to borrow it. Because anyway, they create money even when they borrow. Is that right? They always create money because bonds are also part of money. 

MICHAEL HUDSON: Steve and I are always in agreement. I’m closer to him than to any other economist. We’re good friends for many years. So yes, Steve, I think, explains it in greater detail than I do. His background is a mathematician. And so he’s treating it mathematically. Whereas I say, well, of course, it does make a difference whether the government prints money or borrows it. The difference is it creates a financial class that tries to take over the government. That’s the difference. I talk about the politics. He’s talking about the mathematics. But we’re in agreement as to what each other says.

Steve and I just did a long interview the other last week, I think that Carol put up our talk with each other. So yes, we each have a different focus, but we agree with each other’s presentation. 

CONRAD: So the whole debate about this, I think is completely like in vain, because, of course, you’re right, when you have private borrowers, that’s a problem. But I mean, you could print even print them out, like transfer, I mean, as far as I know, they like German government, they never repay that, but they like make new, they just sell the bonds new and pay the old bonds like that. You know what I mean? Like, the German— English is not my mother tongue. But you know what I mean? I think they just switch the bonds around. So it’s never like repaid. So basically, you catch just arguing.

MICHAEL HUDSON: Nobody expects the government ever to repay the actual currency, because then there wouldn’t be any more currency, but it’s repaid. Because all currency is debt, all money is debt. That’s why you have to look at the balance sheet. And that’s why Steve Keen has so much focus on balance sheet relationships. 

KARL FITZGERALD: Lovely, lovely. Thanks, Conrad. Yeah, we’ve just clocked over 90 minutes. And of course, Flo does have a follow up question [that] relates to what you were in a way just discussing. 

FLO: Michael, would you consider the existence of secondary markets for capital a result of an imbalanced balance sheet on a national econ level?

MICHAEL HUDSON: You could define it as an imbalance. It all depends on how you define what balance is. You could say that a billionaire, I mean, people, economists have this funny idea of balance and equilibrium. If I fall on my face, I’m in balance, I’m in equilibrium, but I’m falling on my face. So what does balance mean? Every economy technically is in some kind of balance, but it can be a polarized balance. It can be a balance of equality. It can be a balance where nothing is changing. 

The idea of balance and equilibrium, I don’t think is as helpful as realizing that the dynamics of economy are to polarize. And the main reason they’re polarizing is because of a finance interest rate, the buildup of debt and the use of creditors to take over the property system. 

The real balance isn’t by buyers and sellers at the marketplace bartering things or buying goods and services. The real balance you want to talk about is the distribution of wealth, of financial wealth, real estate wealth and property. And you realize that every economy is in balance if it’s polarizing. And that’s what the West is doing. 

Economics should be about how you create a balance that doesn’t polarize instead of a balance where you end up with 90% falling on their face and the 1% standing over them laughing.

FLO: Yeah, that makes sense. Yeah, I was just kind of curious on your thoughts on the secondary markets in general. 

MICHAEL HUDSON: It’s too technical. I don’t have any thoughts about markets in general. I’m too specific. 

FLO: Well, I mean, I just think it’s such an interesting kind of phenomenon, I guess, when I first started learning about this. And I think it might have been Steve Keen or Robert Hockett kind of talking about, you know, how money works in the economy. And really, the fact that the whole financial system is just like, you know, different ways for rich people to park their excess capital and to—

MICHAEL HUDSON: Not just park it, to use it to indebt other people. Somebody’s saving is somebody else’s debt. It’s not parked. It’s not like a car that’s parked. It’s actually impoverishing, stripping and taking money from somebody from a debtor with the idea of taking all of the debtor’s property and leaving them broke.

Think of it as a dynamic. Don’t think of parking. This is how journalism trivializes economic discussions, because they get it from the economics profession. I’m not an economist. I’m an anthropologist or a futurist. Steve isn’t an economist. He’s a mathematician. We don’t want to call ourselves economists. We wish there weren’t any in the world and people could have it much easier to understand.

FLO: Yeah. OK, cool. 

KARL FITZGERALD: All right. Yeah, we must be getting close to wrapping up, I reckon. Yeah. Don Burns asks,—

DON BURNS: Can drug companies also be considered [to be] charging unearned rent when the profit margins are so high?

MICHAEL HUDSON: Yes, they’re not profits. They’re monopoly profits. There’s a euphemism to call monopoly rents “profits”. But that’s why it’s worthwhile reading classical economics, because the whole— rent is the excess of price over cost-value. And when the price of a drug is more than the cost of production, that’s economic rent. That’s unearned income. That’s what the rent recipient earns in his sleep or her sleep without any productive effort of their own.

So introducing the distinction between rent and profit is essential if you want to understand why the economy is being distorted.

Economic rent [involves] a distortion. If you were saying, what is balance? A balance would be where prices reflect actual value because the production, anything over the price over value is economic rent. Economic rent is a distortion and therefore imbalance.

KARL FITZGERALD: And that cost base you’re talking about includes a reasonable rate of return. And what would a reasonable rate of return be in a pharmaceutical industry, Michael? 

MICHAEL HUDSON: It would be the average rate of profit for the economy as a whole, let’s say 7 to 9 percent, maybe 11 percent. 

KARL FITZGERALD: Somewhere there. Okay, fantastic. Well, Chris L asked earlier on how much he would appreciate a reading list. Maybe we set that as a challenge for the new year. 

MICHAEL HUDSON: It’s almost impossible. I mean, all my books have, I say it, all of the authors in my books. I don’t know what I can do more than just say that. 

It’s good that you mentioned Michael Flürscheim. His book is very clear. I think Ed Dodson has a whole series in the Henry George School of all sorts of 19th century books that are very interesting. But there’s just so much to read. I mean, what I was told to read basically was read Marxist theories of surplus value and then read all of the books in the bibliography. And I was told that when I was 21 years old. And that’s what I did. 

KARL FITZGERALD: Hmm, yeah, you can feel that people are looking for a curriculum to understand this in detail so they can go through it step by step. Yeah, maybe one day, one day. 

MICHAEL HUDSON: Well, if they read my books, they can see who I’m discussing and mentioning, and they can decide if they want to follow up the books on their own, who I’m quoting. 

KARL FITZGERALD: Yeah, there was so much mentioned in the webinar chat today. Looks like lots of good camaraderie in there too, so great to see people coming on screen and supporting each other. 

MICHAEL HUDSON: I wish there were more. I mean, I really, you know, the reason I’m doing this, Patrion, you know, I want to get my ideas out. I want people to discuss it. I want to spread a way of looking at how to look at the world and understand what’s, where it’s gone wrong. And I need to talk to you to find out, hey, am I getting across or what can I clarify? Or, you know, what are your views on all this? 

KARL FITZGERALD: Yeah, yeah, well, we went through a ton of questions there that were fantastic. Maybe next time we just start off with people on screen and do it that way. But yeah, thank you again, Michael. And there’s so much goodwill and love coming through on those chats in appreciation for all your teachings. So yeah, thank you very much, everyone who’s attended. Thanks to all the patrons who are supporting us. And a big hello to anyone who watches this on YouTube. There’ll probably be 15,000 people watch this over the next few months. And we call out to you to join the Patreon team and help Michael, you know, work around these goddamn monopolists like Jeff Bezos, just outrageous, those commission takings, outdoing Apple even. Yeah, go Lina Khan, get in there, make some things happen whilst you’re in office. Let’s hope she gets to stay in power for a bit longer. Michael, any final words?

MICHAEL HUDSON: I can’t think of anything that I’ve said, everything that I could have to answer every question. I think something’s going to happen in the next few weeks, I think, in the world. We’re in a very unstable position right now and something’s going to split. And I don’t know what it is, but it’s going to be very interesting. And I hope maybe even in January, we could talk again.

KARL FITZGERALD: Wow. Okay. Well, some breaking news of gigantic proportions happens. Let’s open another Q&A session up. I just want to come up with a better name than a Patreon Q&A session with Michael Hudson. We need a good name. So there’s your homework supporters. Think of a decent name for these discussions because, yeah, we must have done 10, 12 of them now. And each time there’s always a new layer of understanding coming through. 

MICHAEL HUDSON: We could call it How the World Works. 

VIRGINIA COTTS:  A fireside chat, Michael. That’s too much Franklin Delano Roosevelt. 

MICHAEL HUDSON: How about How the World Works? 

KARL FITZGERALD: How the World Works with Michael Hudson. 

MICHAEL HUDSON: I don’t know. I’ve never thought, I don’t think of the titles in my books. Other people think of the titles mostly. So I’m not good at titles. I’m more content producer than a packager. So maybe packagers can make a good suggestion. 

KARL FITZGERALD: Deanna comes up with “Expand your brain with MH the GOAT”. 

MICHAEL HUDSON: No, that’s too egocentric. No, no, it’s not the size of the brain. The Neanderthals had larger brains than the Cro-Magnons. And Shakespeare had a very small brain. It’s how the brain is wired up. That’s what we’re trying to do. We’re trying to wire up the brain to understand how the economy works and what the dynamics are. Systems analysis. 

KARL FITZGERALD: And reprogramming. Yeah, beautiful. 

VIRGINIA COTTS:  Michael, you need like six months to rewire your brain from this stuff too, because we’re so conditioned to see, to understand things one way. 

MICHAEL HUDSON: That’s right. That’s what it took me. Doing the balance of payments. It took me about six months. And one day, finally, I got up just thinking in terms of balance sheets. You’re right. You actually have to work in the field to understand that. Otherwise, they’re just generalities. And I knew abstractly that bankers were crooks and many mercantile people were crooks. But until I met them, I didn’t have just the oomph of just how crooked they were and the tricks that they really use. And if you’re going to cheat somebody, always take them out for dinner later. Be friendly with them. All the little techniques of crookedness. 

VIRGINIA COTTS:  That’s why these events are so important, because you help us rewire. 

I just want to do a plug. Real Progressives is having a webinar on Saturday with Hamza Hamushain about green colonialism. He has a book about what he calls the Arab region and fighting green capitalism in the Arab region. Anyway, very interesting. I put the link in the chat. Everyone’s invited. So please come. That would be great. 

MICHAEL HUDSON: I assume you mean by the German Greens, the advocacy that we want an economy exclusively run by coal, mainly coal, with oil, and cutting down the forests. That’s the German Green policy. Basically, cut down the Amazon, essentially. 

VIRGINIA COTTS:  In fact, this guy Hamza Hamushain talks about a German company that has this idea of green hydrogen, clean hydrogen, being created in the most arid part of the world for use in Germany. 

MICHAEL HUDSON: That sounds really high. The highest pollution thing I can think of. You’re going to spend billions of dollars in war bombing the country and bombing the people in order to grab the hydrogen. 

When the Greens talk about hydrogen or free energy, they mean go to war. They’re an arm of the military-industrial complex. They’re advocating war and genocide, which is just exactly what they’re doing in Germany, Ukraine. For them, you can’t be green if you don’t spend all of your effort fighting Russia, China, and Eurasia with coal, deforestation, and oil. You’ve got to conquer the Near East. 

VIRGINIA COTTS: Green capitalism is just as profitable as any capitalism. People are arguing about electric cars instead of high-speed rail, instead of real public transit. 

MICHAEL HUDSON: That’s right. 

VIRGINIA COTTS:  Let’s all buy an electric car, and then we’ll be doing our… You got it. I don’t think that fad is going to really last that long. 

KARL FITZGERALD: Come on. If we’re talking true green economics, we’re basing the tax system on resource rents, land rents, monopoly rents, with a carbon tax that’s charged based around a BTU. I know, Michael, you get fired up sometimes, but there’s some German green mayors who are doing their bit at the local level to make this tax transition. 

MICHAEL HUDSON: I know. When they mention Annalena Baerbock, I can’t resist. Uh-huh. All right. 

KARL FITZGERALD: Well, we better wrap up there. Thanks so much, everyone. Great session, and yeah, great work, Michael, as always. A big thanks to the Progressive Economics team. Well done again. We’ll look forward to seeing you in March, maybe sooner, if there’s some sort of economic catastrophe. 

MICHAEL HUDSON: Yeah, we can do it more often. Yeah, I like these talks. I have to know what needs clarification. 

 

Photo by Anthony Intraversato on Unsplash

The post Watching the World Divide in Half first appeared on Michael Hudson.

Yanis Varoufakis’s new film series explains how elites used the financial crisis to terrorize Europe’s populations into submission. In this interview, he tells Jacobin why the anti-austerity movement failed and why the center is converging with the far right.

Debt is to capitalism what hell is to Christianity: unpleasant, and essential.” Speaking in his new documentary series In the Eye of the Storm, Yanis Varoufakis explains how elites have used capitalism’s own structural conditions to terrorize populations into submission and advance their counterrevolution. For the former Greek finance minister, austerity was not a necessary response to crisis but an instrument of “class war,” used to redesign economies in Europe and beyond.

Varoufakis’s new series recounts the resistance against this process — and the ways in which the European institutions’ dogmas set the EU on its current right-wing course. In an interview for the new print issue of Jacobin’s German-language magazine, David Broder spoke to Varoufakis about his time as finance minister, the reasons why recent crises have mostly benefited the far right, and the decline of Western hegemony globally.

DAVID BRODERAt the end of 2023, the Economist named Greece “economy of the year.” In June’s elections, New Democracy had won a majority, a result widely attributed to signs of economic growth. The main opposition party, Syriza, continues to decline. So, aren’t things going well in Greece?

YANIS VAROUFAKISThe Economist has every reason to celebrate an economic miracle. If you’re a money man, or a vulture fund purchasing distressed loans, Greece is an El Dorado.

Today there are 1.2 million homes being repossessed, in a land of ten million. Let’s say a house was bought for $250,000 before the crisis. Now it’s worth €200,000. It had a loan on it of €150,000, of which €50,000 was repaid. The mortgagee can’t repay the other €100,000 because of the crisis, loss of income, etc. Then a vulture fund registered in Delaware, with a bank account in the Cayman Islands, buys up the loan for €5,000. Even if they sell it for only €100,000, they’ve gained €95,000 on €5,000. I doubt there’s anywhere you can get higher rates of return. This is happening on an industrial scale.

The Greek state is more bankrupt now than in 2010, when it became bankrupt. Today the national debt is higher while national income is down. But now that a series of governments have been good girls and boys for the troika, the international creditors’ community has decided to proclaim Greece no longer insolvent. How come? Everybody knows that the Greek state is bankrupt. But there’s also the European Central Bank [ECB] winking at everyone who has bought Greek debt: don’t worry, we’ll stand behind it. So, why buy German debt when you can buy Greek debt that gives you higher yields?

The Economist has every reason to celebrate Greece as an economic miracle. If you’re a money man, or a vulture fund purchasing distressed loans, Greece is an El Dorado.

If you have capital to use in order to extract other people’s wealth, then Greece is the place to come to. But if you’re Greek and you don’t belong to the oligarchy, you’re in serious trouble. For thirteen years your real income has been falling. The social safety net is dismantled, as are any collective bargaining agreements. Then came the cost-of-living crisis, which has hit the Greek working class and underprivileged harder than anywhere else in Europe. Inflation is class-conscious: if you’re on lower incomes, your inflation rate is far higher. So, put all that together and you have this remarkable bifurcation: Greece, the best place in the world to be a vulture fund and the worst if you’re not.

DAVID BRODEROK, but even a decade ago you predicted the likely effects of austerity. And this insight, and these consequences, don’t seem to have had a positive reflection in reviving the anti-austerity movement or building forces to the left of Syriza. Your MeRA25 was in parliament for four years, but didn’t get reelected in last year’s elections. Is this just because of lasting demoralization after defeat in 2015? Or is there something you’re not doing to mobilize support?

YANIS VAROUFAKISFull disclosure: we were among the big losers of last year’s elections. Why was that? Why did we all lose, both those of us in the then Syriza government who did not surrender to the troika and those who did?

The best explanation was given to me by a taxi driver. He was taking me home from the airport and told me, “You know what? I agree with all that you’re saying. And I like you, but I didn’t vote for you, or for Syriza. I won’t forgive you for giving me hope. I didn’t use to vote. I only went to the polling stations twice. Once in January 2015 to vote for you. And then again in July 2015, in the referendum to say “no” to the creditors. And what happened? You all folded, and we’re back in the same quagmire as before. I don’t care whether you were one of the good guys. Then you came to me in the election last year with a whole program that you can never implement because you’re struggling at 5 percent. So, I’m not voting again.”

On the Left, if we’re lucky, we can get majority support once every fifty years, during the acute phase of a capitalist crisis. If we blow the opportunity, we have to wait another fifty years.

On the Left, if we’re lucky, we can get majority support once every fifty years, during the acute phase of a capitalist crisis. If we blow the opportunity, we have to wait another fifty years. That doesn’t mean we stop fighting. MeRA25 keeps doing all that we think needs doing, because in the end, we’re a bit like surfers: you can’t control when the wave comes, but you’d better be ready to catch it when it does.

DAVID BRODERBut was the taxi driver right to think that the initial hope was misplaced? Your series tells us that a small country saying “no” inspired many internationally. But the troika also wanted to demonstrate that you couldn’t say “no,” and then crushed you to prove the point. If this could have been a “David and Goliath” tale, what “catapult” did you have?

YANIS VAROUFAKISWe knew they’d try to crush us. In April 2013, while living in Texas, I warned Syriza’s leaders that the Cypriot government and the ECB was a dress rehearsal for what they were going to do to a future Syriza or Podemos government. They were flexing their muscles with little Cyprus to rehearse shutting down the banks to force a capitulation. [Alexis] Tsipras understood and asked me: “OK, so what do we do?”

I sat down for six months and devised an action plan. I presented it to the team and they approved it. Then, just before the January 2015 election, Tsipras offered me the finance ministry to implement it. Alas, that action plan can’t be judged, because they didn’t let me implement it. I’m convinced that had we followed it the troika wouldn’t have been able to crush us.

In the ministry which I inherited, I had €50 billion worth of bonds in Greek law, which I could restructure with one signature. I didn’t even need to go through Parliament. And it was in Greek law. They couldn’t take me to New York like they used to take Argentina and so on. That was our nuclear weapon — because had I proceeded to haircut those bonds, the ECB would not be allowed (by Germany’s constitutional court) to save the Italian state by buying its bonds. Mario Draghi was very worried about this weapon of ours, as he told me during our first meeting. But right after that, my own government signaled to him behind my back: “Don’t worry. We won’t let Varoufakis do it.” It was like sending David against Goliath without the catapult.

DAVID BRODERBut why did Tsipras refuse to let you use it?

YANIS VAROUFAKISIt’s clear that he had already reached an agreement with Angela Merkel to sign the memorandum to surrender. What’s not clear is when he decided to surrender: before we were elected or after? I don’t think I’ll ever know.

Greece was the linchpin, and when Alexis Tsipras sold us down the line, he was also selling the whole European left down the line.

What I do know is that those who, after the event, claimed that we were always going to be crushed are profoundly wrong. I am not saying that we would have definitely won. But we did have a good chance — assuming we used our weaponry. In my estimation, it would have cost them more than €1 trillion if they did crush us. That’s serious money for a monetary union that doesn’t have a fiscal union to back its expenditure. I don’t think Merkel would have dared. I think we’d have had a chance, and then Podemos would have had a chance, and then our Italian comrades . . . . So, Greece was the linchpin, and when Tsipras sold us down the line, he was also selling the whole European left down the line.

DAVID BRODERIn the past, you made intelligent arguments about why Grexit was not just unnecessary but a bad idea. You said that you’d end up with an autarkic economy, and that — unlike, say, Argentina unpegging the peso from the dollar — it’d take months to prepare the return to the drachma, effectively offering advance warning of a huge devaluation. Ahead of last year’s elections you proposed a state-backed electronic payments system. But wouldn’t the creditors also have been sure to ensure Grexit failed?

YANIS VAROUFAKISHypotheticals and counterfactuals are always hard to work out. My point was simple: capitulating would render Greece unviable — as it now is. Fighting back gave us a chance to break out of our doom loop. The digital payments system would help in any case. By how much, no one knows. But it would help whether we are in the eurozone or after going back to the drachma. Even if there was even a 5 percent possibility that we could have averted extra austerity and privatization within the euro, why not try it? I’m still convinced we could have done it — and that, thus, resistance was the optimal strategy.

Today, we have fewer options. One reason is the nonperforming loans (NPLs), mortgages, repossessions, and so on that I mentioned before. In 2015, we had nonperforming loans, but since then, with the Syriza government creating the foundation for it, they created a secondary market for NPLs. This is a gigantic source of rents for the vulture funds. The restructuring of the Greek banks is based on new derivatives that contain these NPLs as a form of capital.

If we ever came anywhere near government again, I’ve no doubt they’d try to crush us with double the energy of 2015. We would need a new nuclear option: an alternative to the euro.

So, now we don’t have the nuclear option we did in 2015, and the troika has a greater incentive not to allow us to stop home repossessions. If we ever came anywhere near government again, I’ve no doubt they’d try to crush us with double the energy of 2015. We would need a new nuclear option: an alternative to the euro. The electronic payment mechanism you mention has a dual use: to help create liquidity within the euro and to be the first move — if need be — toward the drachma.

This is, of course, a major reason for proposing it — if they shut down our banks, payments can be transferred to this system — which can, fairly easily, evolve into the new national currency. In 2019 and then in 2023, MeRA25 communicated this plan A, B, C to the public in a transparent way, so that they’d know what they were voting for. Alas, unlike in 2019 when voters gave us nine seats, in 2023, they kept us out of Parliament and voted new fascist parties in.

DAVID BRODERAhead of the EU elections, it seems far-right parties are mobilizing people against the establishment — but also, increasingly, joining the establishment. In the film you say that liberals need these far-right bogeymen just to be able to rally people against something. But if their opposition is so fake, then why such success?

YANIS VAROUFAKISAll we need to do is look at the 1920s and 1930s. After their 2008, which of course took place in 1929, the fascists and Nazis managed to harness discontent — even borrowing or stealing from the Left’s criticism of the bankers and so on while directing the people’s anger to the “other,” toward the Jew. And when they got into power, the fascists became the agents of industrial and financial power, of capital.

That’s always the case. Think of [Donald] Trump: he told blue-collar workers in the Midwest that he was going to get rid of Goldman Sachs and Wall Street from Washington. Then what’s the first thing he did? He took the CEO of Goldman Sachs and made him head of the US Treasury.

It is a mistake to think that the nationalist, or fascist, international are clashing with a radical center. We should think of them as different sides of the same coin. They are symbiotic. [Emmanuel] Macron would never have become president if [Marine] Le Pen did not threaten the system. And Le Pen would never rise to challenge for the presidency if you didn’t have people like Macron introducing the austerity that causes the discontent that feeds her rise.

The top 0.1 percent, the upper echelons of the ruling class, demand of governments that they pass tax cuts for them and transfer huge quantities of rents to them. But they know that such legislation is extremely unpopular. So, the EU’s right-wing populists incite hatred toward “the system,” the Jew, the Muslim, the other, the foreigner, the migrant, the refugee to gain power. Once in power, they enact this legislation on behalf of the top 0.1 percent.

DAVID BRODERBernie Sanders often says that the Biden administration needs to do more for working-class America to answer the despair that Trump feeds off. What do you think it can do to stop Trump winning?

YANIS VAROUFAKISThere’s nothing the Biden administration can do. Firstly, it doesn’t have the numbers. Secondly, it doesn’t have the time before the next election in November. Thirdly, it doesn’t have the will. The Biden administration was sold to Wall Street and to Big Tech and the powers-that-be even before it was formed.

Bernie Sanders and I started the Progressive International together in Vermont. However, I’ve been in disagreement with him — a comrade and friend — since 2016. After the then primaries, when the nomination was stolen from him and handed over to Hillary Clinton, Bernie had nine hundred thousand wonderful volunteers all over the country, ready to become the third force in US politics. I thought he should have started a new party. Instead, he let those young activists go to ground — and then disappointed them entirely, four years later, when he sided with [Joe] Biden.

I’m not one to turn on comrades. We can have legitimate disagreements. I understand that, especially given his age, Bernie wanted to make a difference. Not just demonstrating in the streets but from within the corridors of power. He had something of a positive impact on some of the Biden administration’s initial policies during the pandemic. Some people got to eat because Bernie Sanders fought for their corner within the Biden administration. But that doesn’t last.

Now, the whole progressive movement and the DSA [Democratic Socialists of America] have been sidelined, especially with what’s happening in Israel/Palestine and Ukraine. The dynamism of the political revolution that Bernie had started in 2016 dissipated. I’m afraid that the new wave that Bernie energized is not going to survive in a Democratic Party, which like Labour in Britain, is extremely good at destroying all progressive energy within itself.

DAVID BRODEROn the international front: South Africa’s case to the International Court of Justice offered a damning indictment of Israel’s actions but may end up exposing the hollowness of international law. I’m interested in your thoughts on how European countries have reacted to the war, and what effect this has on how people outside Europe see the EU and the “international community.”

YANIS VAROUFAKISThey’ve reacted disgracefully. The EU and almost every government will go down in history as aiding and abetting the genocide of the Palestinians. It’s not just complicity but a mode of behavior that is turning our prime ministers and presidents into prospective defendants in the International Criminal Court [ICC]. When Ursula von der Leyen — as it happens, without any authority — went to Israel to cheerlead the IDF [Israel Defense Forces], she deserves not only to be condemned by future historians, but also to be prosecuted by the ICC.

This last couple of decades, instead of becoming less reactionary, Europe has become criminal. Once, French president Jacques Chirac, during a visit to the occupied Palestinian territory, confronted the Israeli gendarmes and the IDF. I can’t imagine Macron doing that. Willy Brandt waxed lyrical about Palestinians’ right to their own state. Today, Olaf Scholz is presiding over a regime that is arresting Jewish comrades of ours in Berlin for the crime of carrying a placard saying “As an Israeli and a Jew, stop the genocide in Gaza.” You couldn’t make it up!

DAVID BRODERThe current wars, and the expansion of BRICS, seem to point to a breakdown of the Western-led order. Do you think this is a changing power balance in a re-formed international order or something more like a hardening of regional trade blocs?

YANIS VAROUFAKISWe never had an “international order” and there was never an “international rule of law.” Where do we start: Iraq, Afghanistan, Vietnam before that?

My concern is that we’re putting too much — but also too little — emphasis on BRICS. It’d be a huge mistake for progressives to do what they used to do with the USSR, to imagine that, whatever its authoritarian aspects, at least it’s the counterweight to the United States. Let’s not think of the BRICS that way.

India’s Narendra Modi is a fascist. Saudi Arabia and the United Arab Emirates, who are edging closer to BRICS, have a currency that is pegged to the US dollar. With BRICS, they are creating a plan B for themselves, not for the world’s dispossessed. The most interesting part of the BRICS is China. It contains the most progressive and the most authoritarian forces on this planet. A huge class struggle is going on there as we speak.

In my recent book Technofeudalism, I offer an analysis of the new Cold War between the US and China. The essence of the new developments lies in what I call “cloud capital.” This is a kind of capital which is algorithmic, based on the internet, on Big Tech. It’s not like a robot that makes cars or a steam engine: for the capital that lives in your laptop or your phone is a produced means of behavioral modification, that grants its owners tremendous power to extract rents from workers, capitalists, and users alike.

That same cloud capital is the foundation for a new kind of payment system. And there are only two bundles of cloud capital. One is to be found in the US, the other is China. Nobody else has cloud capital worth talking about. If my hypothesis holds water, we are seeing a huge rivalry between these two mega cloud fiefdoms. And what really concerns the United States is this: the only reason why the United States has been hegemonic since the late 1960s and early ’70s, after they lost their trade surplus to the rest of the world, is because of the exorbitant privilege of the dollar. The payment system is in dollars, which means that the US faces no trade or budget constraint. Even though it has a huge current account deficit, it continues to buy stuff from the rest of the world because it pays in dollars that it prints — dollars that are recycled back to Wall Street and to American government debt as capitalists from all over the world send their dollars back to the US to buy US government debt, shares, and property.

The dollar payment system hasn’t been challenged so far. But the combination of Chinese cloud capital and Chinese finance, which is separate from US finance, can become an international digital payment system, alternative to the dollar. That’s why Saudi Arabia is interested in China and the BRICS: they want access to that alternative payment system because they saw what happens if you fall foul of Washington. You can have $300 billion confiscated, which is what happened to Russia after they invaded Ukraine. This is the reason why we have a new Cold War: because they are trying to quash the capacity of Chinese cloud capital to antagonize the dollar payment system.

CONTRIBUTORS

Yanis Varoufakis was Greek finance minister during the first months of the Syriza-led government in 2015. His books include The Global Minotaur and Adults in the Room.

David Broder is Jacobin’s Europe editor and a historian of French and Italian communism.

The post Greece, EU elections, Palestine & the International Order – JACOBIN interview with David Broder appeared first on Yanis Varoufakis.

(China Part 2/2)

RADHIKA DESAI: Hello and welcome to the 25th Geopolitical Economy Hour, the show that examines the fast-changing political and geopolitical economy of our time. I’m Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: And working behind the scenes to bring you our show every fortnight are our host, Ben Norton, our videographer, Paul Graham, and our transcriber, Zach Weisser. Today we are going to take up where we left off last week on the subject of China’s future. What is it to be? Economic decline, as frequently predicted by Western pundits? Or is China going to be launching the next industrial revolution?

And as last time, we have with us Professor Mick Dunford, Professor Emeritus of Geography at Sussex University, and now working at the Chinese Academy of Sciences. He keeps a close watch, among many other things, on China’s economy. Welcome, Mick.

MICK DUNFORD: Thank you very much.

RADHIKA DESAI: As we pointed out last time, China’s breakneck growth has not only aroused envy in the West, but also prompted the proliferation of doomsday predictions about China’s economy. We are told that we are at “peak China”, that China can only go downhill from here, that China’s property bubble is about to burst and throw China into a morass of Japanification and secular stagnation, that China has been stealing technology all these years, and the stolen technology has been powering the growth. And now that President Biden is going to make it impossible for them to do so, that China will stop growing, that China has a serious unemployment crisis, that President Xi’s authoritarian leadership is stifling growth by stifling innovation and entrepreneurship. China, of course, is involved in terrible things like debt-trap diplomacy vis-à-vis the rest of the world, etc., etc.

You know how it is. You’ve all seen the long list of accusations. And in the last show and this one, we are debunking these myths.

Now, we had organized our discussion around certain topics, which I will show you in a second. Here we go. So, we had organized, these were the topics. We discussed how to characterize China’s economy, how to understand China’s growth story. We took a closer look at China’s COVID response. And then we had a really exhaustive and long discussion about the alleged property and debt bubble in China and whether it’s going to lead to Japanification.

And we emphasized that for a number of reasons, including the fact that China has a very different growth structure, a very different financial sector, a far more effective industrial policy, etc., etc., that China was not in the least in danger of Japanification.

So, today, we want to take up the next four topics. We’re going to be talking about whether China has a problem of restricted consumption and whether this is why China’s growth is down and whether there are going to be stagnant living standards, of course, then affecting the legitimacy of the Communist Party’s rule, etc.

We will then talk about the role of exports in China’s growth story and how we may expect this to change, because there’s a lot of myths around that as well. We are told that if China cannot export to the same extent, it will, of course, suffer from stagnation.

We will then more qualitatively discuss the main elements of what is China’s new growth strategy. And finally, we will debunk some of the myths that surround China’s international role, myths such as China is engaged in debt trap diplomacy, that it only wants to find employment for its surplus labor and markets for its surplus commodities and resources for its hungry industries.

So, that’s what we plan to do today. So, why don’t we just get going? Maybe we’ll start with you, Mick. Do you think China has a restricted consumption problem?

MICK DUNFORD: Okay. I think the first thing to say is that China remains an upper middle income country. So, obviously, average levels of consumption are smaller than those in economically much, much richer countries.

Can you show the chart of consumption and investment?

So, if you look at this chart, which starts in 1950, you can see that over the course of time, the share of consumption expenditure in gross domestic product has declined. Household consumption in recent years has been in the region of about 38, 39 percent.

Early on, consumption levels were much higher when the country was much, much poorer. And as the share of consumption declined, the share of investment increased, which we shall speak about in a little while. I mean, the chart also plots net exports, and you can see that net exports have declined. And the share of GDP has declined. And the share of GDP has declined. And the chart also plots net exports, and you can see that net exports have declined somewhat in recent years.

But this decline in the share of household consumption expenditure has occurred as GDP has increased at astonishing rates. So, the actual real value of consumption in China has increased enormously over the course of time, and it continues to increase at this present point in time. So, it’s a country, well, it has 400 million people who are in middle income categories. And so, partly because of that, it has an enormous market.

But I want, when people point [out] trends in consumption, I think it’s quite important to think about the way in which China’s recent poverty alleviation record has actually fundamentally transformed the consumption possibilities of very, very low-income people.

Can you show the chart, Radhika, please?

RADHIKA DESAI: Which one?

MICK DUNFORD: Of the poverty areas.

RADHIKA DESAI: This one.

MICK DUNFORD: Okay, this is a map of what are called contiguous destitute areas. So, basically, 10, 15 years ago, almost all the poverty counties and all the poverty villages and most of the poverty households were actually concentrated in these largely mountainous rural areas. I won’t point them all out, but you have the south of Xinjiang, you have virtually the whole of Tibet, you have Tibetan areas that are in four other provinces, you have the Wuling mountain area, almost all of them are mountain areas, Wuling mountain areas in four provinces.

Now, in these places, there were 80 million people whose income was less than $1.96 per day. It’s important to say that rural Chinese people have important assets, because they have contracted land on which they can grow food, they have what is called a JGD on which they can build their own home, and they also grow their own food. So, cash income is not the only criterion by which you should judge the welfare of people who live in rural areas, but their cash incomes were very low and often depended upon the fact that people from these areas would go to work as migrant workers in other parts of China.

But, between 2013 and 2020, every single one of these people were lifted above the poverty line and often lifted well above it through an extraordinary program of poverty alleviation. So, this is one case where you saw massive increases in the consumption possibilities of the poorest people in China.

So, the idea, that China has a consumption problem, I find quite curious in the light of this extraordinary achievement. And the point is, this program has not ended, it continues. And so, the whole aim is, to move, as I say, in the direction of common prosperity, which means continuing to lift the income of these people so that they start to ultimately start to join middle income groups. And as they do, and as they spend, and obviously consumption will increase quite significantly in the years ahead, and it’s one of the reasons why China has an opportunity to continue to grow for quite a considerable period of time.

RADHIKA DESAI: That’s exactly it. And I’d like to point to another dimension of this by showing you this chart.

You know, Western complaints that China has a restricted consumption problem, that really what China needs to do is to increase the incomes of its, increase the consumption of its people, is really, according to many people, according to many scholars, it’s really a way of, for Western countries to retard China’s growth.

Because essentially, if you think about it, consumption plus investment is total GDP. So, if you increase the share of consumption, you’re going to decrease the share of investment. And what it will do becomes very clear from this chart.

So, in this chart, we’re looking at investment or gross fixed capital formation for China, and then for the UK, US, Japan, and the world. So, China is this red line here that you see, and the UK is this orange line, the United States is the blue line, and the world is this purple line.

And what you see here is that basically, and the chart goes from about 1960 to 2022, so you can see that China has grown essentially by increasing the share of investment in its GDP. And the slow growing country, so Japan for a while, of course, had a fairly high, although China’s share of investment of GDP today is higher than what Japan’s was in the heyday of Japan’s growth at close to 40 percent. In China’s case, it is above 40 percent, reaching in some cases to 45 percent. But what you see in the case of Japan as well is that Japan’s share of investment to GDP began declining, and declined particularly markedly in the early 1990s. And today, it is kind of at the world average. It is higher than that in the United States and the UK, but it is at the world average.

So, these are essentially the slow-growing parts of the world economy, and they are characterized by a low rate of investment, which, in the case of the US, it is actually under 20 percent. In the case of the UK, it’s actually under 15 percent. And it’s no wonder that these economies are ailing. And the reason is simple. Investment is absolutely critical to expanding production, and also increasing productive efficiency. You always need an investment. And so, you increase productivity efficiency, you increase productivity, and therefore, you increase the capacity of people to increase their own material welfare, if you think about it, in terms of what it means on the ground. So, this is very, very important. And study after study has shown that in terms of—

Many factors affect growth. But if there is one factor, which is almost always emphasized as being critical for growth, you can’t have growth without this, it is investment. So, this idea that China is suffering from lack of investment is ludicrous. Yes, the share of consumption versus investment is lower, but that is not incompatible with increasing levels of material welfare, which indeed China has been experiencing in the recent past.

MICHAEL HUDSON: Well, I think part of this investment consists of housing, and housing does not appear as part of consumption, because that’s a balance sheet relationship, ownership. But to the extent that this capital formation takes the form of housing, that actually is consumption.

In the real world, if we look at consumption as, how you’re living in a house, and you include having a house of your own as a part of consumption. So, actually, there’s a direct correlation, feedback, and almost identity between capital formation and consumption in the form of residential housing.

RADHIKA DESAI: Mick, did you want to add anything?

MICK DUNFORD: Well, I mean, I just said, I mean, the point is that if you invest, you employ people, the people who are employed receive wages, those people will then use some of those wages in order to purchase goods and services. So, investment actually also gets translated into increased consumption.

And I can’t remember the precise numbers, but there was a very interesting study done in Singapore, which actually showed that investment generates in industrial activities in particular, which is what China is actually targeting at this point in time. Investment in industrial activities generates far, far more jobs than does investment in services.

I mean, if you simply try to fuel a consumption boom, then to some extent, what you will fuel is a growth of services, which generally speaking, are very low productivity and do not generate the jobs that you will ultimately generate if you go down an investment path.

RADHIKA DESAI: And I think there’s also a couple of other elements to this story before we leave it, maybe we should take a look at that. So, one of the reasons or one of the outcomes of China’s consistently high rate of investment has been, of course, China’s climbing share of world manufacturing. So, here you have China’s gross output and value added in manufacturing versus NAFTA’s and the UK’s.

Mick, this is your chart, actually, maybe you want to speak to this.

MICK DUNFORD: Well, no, I mean, in a sense, it speaks for itself. I mean, it shows that China has actually come to account for an enormous share of industrial manufacturing “value-added”.

I mean, in the United Nations Industrial Classification, there are 500 categories. China has a presence in every single one of those categories, and it leads the world in about 40% of them. So, it basically is the only country in the world that has a completely comprehensive industrial system. And that is very, very important, because that lays the foundations for industrial upgrading, because in a sense, it means that, I mean, obviously, there are a few critical sectors where China has certain gaps at this point in time. That means that China has this kind of comprehensive industrial system, which enables it, if you like, to generate a process of investment that will generate very strong growth internally within China.

RADHIKA DESAI: Indeed, in fact, what I’m reminded of as well in this case is the simple fact that China, as a result of these investments, has also acquired its technological lead. So, there was a recent report published by ASPI, which is the Australian Strategic Policy Institute, normally a terribly anti-China outfit, but this, and they are basically just playing Cassandra, of course, for the West.

But this report pointed out that China’s global lead extends to 37 out of 44 technologies that ASPI is now tracking, that China is, and this covers important technological fields like defense, space, robotics, energy, environment, biotechnology, artificial intelligence, advanced materials, and quantum technology.

So, you can imagine that this idea that China should somehow decrease the proportion of its income it spends on investment and increase consumption is essentially a recipe for essentially restricting China’s growth.

And then there are also a couple of other points I’d like to make, and this relates to exports, because, of course, exports is also part of what would be— exports plus investment plus consumption is total GDP. And so, here we have China. It is true that between about the 1990s and the mid-2000s, I would say that China’s exports as a share of China’s GDP went from a low of about 10% in the mid-1980s to a peak of over 40% in the late 2000s.

But since then, particularly since 2008, it has declined. And even though it has declined, China’s growth rate remains substantially above the growth rate of the advanced countries. You know, China’s exports as a share of GDP for China today is substantially lower than that for Germany, as you see, which remains quite dependent on exports, partly, of course, because of the existence of the EU.

And here’s another chart that is also quite interesting.

Because this is kind of a nice segue into talking about China’s growth strategy as well. Because what you see here, in fact, let me show another chart first. Mick, this is your chart. Maybe you start with this one, and then I’ll show the other couple of charts.

MICK DUNFORD: Yes, well, I mean, this chart plots world GDP growth from the middle of the 1960s and also plots, well, actually from the early 1960s and from the middle of the 1960s, it plots world export growth. And what it shows very, very clearly is that one can say certainly up to the North Atlantic financial crisis, the growth rate of world exports, this is real growth, considerably exceeded the rate of growth of world GDP. And since then, the rate of growth of exports has slowed very, very significantly indeed, and generally speaking, only barely exceeds the rate of GDP growth.

In the case of China, this change in the global situation obviously is one of the reasons for China’s somewhat slower growth, although as we’ve insisted, China’s rate of growth is still consistent with its long term objectives in relation to increasing GDP by, and GDP per head by 2035.

China’s exports grew at something like 18.1% per year up until the financial crisis over a period of nearly 30 years. That’s quite astonishing. Then with the financial crisis, they dropped to 9.4%. And then since 2013, it’s grown at 5.7%. So obviously Chinese exports are growing much less quickly. Because exports are growing less quickly, of course, many of the private sector firms that were export-oriented, have been reluctant to invest. And if they go to a bank asking for credit, it obviously is going to be more difficult to get credit unless they actually have a strategy, which is clearly designed to upgrade and move up the value chain.

So China, China’s export, in a sense now contribute less. And that’s one of the reasons why China is undergoing this current process of structural change. This is a process of structural change that, as I’ve said, is amongst other things designed to significantly upgrade existing industries, not to abandon them, basically to use new technologies in order to upgrade and improve the quality of these industries. So they continue to play an important role.

Although at the same time, because of the growth that we spoke about earlier in the size of China’s domestic market, the domestic market, as we shall probably explain in more detail later, is going to be a significant focus of future growth.

MICHAEL HUDSON: This is probably going to continue. The interesting thing is to look at Germany, which was at the very top of the chart. We know that Germany’s exports are not going to increase because of the sanctions against Russia, and also because of China’s creation of its own automobile industry. It’s not importing BMWs. BMW has moved its production to China. China is not importing chemicals from Germany because BASF has moved its chemical operations to China.

So you’re having a movement of Germany into China, and much of the increase and the decrease in world trade relative to GDP, which means domestic self-reliance, is a result of China’s role itself. These charts would be quite more emphasized if we had China on the one hand, and the rest of the world without China on the other. So you’re having China’s import displacement for much of this as it becomes more self-sufficient. This is sort of a model, not only for China, but for the whole Belt and Road Initiative that it’s trying to put together to make them independent of the US and NATO countries, because the US and NATO countries have already said, we don’t want more trade with China.

You’re having the World Trade Organization really coming to an end. In today’s Wall Street Journal, for instance, there’s accusations that we’ve got to ban all Chinese exports because Brazil has brought an anti-dumping rule against China. Anti-dumping means the government is supporting development. Well, of course, the government’s supporting development. Anti-dumping, you’d have to ban all American exports, especially agricultural exports, all Chinese exports. This is simply a legal means by the US controlled international diplomacy to isolate China.

But of course, the result is that it’s isolating the NATO countries from what’s becoming the whole Chinese sphere, that it’s going to be independent in itself. And if you would do, say, the Eurasian sphere versus US-NATO, you’ll have a very interesting contrast there. Very little, less and less trade between the world majority and the US-NATO, but much more domestic trade, which will not appear as trade at all because it’s domestic.

RADHIKA DESAI: You know, absolutely. And I just wanted to share this chart once more, just make a couple of points about this.

You know, this whole, what you’re looking at here is a quantitative story, but there is also a qualitative story hidden there. And Michael, you just referred to it, which is that, this peak of exports was really a peak, generally speaking, of trade among, on the one hand, the US and Western countries, and on the other hand, China. And to a lesser extent, some of the other BRICS, but that was the main story.

Now, after this dip, if and when world trade recovers, it will have a very different structure in which China remains central to the story. But increasingly, China’s trade partners will be a rather different set of countries, precisely because, this dip, the dip of export of goods and services, okay, it’s gone up a little bit here. But quite frankly, if Biden’s strategy, foreign policy continues along its present path, which is causing conflict, expanding sanctions, etc., etc., and proliferating conflicts across a range of theatres, this is only going to essentially isolate the West and take it out of, as Michael, you were saying, out of the trading relationships of the world, and so on. So, this is a qualitative change that we are looking at. And I think, and that’s one thing.

The second thing is, of course, that in, as far as the consumption story is concerned, actually, a good part of what China does not export, as Mick was saying, actually becomes part of the internal consumption of China. And as you’ll see in a minute, China’s new growth strategy directly involves the expansion of the consumption, in quantitative terms, not in proportional terms, but in absolute quantities, the expansion of the consumption of the Chinese people.

Because remember, at the time of 2008, when China’s economy was delivered this short, sharp trade shock, China’s economy turned, this giant economy turned on a dime. It said, okay, if we cannot have access to those export markets, first of all, we are going to engage in a massive investment drive. And so, the next two or three years, China engaged in a massive investment drive. And then as that came to an end, China has explicitly followed the policy of allowing wages to rise, so much so that many industries that relied on low wages are no longer economical and profitable in China anymore. And they are moving elsewhere, which is fine, which is as it should be, because China is expanding other more high productivity industries, as Mick and others have pointed out. So, that is the qualitative story.

And I just wanted to show you this chart as well, which only goes to about the mid-2010s, but I would say the story continues today.

What you see here is this red line shows China, gross exports as a share of gross output or GDP from 1995 to 2017. And you see that this is the developing countries excluding China, and this is China. So, first of all, compared to other developing countries, China’s reliance on exports was considerably lower. And then what you also see is that it has actually been going down.

That is to say, China’s growth, the market stimulus for China’s growth is increasingly coming from China’s own economy. And the same goes for the import of intermediate inputs. China is importing fewer intermediate inputs, which means that firms within China are increasingly producing the inputs that were previously being imported into China. So, in that sense, growth in China and also in the rest of the developing world, though to a lesser extent, is becoming less reliant on trade growth.

And this is a chart which I got from Richard Baldwin’s, one of his blogs. And it also shows similar things. Export-linked manufacturing as a percentage of manufacturing. It peaked for China in about 2006, and then it has declined. And domestic sales of China’s manufactured goods, it shows, is growing faster than export sales. You see here this blue line is domestic sales.

So, you can see that more and more of what China is producing is being produced and in many ways even preferred by China’s citizens. So, this is a really welcome development. And as China moves to the forefront of technology in a range of fields, this will only increase because why would you buy a foreign item if it is technologically inferior to your domestically produced items? So, those are some of the things that I wanted to bring out.

MICK DUNFORD: Can I just, I mean, re-emphasize some of the very important points that Michael and you, Radhika, just made.

I mean, in that period up until the financial crisis, China had very large export. And it was basically exporting goods predominantly, as you said, to Europe and to the United States. But Europe and the United States, with the exception of Germany, were countries with huge trade deficits. So, this model was only sustainable insofar as trade surplus countries lent their surpluses to the richer countries in the world to enable them essentially to live beyond their means.

So, what’s come to an end, or coming to an end, it seems, is that particular model.

But at the same time, it’s important to recognize that China, even today, is the main trade partner of 140 countries in this world. But these countries are largely part of the Global South. So, they’re countries that in the recent thirty— in the recent neoliberal era have actually grown relatively slowly. And that’s one of the reasons for this relatively slow growth of world trade recently, which has come to depend more on them.

But I mean, if you look at China’s trade, it’s being reoriented significantly towards these countries. And if one puts in place a system of trade, which in a sense is win-win, then it’s quite conceivable, as you said, that in the course of time, South-South trade is going to grow very substantially. And I mean, China has a very, very strong commitment, to the maintenance of an open world economy, and in the establishment of complementary relationships.

So, it’s quite conceivable, as you said, that while you’ve seen greater growth of the domestic market, more emphasis on the domestic market, in the longer term, the export market will continue to, play a really very significant role in Chinese growth. But it will probably be much, much more connected with the development of other parts of the Global South.

RADHIKA DESAI: In fact, that reminds me of another point that I meant to make. And that is that, you Mick wrote a very fine piece recently in, I forget the journal now, but, and I commented on that, you said that a large part of what’s going on right now is that China’s international policies, foreign policies, foreign economic policies are directed towards reshaping the international environment in a certain way, which allows it to continue what it calls globalization. And I’ll come to that in a minute, to increase international trade linkages, in a positive way for mutual benefit, rather than to subject other countries to imperial subordination, etc.

So, in that sense, the Belt and Road Initiative, or the lending and investment policies and what have you, all of these ways are attempts to reshape the international environment.

And in this, by the way, in many ways, I would say that the West has given China a great gift by prosecuting its proxy war against Russia, because it has driven Russia into the arms of China in a more certain way. I mean, this was already happening, but it is now happening in an accelerated fashion.

And just think about it. China and Russia are two economies with such enormous complementarities that they can only get more and more increasingly integrated, because Russia has a small population and vast resources, and China has a large population and, well, China also has a lot of resources, but it can do with more resources. So, in that sense, energy and trade, that China-Russia energy and trade relationship has deepened massively over the last two years, and it will continue to do so.

And I also wanted to say that the same, Russia is doing the same thing. Russia, just yesterday, we had an International Manifesto Group webinar with key foreign policy experts from Russia talking about a new report entitled “Russia in the World Majority”, or “Russia’s policy towards the world majority”, in which they point out that Russia is engaged in a massive reorientation of its foreign economic and political policies precisely in order to reshape the international environment in a way that is conducive to their growth.

And in both of these cases, unless the West really changes tack in a major way, it’s going to get left out. And this re-formation of the international environment is going to reorient the world economy with China as its motor, Russia following along, and the rest of the world majority countries as well.

MICHAEL HUDSON: You’ve put your finger on the key, Radhika. I think President Biden, and before him, Donald Trump, have done a great service to the whole world. They’ve said countries have to be more self-sufficient for themselves. You can’t depend on the United States because we may do things to hurt you. You’ve got to be self-sufficient. And I know that you’re neoliberal, you want trade, but we’re going to help you be more self-sufficient by imposing sanctions to really force you to defend yourself and to create the independence, because we know that you’ll be much better off being self-sufficient.

And that altruistic sacrifice of U.S. trade and U.S. economy to help China and Russia, I think they deserve the peace prize.

RADHIKA DESAI: Quite right, exactly. The inadvertent peace prize.

Okay, so I think we’ve dealt with the whole issue of restricted consumption, stagnant living standards, investment, etc., and also the matter of exports and the role of exports in China’s growth story.

So now perhaps we can talk about China’s new growth strategy. And Mick, we know that you’ve been doing a lot of work on this, so perhaps you can start us off by talking about what you take to be China’s growth strategy.

MICK DUNFORD: You know, I think the first thing to say is that, I mean, if you think about China, you know it’s a country that in 1949 embarked on a transition to socialism. And, as it moved forward it encountered various problems, and as it encountered problems it introduced reforms to address those problems. And it’s gone through a series of phases, you know.

In the early period it was basically embargoed by the United States until the early 1970s, and then it started to open up to the world. And then after about 2010 you had the pivot to Asia, and the United States started again to try to constrain China’s growth. So that context has been particularly important in shaping China’s development.

But, from reform and opening up it basically developed by entering the neoliberal world economy in a managed way. But in the course of that it encountered a lot of difficulties, in terms of the impact on the environment, the impact on inequality, the impact on corruption, and so on. And so it has seen aspects of its modernization process that do not really endear it to Western path to modernization.

So one of the really important things about what is happening in China now is that it is talking about a new path of modernization that is different from the path that was followed by the Western world, and it involves many dimensions.

Obviously it involves important emphasis upon productivity increasing technologies, and then the critical thing is, what drives growth is actually the diffusion of technology, the rapid diffusion of technology. And the rapid diffusion of technology depends on investment. So investment in a sense leads to rapid uptake of productivity increasing investment.

So obviously this technological upgrading is a critical part, and that relates also to the view that the previous drivers of China’s growth are no longer. Well, either, they were associated with monopoly behavior or they were not associated with high productivity. So you had a low productivity, low wage export sector that needs to be upgraded. You had a platform economy that consumed vast amounts of capital, but because of the rents that are associated with monopoly positions, and you have the housing market, the real estate system, which we spoke about in the last discussion.

So, China wants to change growth drivers, but at the same time is concerned about what it calls ecological civilization. You know, in other words, establishing a harmonious relationship with the natural world. It’s concerned about the enrichment of the spiritual quality of life, and this is very interesting because it relates to a kind of criticism, of what has been observed, looking at some of Western societies and the way they’ve become extremely individualistic and very highly fragmented.

And also, the way in which, a whole series of developments in education and so on are associated with, how can I put it? You know, in a sense, they want to improve the quality of everyone’s cultural life and increase the sort of spirituality of human existence.

And then it’s also, of course, closely linked with the idea that they need to improve their own systems of democratic accountability and governance. And it’s also linked to the idea that development is only really possible in a peaceful world.

So China has a different view about the path to modernization, and that goes hand in hand with this attempt to implement structural change in the economy by directing resources towards productivity, increasing investment, and also, taking up this issue of internal circulation that you have written about and discussed, Radhika.

RADHIKA DESAI: This is from the 14th five-year plan, so that would have been five years, no, five years ago, more than that, maybe 10 years. 2014. 14, that’s right. It was 10 years ago now.

So, essentially, like I was saying, in order to deal with the shock of 2008, they had first a massive investment drive. And then, within a few years, they were already pointing out that a large part of the stimulus for China’s growth must not just come from outside, but also from the domestic economy.

So, Article 13 of this policy refers to promoting domestic international dual circulation. And it says, based on domestic great circulation, we will coordinate and promote the construction of a strong domestic market and the construction of a trade powerhouse. So, both domestic market and foreign market are important to form a powerful gravitational field to attract global resources and factors of production, promote the coordinated development of domestic and foreign demand, imports and exports, and the introduction of foreign capital and foreign investment, and accelerate the cultivation of new advantages to be used in international cooperation and competition.

So, the expansion of the domestic market was made into an explicit goal. And that, I think, can only be a good thing, because at the end of the day, what is development about but increasing the material standards of living of ordinary people, increasing their consumption of meaningful things, obviously, not just superfluous and, in fact, sometimes even harmful goods that we often end up counting as part of consumption in Western countries.

But there’s an associated theme here that I also wanted to bring up, because I promised earlier that I would clarify what I mean by the Chinese meaning of globalization. You see, in the West, we think of globalization as essentially an ideology, and as Western governments promote it, it is an ideology of free markets and free trade. The idea is that the government should step back from any role in the economy and should not try to manage trade flows, capital flows, investment flows, etc., etc.

This is the meaning of the term globalization in the West, and the purpose of this meaning is actually not, the West continues to practice all sorts of protectionism and regulation and what have you, but the purpose of it is to open up the rest of the world’s economies to Western corporations, Western capital, Western commodities, and, of course, open them up in order that they may supply Western needs for resources, cheap commodities, cheap labor, cheap manufactured goods, etc., etc.

So, this is the Western meaning of the term globalization, and as most people will recognize, the essence of it is to subordinate most of the economies of the world to Western economies. It is an imperial subordination project.

In China, it means something completely different. In China, the Chinese kind of recognize the simple elemental economic adage that the more you have a division of labor, as Adam Smith pointed out, the more we can all benefit. So, we can all benefit from specialization, we can all benefit from increasing scale of production, and so on and so forth, but this should not be done in a zero-sum game. This can be done and should be done for mutual benefit.

And in order to ensure that there is increasing economic interconnection within the economies of the world, all economies have to continue to benefit. One of the results of globalization has been today de-globalization because it has harmed economies to the extent that it has. If you manage the process for mutual benefit, then it actually becomes a more sustainable process.

So, the Chinese look at increasing international interconnection as a managed affair in which states do regulate trade flows, investment flows, etc., etc., in order to achieve mutual benefit of the economic partners, whoever they may be. And I think this type of globalization China will continue to promote and is continuing to promote in these attempts, as I referred to earlier, of trying to reshape the international environment to something that is conducive both to its own growth and that of the rest of the world.

And in fact, that’s something that Western imperial powers have not allowed because they say that you want to have a growth both of domestic and foreign markets, and China’s investments in the rest of the world are doing exactly that.

MICHAEL HUDSON: What you’re saying, Radhika, is that China’s concept of growth is very different from the concept of growth in the United States or in neoliberal economics.

Much of what you’re talking about doesn’t even appear in GDP because it’s largely redistributive. It has to do with the quality of life. It really is: what kind of growth are you going to have? That’s what the issue that China’s development is posing for the whole world and what we’re talking about.

We talked about providing housing, providing better living standards. If you provide education for free, is that growth? If you provide medical care for free and it’s not part of the market, is that growth?

In the West, they say, what is part of the market, especially excluding government? And China looks at the whole economy and says, no, we’re looking at growth of the whole society as an organism. We’re talking about transformation. Transformation and redistribution is much more important than growth. That’s not measured by GDP, but you pointed out the qualitative aspect of what the West views simply as quantitative changes.

RADHIKA DESAI: Exactly, yeah. Did you want to add anything, Mick?

MICK DUNFORD: Well, if I just come back in relation to what you said about China’s view of globalization. China sometimes describes itself as “socialism with Chinese characteristics”. And Chinese characteristics are actually very important in many ways. I mean, Chinese thought is obviously a synthesis of Marxism, but also with earlier Chinese traditions.

If you look at Chinese ideas about international relations, the core concept, the core concept is harmony. I mean, actually, it’s one of the core concepts in Chinese thought, the idea of harmony and living in harmonious relationships with others, which means understanding the kind of internal dynamic of others and then working with them to develop their potentialities, rather than imposing.

The Western model is that you sort of imprint, your model on something where instead of looking at their own internal capabilities and helping them move in a positive direction.

So some of the core concepts in Chinese international relations are things like guānxi (关系), or “relationality”; or gòngshēng (共生), which means symbiosis; or tiānxià (天下), or “all under heaven”.

And that leads to these ideas that the way you help yourself is actually by helping others. So by helping others, you actually help yourself. So it leads to a quite different view about the way in which the relations between countries should be organized, the principles governing the relations between countries.

It’s obviously very difficult to act in this way if there’s a bully in the room, which at present there is. But I mean, even in the face of that bully, you can see that China tries to hold its principles as far as it possibly can.

So I think that is quite important. I mean, that’s associated with, if you like, a mutually supportive approach to working with other countries and trying to find complementarities. And that grows out of a different tradition of thought, that is rather different from the Western tradition.

And that’s also why, China speaks about a rather distinctive and different path to modernization. And that’s why they come up with these initiatives, like this global civilization initiative, or this global indivisible security, although it was Russia, that before the start of the conflict in Ukraine, insisted on this issue of indivisible security in relation to European security. And then this global development initiatives.

So, it’s important that we start to look at the existence of other traditions of thought in the world and start to understand the variety and multiplicity, of human civilization and the way in which those civilizations can work together and cooperate in a different kind of global order from the one that’s prevailed, for the last 500 years, when the Western world basically seized on Song Dynasty innovations to embark on a process of colonialism and conquest.

RADHIKA DESAI: Quite right. I just wanted to pick up on one, a very deep point actually emerges from what you were saying, because you know you were emphasizing harmony. And I think that, of course, the Chinese value harmony and the West can say, well, we value harmony as well, except that in the West, from the earliest beginnings of capitalism, there has been an extremely odd conception of harmony, which is supposed to spontaneously arise from the workings of the market.

And in that sense, and even though actually spontaneously capitalism, market society, whatever you want to call it, has actually produced a lot of conflict. The ideological commitment to the market has always meant, and therefore to markets, private property, profits, all these things, has always meant that no matter how much evidence piles up that market relations are producing conflict, unregulated market relations are producing conflict, both domestic conflict and international conflict, the West sticks ideologically to this notion that, you are going to have harmony out of markets.

Whereas the Chinese conception realizes that harmony is a value and you have to work to produce harmony. You have to do it through deliberate actions of both households and businesses as well as governments. So, harmony is not spontaneous. It is something that is consciously aimed for and produced. And that is the difference.

I think that increasingly as China plays a leading role and its demonstration effect, how it manages its economy, how it manages its international relations, its demonstration effect will underline the truth that harmony is something that is desirable, but if we are to get it, we must work for it. We must build it through deliberate actions. So, I think this is a very, very important thing. And in this sense, the Chinese are extremely pragmatic. They will do whatever works, whereas I think in this context, the West is appearing more and more ideological in its commitment to this weird ideology that somehow markets produce spontaneous harmony.

So, maybe now that we’ve talked about China’s growth strategy, and this is a very perfect segue into talking about China’s foreign policy, particularly the accusations that are made against China of creating debt trap diplomacy. I mean, and by the way, I should say that we are going to talk about a lot of things, but people who are curious about China’s foreign economic policy and accusations that China only wants to export its labor, that China only wants to grab the world’s resources, etc., and is engaged in debt trap diplomacy. We will be discussing that in particular, but please also go to the Johns Hopkins University’s China-Africa Research Initiative website that has exceedingly valuable statistics and reports and blogs about this matter.

But Mick, I’m going to show the chart that you wanted to discuss. So, we’ll start off the discussion with this chart. So, go ahead.

MICK DUNFORD: Yeah, I mean, I think, the first thing I want to say is, if you look what China does is it basically builds, high-speed rail, ports, power plants, factories, roads, constructs social infrastructure, and it’s established certain or cooperated in the establishment of certain financial institutions, that do lend to the developing world.

This chart actually plots Chinese credit, so it’s the debt of the rest of the world, the developing world, to China. And the chart on the left simply indicates the way in which debt owed to China has, of course, increased over the course of time as a result of Chinese development assistance and China’s lending, especially to parts of the Global South.

What I want to emphasize, however, is what the chart on the right shows. So, the one on the right records the share of gross national income of total debt, I should say, of total debt. And it does it by looking at the World Bank grouping of countries as least developed, low income, lower middle income, low middle income, middle income, macro middle income, and then separates out sub-Saharan Africa.

I mean, one of the very striking things about China is that a large share of its lending is, in fact, to very low income countries. It lends more to the least developed countries in the world than do the multilateral institutions and do the OECD group.

But if you look, if you see the least developed countries, their total debt to the rest of the world is 43% of their gross national income, which is, nearly one half, a very substantial share. But of that debt, the share owed to China is only 5.5%. And Chinese debt amounts to 12.8% of the total. Now, I mean, if you take the famous case of the Sri Lankan port of Hambantota, I mean, that issue blew up because Sri Lanka had to repay, Sri Lanka’s debt to China was about 10% of its GDP, 11%, but it had to repay debt to the Paris Club and to multilateral institutions.

So that is fundamental debt problem was debt to these institutions and not debt to China. Although Sri Lanka is not in the least developed case.

If you look at low income countries, China’s share is 5% of GNI. China’s debt is 5% of GNI. Their total debt is 51.4% of gross national income. And then you can work your way through the list. I mean, if you look at sub-Saharan Africa, 43.1%, their debt is 43.1% of the gross national income. This is data from the IMF for [2021].

So, 43% of GNI debt, which obviously is an excessive level of debt and is a serious impediment to the development of these countries. You know, especially, if this debt is not used to fund infrastructure and other kinds of activities that are going to generate income and enable them in a sense to disindebt themselves.

But China’s share of GNI is 4.3%, and its share of the total debt of sub-Saharan Africa is 10%. So these claims about a debt trap are, in a sense, simply do not stand up empirically.

And it’s very interesting to go back to where that notion came from, because it came from a book, I think, written in the 1970s. What was it? I can’t remember the precise title. Michael will tell us about “Disclosures by an Economic Hitman”, who was actually talking about what the United States did. So it’s very curious, that that thesis has been applied without any real justification to China, simply in order to discredit China’s very significant contributions to the development of the Global South and the very significant contributions of the BRI, which also, receives completely unwarranted criticism.

I mean, obviously, some things do not work as they’re meant to work out. But I mean, the degree of criticism of these projects is absurd, in fact.

RADHIKA DESAI: Indeed. Sorry, Michael, please go ahead.

MICHAEL HUDSON: It’s very important because it’s obvious now that much of the Global South cannot pay its international, its foreign debt, its dollarized debt. And we’re back in a situation very near to 1982, when Mexico’s default on its Tessobonos led to the Latin American debt bomb.

Now, the United States realizes that there’s going to be a debt write-down. The bank lobbyists, people like Bono, say, well, the government should now forgive all of their debts to the Third World so that all the money that the governments have can be paid to private bondholders. So Bono is the lobbyist, basically, for the private bondholders. Instead of the government taking priority, as it does under international contracts, the money would be paid to private holders.

But for the government debt, Mick, you’re absolutely right. The reason why the Global South has a right to annul its debt to the World Bank and to the IMF has been that these loans are to finance underdevelopment, not development. They’ve been to finance economic dependency, not economic self-reliance. They have imposed on the Global South a trade pattern that has led their balance of payments into increasing deficits. And the IMF has only lent money on the condition that they privatize and sell off their basic infrastructure, their raw materials, and other things.

So the United States is trying to say, well, if we write down our debt to the foreign dollarized debt, to foreign governments and the IMF and the World Bank that are basically arms of the U.S. economic strategy, then China has to write down its debt.

Well, the difference, as you point out, Mick, and this is what I think China needs to make very explicit that it has not done so far, is that its debt has been to help countries grow, not to finance their dependency, more or less. And China’s idea of mutual gain means, yes, we’re going to help you develop your ports so that you can grow, and your growth will provide your ability to have the money to pay for the loans that we’ve made out of your growth, not using the debt as a means of, oh, you can’t pay. Please sell off your ports, your raw materials, your land, your public utilities, and ultimately your government.

What we’re talking about with the chart is the whole difference between the Eurasian BRICS-plus strategy of international trade and investment and the predatory neoliberal U.S.-NATO strategy of the World Bank, IMF, and the U.S. government.

RADHIKA DESAI: Absolutely. You know, first of all, let me say that, “Confessions of an Economic Hitman” is a relatively more recent book.

But Cheryl Payer, back in the 1970s, already, maybe early 1980s, had already written a book called “The Debt Trap”. And the debt trap she was referring to was the one set by the West, not by China.

So these accusations of what China, about what China is doing are really absurd. And in fact, Michael, as you were talking, I was reminded that in a recent essay that I wrote, I cited the following study by one Asad Izmi, who noted in 2004 that Africa’s external debt has increased by more than 500 percent since 1980 to $333 billion and transferred $229 billion in debt payments from sub-Saharan Africa to the West since 1980, four times the region’s 1980 debt.

In the past decade alone, African countries have paid their debt three times over, yet they are three times as indebted as 10 years ago. So talk about debt trap diplomacy. This is what the West is doing to the poorest countries in the world.

He’s talking only about Africa. He’s not even talking about debt elsewhere, which has also, I mean, essentially what we have witnessed in the 1980s and 1990s are giant, so-called giant reverse capital flows. And the reason they’re called reverse capital flows is, of course, that the neoliberal ideology is that, free capital markets are going to direct capital from where it is in excess in the first world countries to where it is needed. But in fact, money and capital are moving from those parts of the world where they are needed to those parts of the world where they are already in surfeit. So that’s one point I wanted to make.

The second point I wanted to make is that, this current phase, it was actually an Indian academic who really is part of India’s aggression towards China that started using the term debt trap diplomacy vis-a-vis China. A guy called Brahma Chalani, who is one of the anti-China hawks in India.

And finally, I just want to say that the discourse of the accusations of debt trap diplomacy are actually part of a complex footwork on the part of the West, because as you showed in your chart, in fact, let me just go back to that. The chart that we were discussing, what you can see here is that bulk of the debt in this right hand side chart here, bulk of the debt that you are looking at is actually owed to not to China, but to the rest of the world, of which, of course, the Western countries are the leading creditors. And Western private lenders are also among the leading producers, lenders, because what has happened in the recent past is that Western financial institutions, essentially given the stagnant character of their own economies, have been looking for returns elsewhere. And one of the ways in which they have been getting these returns is by charging exorbitant interest rates to third world countries to lend to them to buy their bonds, essentially, which are issued in dollars or other international currencies.

So third world countries are in debt distress. As Michael pointed out, we are close to a 1982 type position. This is going to require complex negotiations. But these negotiations, unlike back in the 1980s, will now involve an outsider, namely China. China’s debt rescheduling practices are actually tremendously liberal. China has gone to the table and given both debt forgiveness and generous reschedulings and so on, without the kind of extortion that we are just looking at. But the West does not want to do that. And what better way of dealing with this issue of having to include China in their negotiations and China’s very different lending practices than to accuse China of what they are doing all along. So that is really the real story.

So that is about debt trap diplomacy. And any other, I think we should probably wind down because we are definitely over an hour by now. So any final comments on any aspect of this, but particularly China’s foreign economic policy?

MICK DUNFORD: No, I just think that what you just said, Radhika, is extremely powerful. But I think if you combine it with an analysis of the data, then it is quite clear that these claims about debt trap are in a sense trying to distract attention from the real source of the issue and to some extent stand in the way of a solution.

RADHIKA DESAI: Yes, and also because this time around the private sector is very heavily involved. And they are basically trying to, instead of dealing with the fact that the private sector has been lending irresponsibly and in a predatory fashion, they’d rather talk about China. This is basically it.

MICK DUNFORD: Yes, I think, they’re trying to put moral pressure on China, because if they can put moral pressure on China to get China to basically deal with the debt problems of these countries in order to reschedule their debt and so on, it enables them to be repaid in full. I mean, this is a classic example, of this kind of win-lose view of the world that predominates in the Western world.

RADHIKA DESAI: On that note, I think we should probably wind this discussion to a close. So please, we have just been talking about, we’re just completing the second part of a two-part series on China’s future, China’s economic future, whether it is going to decline, as the Western world and Western pundits love to say, or whether it is in the process of engineering the next industrial revolution.

So please watch both episodes, please share widely. And thanks again to Mick and to all of you for listening. And I look forward to seeing you again in a fortnight or so. Bye-bye.

MICK DUNFORD: Bye. Thank you, Radhika. Thank you, Michael.

Photo by Robert Nyman on Unsplash

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On 11th March 2024, Phillip Adams invited me to LNL for one last time before he is due to retire. Bittersweet program where we talked about everything that intervened between our first ever encounter on LNL in 1993 to today.

Thank you Phillip. On behalf, I believe, of countless souls who will miss your voice, your intelligence and your empathy on the little wireless program.

 

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