By Michael Hudson

Economist Michael Hudson explains how American imperialism has created a global free lunch, where the US makes foreign countries pay for its wars, and even their own military occupation.

Max Blumenthal and Ben Norton discuss the economics of Washington’s empire, the role of the IMF and World Bank, attempts to create alternative financial systems like BRICS, and the new cold war on China and Russia.

-Transcript -

How The US Makes Countries Pay For Its Wars – Economics Of American Imperialism

MICHAEL HUDSON: The World Bank has one primary aim, and that’s to make other countries dependent on American agriculture. This is built into its articles of agreement. It can only make foreign-currency loans, so it will only make loans to countries for agricultural development, roads, if it is to promote exports.

So the United States, through the World Bank, has become I think the most dangerous, right-wing, evil organization in modern history — more evil than the IMF. That’s why it’s almost always been run by a Secretary of Defense. It has always been explicitly military. It’s the hard fist of American imperialism.

Its idea is to make Latin American, and African, and Asian countries export plantation crops , especially plantations that are U.S.- or foreign-owned. The primary directive of the World Bank to countries is: “You must not feed yourself; you must not grow your own grain or your own food; you must depend on the United States for that. And you can pay for that by exporting plantation crops.”

BEN NORTON: Here at Moderate Rebels we talk a lot about imperialism. I mean it’s really the main point of this show. This program explores how US imperialism functions, how it works on the global stage, how neoliberal policies of austerity and privatization are forced at the barrel of a gun through the US military, through invasion and plunder.

We talk about it in Venezuela, Iraq, Syria and so many countries. But we often don’t talk about the specific economic dynamics of how it works through banks, loans, and bonds.

Well, today we are continuing our discussion with the economist Michael Hudson, who is really one of the best experts in the world when it comes to understanding how US imperialism functions as an economic system, not just through a system of military force. Of course the economics are maintained and undergirded by that military force. And we talk about how the military force is expressed through regime-change wars and military interventions.

But Michael Hudson also explains how the International Monetary Fund and the World Bank, the US financial system, banks and Wall Street all work together, hand in glove with the military to maintain that financial chokehold.

He spells this all out brilliantly in a book called Super Imperialism: The Economic Strategy of American Empire. He began to write that book in 1968, and then recently updated it in 2002, published again in 2003 with the war in Iraq and the war in Afghanistan, and kind of updated and showed how, even though the system that he detailed 50 years ago hasn’t really changed, it has shifted in some ways.
So today we’re gonna talk about how that international imperialist system dominated by the US works.

Michael Hudson is an economist and he’s also a longtime Wall Street financial analyst. He is also a professor of economics at the University of Missouri, Kansas City, and you can find his work at michael-hudson.com, which I will link to in the show notes for this episode.

So without further ado, here is the second part of our interview with Michael Hudson.

MAX BLUMENTHAL: I think it’s a good transition point to talk about another kind of scam you’ve identified. There’s a really hilarious aside in the second preface to your book “Super Imperialism,” where Herman Kahn, who is, I think a founder of the Hudson Institute, which you went to work for. He was also the inspiration for the Dr. Strangelove character and Stanley Kubrick’s film.

There’s an award that the neocons give out every year named for him; Benjamin Netanyahu is a recent award winner.

But Herman Kahn was he was on a panel for one of your talks, where you laid out your theory of “Super Imperialism,” and how the United States actually gets other countries to subsidize its empire, and is able to expand and carry out this massive imperial project without having to impose austerity on its own population, as other countries have to do under IMF control.

So Herman Kahn comes up to you after the talk and says, “You actually identified the rip-off perfectly.” And your book starts selling like hotcakes in DC, I guess among people who work for the CIA, and people who work in the military-intelligence apparatus.

MICHAEL HUDSON: What he said was, “We’ve pulled off the greatest ripoff in history. We’ve gone way beyond anything that British Empire ever thought of.” He said, “That’s a success story. Most people think imperialism is bad; you’ve shown how it’s the greatest success story — we get a free lunch forever!”

MAX BLUMENTHAL: Right. So explain the ripoff you identified there, and how it is being perpetuated under the Trump administration in ways that I think are pretty amazing, including through the imposition of unprecedented sanctions on something like one-third of the world’s population.

MICHAEL HUDSON: Well I wrote “Super Imperialism” in 1972, and it was published exactly one year after President Nixon took America off gold in August of 1971. he reason he took America off gold was that the entire balance-of-payments deficit from the Korean War to the Vietnam War was military in character.

Especially in the ’60s, the money that America was spending in Vietnam and Southeast Asia had to be spent locally. And the banks were French banks, because it was French Indochina. So all the money would be sent to Paris, to the banks’ head offices, turned over from dollars into francs, and General de Gaulle would end up with these dollars. Then every month he would send the dollars and want payment in gold. And Germany would do the same thing.

So the more America fought militarily, it depleted its gold stock, until finally, in August 1971, it said, “We’ve been using gold as the key to our world power ever since World War I, when we put Europe on rations. So we’re going to stop paying gold.”

They closed the gold window. And most of the economists were all saying, “Oh my heavens, now it’s going to be a depression.” But I said, “Wait a minute, now that other countries can no longer get gold from all this military spending” — and when you talk about the balance-of-payments deficit, it’s not the trade deficit, it’s not foreign investment; it’s almost entirely military in character.

So all this money that was spent abroad, how are we ever going to get it back? Well, these dollars we spend around the world, mainly for the 800 military bases and the other activities we have, these dollars end up in foreign central banks.

The question is, what are these foreign central banks going to do with these dollar inflows? Well we wouldn’t let foreign central banks buy American industries. We would let them buy stocks, but not become a majority owner.

A former mentor, the man who taught me all about the oil industry at Standard Oil, became undersecretary of the Treasury for international affairs. When Herman Kahn and I went to the White House, he said, “We’ve told the Saudi Arabians that they can charge whatever they want for their oil, but all the money they get, they have to recycle to the United States. Mostly they can buy Treasury bonds, so that we’ll have the money to keep on spending.” They could also buy stocks, or they can do what the Japanese did and buy junk real estate and lose their shirts.

So basically, when America spends money abroad, central banks really don’t speculate. They don’t buy companies. They buy Treasury bonds.

So we run a monetary deficit; the dollars are spent abroad; the central banks lend them back to the Treasury; and that finances the budget deficit, but it also finances the balance-of-payments deficit. So we just keep giving paper IOUs, not gold.

I think President George W. Bush said, “We’re never really going to repay this. They get counters, but we’re not going to repay it.” And then, as a matter of fact, you have Tom Cotton a senator from [Arkansas] saying, “Well you know China holds savings of $2 trillion or so in US Treasury bonds. Why don’t we just not pay them? They gave us the virus; let just grab it and nullify it.”