“Imperialism: How the
struggle of both classes and nations creates
our world”
RADHIKA DESAI: Hello and welcome to the
16th Geopolitical Economy Hour, the
fortnightly show in which we discuss the
political and geopolitical economy of our
times. I’m Radhika Desai.
MICHAEL HUDSON: And I’m Michael Hudson.
RADHIKA DESAI: And we are recording this
show on the last day of what may well be
remembered as a historic BRICS summit,
defying no end of gleeful predictions in the
Western press about the BRICS’ irrelevance,
disunity, mendaciousness, authoritarianism,
and whatnot.
The five major countries that today
constitute the BRICS, despite their relative
poverty, constitute a larger proportion of
the world economy, measured by PPPs, that is
to say purchasing power parity.
And they have been able to come together
and do some amazing things. The Western
media, for example, has been trying to drive
a wedge between China and Russia on the one
hand, who are said to be eager to expand the
BRICS, and India and Brazil and South Africa
on the other, who are said to be reluctant
to do so.
But despite all the predictions about the
disunity and the fracas that would ensue
with China having placed the inclusion of
new members of the BRICS on the agenda, the
fact of the matter is that the BRICS meeting
has closed today, the BRICS summit in
Johannesburg has closed today with the
inclusion of six new members.
So that’s Saudi Arabia, the United Arab
Emirates, Iran, Ethiopia, Egypt, and
Argentina. Given the large number of West
Asian and North African members here, we can
begin to wonder what this is going to do to
U.S. influence in what’s generally called
the Middle East.
The BRICS countries have not only
admitted these new members, but they have
also agreed to set down the rules and
procedures by which a large number of new
members will be inducted, because as you
know, dozens of other countries have
expressed an interest in the BRICS.
So it’s quite possible that the BRICS may
well become the institutional foundation of
the world majority, as the global South and
Russia are increasingly being called. They
have done more things.
The Western press has also sought to
portray these countries, the BRICS
countries, as little more than a bunch of
autocracies or very iffy democracies.
But in fact, despite such propaganda,
what we’ve seen in the BRICS summit is that
they have been focused on presenting a very
different vision of the world order, one
bIased on development, on people-centered
development.
And this has been expressed in a direct
confrontation with the Western conception of
the world order, which has, of course, been
dressed up in the garb of human rights and
democracy, but for decades has brought only
poverty and exploitation to much of the
world.
MICHAEL HUDSON: Well, in many ways, this
was a preliminary meeting just to set the
stage for what’s going to come. And at this
stage, I think all the BRICS can do is to
make arrangements among themselves.
And the easiest thing to do, as we’ve
discussed before, is to trade in their own
currencies and to arrange currency swaps
before trying to create a new kind of bancor
other means of credit financing.
But the real problem is going to be the
relationship between the BRICS and the West.
How can they create a new international
order that we’ve been discussing while they
have to pay all of the neocolonial burden of
their foreign dollar debt and the foreign
ownership of their oil and mining rights and
public utilities?
How can they enforce climate cleanup
costs on foreign oil and mining pollution?
The current international law says that the
companies have a right to sue any government
for a new tax on multinational firms or new
regulations.
And so it means the government has to pay
all of the cleanup costs, all of the
external diseconomies. And essentially,
they’re put into an even worse locked-in
position today than they were in the
colonial period.
So how can they defend themselves from
this kind of US-sponsored order and the
regime change for countries that try to
create an alternative to it? All that’s
going to have to wait for the future BRICS
meetings.
And we really can’t even begin to discuss
that now. We’ve discussed what we thought in
earlier episodes of this.
RADHIKA DESAI: Absolutely, Michael. I
mean, the kinds of problems you’re talking
about, I mean, the BRICS agenda is really a
very, very big and tall one. So all we can
expect at the moment is that the BRICS have
only made a beginning, but a beginning they
definitely have made.
Like you say, you’re talking about the
international monetary system and the
financial arrangements. And the fact of the
matter is that, again, the Western press was
sort of brimming with stories about how
difficult, if not impossible, it would be
for the BRICS to do anything that would dent
the position of the dollar.
But as you know, de-dollarization is not
only ongoing, but the BRICS are very aware
of the need to carry it forward.
And this meeting, the summit has also
closed with an agreement to set up a
commission to discuss exactly what steps the
BRICS countries may realistically take to
begin to disentangle itself as an
organization, as a grouping of countries
from the tentacles of the dollar system,
which have proven so adverse to their
interests.
In addition, the BRICS countries have
also put forward a peace plan for Ukraine,
once again, emphasizing the need to
negotiate. And this could not form a starker
contrast to the West and the manner in which
it has continued fueling a conflict for its
own completely short-term interests and the
short-term interests of their corporations.
So in all of these ways, the fact of the
matter is that the BRICS summit are
presenting an alternative, an alternative
that’s not just about the institutional
arrangements and the technicalities, but it
is an alternative vision of the world order.
On the one side, you have imperialism and
economic subordination, which is what the
West is offering. And on the other side, you
have a world order which is based on
cooperation, on peace, and above all, on
development.
So as we were watching all this, Michael
and I thought what we should really do is we
should take a deep dive into the basics of
what we are doing, into the basics of
geopolitical economy, into the basics of our
perspective, which in fact is very different
from what is on offer in the mainstream
media and even in many sections of the left,
which is going to also, however, be going to
also allow you to sort of see through the
smoke and mirrors created by the dominant
approaches.
So the term geopolitical economy, as we
see it, encompasses political economy, that
is to say an understanding of the domestic
structures of a society, economy, and polity
altogether, as well as the manner in which
these domestic structures determine how
every country relates to other societies in
a pattern of international relationships
because it’s what a country is like inside
that determines how it relates to countries
outside.
That’s why it’s important to distinguish,
for example, between the foreign policies of
imperialist powers, such as the United
States or Britain or France, from the
foreign policies of other powers, whether
it’s China or even some powers, say like
India or Brazil, which are not exactly
socialist, but nevertheless, they do not
have the same imperial background.
So we see international relationships as
being rooted in domestic relationships. And
the term geopolitical economy is therefore
not just about the international, but
equally refers to the domestic, not just
about nations, but also about classes.
MICHAEL HUDSON: Well, the reason for all
of this that Radhika and I have been
discussing is that all economies today are
facing similar financial problems,
especially the linkage between bank credit
and housing debt, problems of local
financing, public financing, because states
and provinces can’t create their own money
and credit in the way that a national
government can do.
So these domestic problems interact with
the international economy. And that’s what
we want to focus on today. At present, that
means interacting with the US-centered
dollarized neoliberal economy, which is
subject to rules set by the International
Monetary Fund and the US State Department.
And we’re going to focus on how these
domestic problems interact with the way in
which the global economy is structured.
And that analysis is going to explain why
a new international economic order is needed
to prevent the global majority from having
to go down the same financialized,
debt-burdened economic polarization that has
pushed the United States and the European
economies into the post-industrial
stagnation that they’re now in.
RADHIKA DESAI: Absolutely. In one sense,
you know, one of the things, Michael, that
what you’re saying reminds me of is that we
talk about the world splitting into two
camps. On the one hand, the camp of the old
imperialist powers, and on the other hand,
the camp of the world majority.
But these camps are not just essentially
the same thing, just pitted against one
another. On the contrary, they represent
qualitatively different models of economic
development. And key in this difference is,
of course, that the world majority is
increasingly beginning to reject the model
of neoliberal, financialized capitalism.
And this has been one of the key objects
of our debate.
So what we want to do is essentially, I
suppose what we are saying about
geopolitical economy is it’s really just a
sound materialist and historical way of
trying to understand that the world is
structured into a hierarchy of nations, a
hierarchy originally created with the
beginnings of capitalism and the imperialism
that went along with it.
So how the world is structured in a
hierarchy, but also how this hierarchy
reflects the internal class relations of
each country. So what we’re gonna do in this
show is we want to set up exactly the main
ways in which our perspective differs from
what other people’s perspectives, the
mainstream as well as certain left-wing
ones.
And the best way to do it was we thought
of some dozen principle ways in which our
perspective differs. So we thought we would
just go through them, so one by one.
So the first one is the way we think
about things, we don’t think that some
nations are irrelevant, only classes matter
or what have you, or that classes don’t
matter, only nations matter. We put both
nation and class into a single perspective.
Don’t you think so, Michael?
MICHAEL HUDSON: Well, there’s been a
whole shift in the way people are thinking.
Back in the 1960s, when I was talking to
liberals and to the left-wing and Marxists,
they opposed nationalism.
They were just coming out of World War II
when they thought the lesson of World War II
was if you have nationalism, you’re going to
have rivalries and that they’re going to go
to war, like Germany did and like the
European countries did, England in World War
I, and they thought the solution was going
to be an international order where everybody
will be one happy family, as if getting rid
of nationalism would cure the rivalries.
And what nobody really anticipated so
clearly was that there has been an
internationalism, but it’s been a unipolar
internationalism that is leading to war, is
the United States has basically declared war
on the whole rest of the world with 800
military bases, interfering with one country
after another.
And it’s been waging war almost the
entire time since 1945, or at least since
1950, maybe a few years it hasn’t been at
war. So the fact is that today’s
internationalism and globalization is a war
economy.
And the military spending by the United
States has forced other countries to divert
a lot of their economic surplus and
government revenue towards military defense,
instead of putting in place the
infrastructure that they’d all been expected
to do after World War II.
And they’ve also become very dependent on
trade in oil, in food, monopolized
technology, computer chips, pharmaceuticals
that are controlled by the United States as
an economic weapon to replace the overt
military colonialism of Europe with a
financial and international investment
colonialism, all that’s backed by an
enormous amount of military spending.
So normally we would say that what’s
happened in the world is reflecting national
self-interest. And that’s what everybody
expected after World War II. They thought
that, well, economic self-interest is going
to determine the shape of the world.
But what American neocons imagine is a
policy that serves their self-interest turns
out to have led to de-industrializing the
United States economy.
Because the US self-interest is to reduce
its living standards, to cut back wage
levels, to polarize the economy, and to
define America’s self-interest as
transferring as much money as possible into
the wealthiest 10%.
So instead of the US self-interest being
the self-interest of the 99% labor, it’s a
self-interest of the financial class. And
that has determined the international policy
that led to inviting China into the World
Trade Organization to essentially use
inexpensive Chinese labor as a fight against
the US living standards.
There is a class element in all of this.
Bill Clinton started it all with his
anti-labor moves and that linkage between
international interest that sort of conceals
the class interest.
And the question for the BRICS is going
to be, what is your national self-interest
as it affects the class interests?
RADHIKA DESAI: Michael, you’re quite
right to go back to the post-second World
War period because in a certain sense, what
you see happening in the post-second World
War period, the reason why, for example,
nationalism gets such short shrift,
particularly in the Western discourse, is
that that’s the moment at which essentially
the United States, in the interest of its
own empire building, is trying to discredit
nations.
It’s trying to say that everybody should
join in its own cosmopolitan vision of a
single world order in which nation states
sort of step back. They don’t intervene in
economies anymore, which allows the most
powerful nation state, namely the United
States, push the interests of its
corporations without any restriction from
other countries.
Of course, the United States did not get
what it wanted, but the discursive
discrediting of nationalism had to do very
much with that. And of course, the fact that
there had been two world wars in the recent
past helped the case that the U.S. was
trying to make.
Of course, the two world wars were not
just caused, they were not just caused by
nation states. They were also fought by
nation, those nation states were also fought
by other nation states. So there were nation
states on both sides.
So, but nevertheless, somehow the United
States tried to equate nationalism with
Nazism and that sort of thing.
But in reality, there was another fact of
that moment in history that would not allow
nations to go away. And that was the
decolonization of the countries that had
been colonized by the various European
powers.
So this decolonization essentially put a
positive spin on nationalism because what
these newly independent countries were going
to do was they were going to essentially
have left leaning, socialistic forms of
development in which the state, representing
the vast majority of the people, many of
whom, the vast masses that had fought for
independence and so on.
The state representing the interests of
these people would try to fashion a form of
development that would serve the interests
of the whole community.
So it’s not just that, say, for example,
that China or Vietnam became communist, but
also countries like India or Mexico or
Brazil or what have you were all pursuing
forms of many African countries.
They were consciously pursuing forms of
development that was supposed to be in the
interest of the vast majority of the people.
So in that sense, there was both a certain
type of cosmopolitanism, which was in the
service of the continuation of imperialism
in a new form, what Kwame Nkrumah called
neocolonialism, was standing side by side
with the positive interpretation of nations
and nationalism.
MICHAEL HUDSON: Well, the U.S. sponsored
kind of internationalism really is finance
capitalism.
And nationalism tends to be industrial,
because you want to build up your
independence. You want to be self-sufficient
in food. You want to be self-sufficient in
basic essentials.
And you need governments to take control,
basically to provide the public
infrastructure, the natural monopolies,
communications and health care and
education.
You want to build up your productivity by
technology, and often this requires
protective tariffs and capital controls and
subsidies to new capital investment,
research and development. And that involves
the government lowering the cost of
production and the cost of living by
providing basic needs.
And finance is not really a class.
Somehow finance is not a class in Marx’s
sense, because it’s external to the economy
of production and consumption.
And all classes, everybody’s a saver and
a debtor. All labor is financialized, just
as the industry is financialized. And the
infrastructure has been financialized
instead of socialized, as people had
expected in the 19th century.
So in that sense, finance works from
outside of the economy, including the
international economy. And Marx explained in
Volume 3, the dynamics of finance and its
debt creation are mathematical and external
to the dynamics of the real economy of
production and consumption.
So what’s unique today, and this was not
anticipated in World War II, is that finance
can actually replace industrial capital as
the main resource allocator, the main
central planner, away from government. And
the problem with all this, of course, is
that finance capitalism tends to minimize
the role of government.
So as to replace it and to shift economic
planning into its own hand, Wall Street and
other financial centers, and its means of
control are via international financial
organizations like the IMF, the World Bank,
the SWIFT system, the Bank for International
Settlements, and even the International
Criminal Court that criminalizes any attempt
to withdraw from this financial system.
RADHIKA DESAI: Right, and so one of the
things that, you know, in trying to talk
about nations as well as classes, domestic
as well as international, that we often run
up against is this idea that somehow Marx
thought that, you know, capitalism was
inherently internationalist and sort of
worldwide, cosmopolitan, shall we say,
global, shall we say.
And of course, socialism should be that
way. So nations are to be completely, you
know, they’re sort of a regressive atavistic
thing which we should try to suppress as
much as possible.
But this, in fact, is not true. You know,
what, Michael, you were saying about how it
is necessary for the state to play a major
role in development, Marx understood that
very well.
So there is this very important saying,
you know, Marx is supposed to have come down
in favor of free trade in the debates on
Corn Laws, but it was a very conditional
type of kind of endorsement of free trade
because Marx thought that, you know, if free
trade hastens the development of capitalism,
then maybe we should have free trade.
But in the same set of writings in which
he endorsed free trade, he also pointed out
the following. And this is where it’s a
quote, “If free traders cannot understand
how one nation can grow rich at the expense
of another, we need not wonder. These same
gentlemen also refuse to understand how one
class can enrich itself at the expense of
another.”
So this is a very clear placing of class
and nation together in the same frame. One
classes exploit other classes and nations
exploit other classes. So it reveals that
Marx is very aware of the structures of
imperialism.
And equally, as we’ve talked about many
times, Marx was also very aware that in
order to develop, states must play a major
role. They must implement tariffs to protect
their infant industries from competition
against which they are not yet able to stand
up.
They must create the credit conditions
and the financial conditions for the
expansion of productive enterprises and so
on. So already for the development of
capitalism itself, the conditions that are
required so require state intervention that
any notion that there is such a thing as
free market capitalism, etc., goes out the
window.
And of course, the other thing that
geopolitical economy also points out is the
reason why even in capitalist countries,
states always must play a central role is
because capitalism is inherently
contradictory and you cannot have a
capitalism, you know, continue for any
length of time without the state playing a
major stabilizing role.
So that is why with the development of
capitalism, you don’t just get the
development of classes, you also get the
division of the world into the modern nation
state system.
So class exploitation occurs, but so does
national exploitation, because essentially
the early developers, the early capitalist
developers inevitably also become
imperialist because the capitalisms are
contradictory.
They try to subordinate other
territories, which then, that subordination
helps them to deal with the contradictions
of their capitalism, whether it is to find
outlets for excess commodities and capital
or to acquire cheap labor and cheap raw
materials, which capitalism needs evermore
as it expands.
And so finally, what this also shows is
that because capitalism prompts imperialism,
nationally focused development becomes the
essential prerequisite of any form of
development for many countries, which is why
quite early in the history of capitalism,
we’re looking at the early 20th century, so
really about a century or a century and a
half from the beginnings of industrial
capitalism, you already have the appearance
of the first socialist challenge to
capitalism in the form of the Russian
Revolution.
So in that sense, these are countries
that are essentially saying we cannot have
subordination to to imperialist, capitalist,
imperialist countries. We do not have any
prospect of developing capitalism. So we are
going to develop on a socialist path
already.
MICHAEL HUDSON: Well, if you recognize
the reality of imperialism, this implies an
entire different body of economic theory.
And I had to begin teaching economic
theory in 1969 at the New School, and I
really hadn’t studied it all the way through
my graduate courses because most
universities found it just too silly to
teach.
The free trade theory assumes that
everybody gains from trade and that all
trade is voluntary and it’s all a choice
free market and that an absence of tariffs
is going to make economies more equal and
more competitive.
And that’s just the opposite of how the
world economy actually works, because the
real effect of free trade is that the
dominant countries all became dominant by
protecting their industry.
First, Britain and then the United States
and Germany in the 19th century were highly
protectionist. And once they had government
subsidized industry, they then told other
countries, don’t do what we did. Don’t have
government protection. Just buy in the
cheapest place. We will give you food and
industry and everything that you need much
cheaper because we already have the capital
in place and you don’t.
And the result is that there was a
polarization of the economy. I describe all
of this in my book, Trade Development and
Foreign Debt, which is a history of
basically not only free trade theory, but
how it was controverted again and again by
British, German and American economists.
All of that is now expurgated from the
classical curriculum.
And the real result of free trade is when
countries are forced into a trade deficit,
their currency is going to decline and then
they have to go to the International
Monetary Fund that comes in and it imposes
austerity and specifically anti-labor
policies.
The IMF’s role is to aim at what Bill
Clinton aimed at when he invited China into
the World Trade Organization.
You want to keep a pool of labor, what
Marx called the reserve army of the
unemployed, not in the United States, but in
the non-industrialized countries that
basically are kept devaluing the price of
labor throughout the world.
And that turns the phenomenon of U.S.
centered imperialism into a global class
war.
RADHIKA DESAI: Right, Michael, so shall
we go on to the next point we want to make,
which is that we should, that geopolitical
economy permits us to understand class and
national exploitation together, just as we
put class and nation together in the same
frame, we also put class and national
exploitation in the same frame.
And this is exactly so. You have class
exploitation within a country that produces
a certain kind of class power within a
country.
So at the international plane, what
geopolitical economy explains is that the
attempt by some powerful countries to
subjugate other countries creates the
structures of imperialism.
So you have to understand the two
together and both forms of exploitation,
that is to say, class exploitation and the
exploitation of other nations, produce
contradictions because capital essentially,
contradictions mean that capital would like
usually to have its cake and eat it too, to
have something and its opposite.
And it can’t always have that. So within
a country, class exploitation produces a
resistance from the working class. It
produces crisis of underconsumption and
overproduction. It produces crisis of
falling rates of profit and all these
things.
And internationally as well,
international exploitation also produces
resistance to it, which is why you have, for
example, the formations like the BRICS or
Struggles for National Independence, as we
had in the early part of the 20th century,
the non-aligned movement and today the BRICS
and all these institutions, they’re not
perfect.
They are far from adequate to what is
needed, but they are steps in the direction
of resisting imperialism and imperial
exploitation, just as trade unions and
political parties are steps towards
resisting class exploitation.
MICHAEL HUDSON: So our ongoing discussion
of the BRICS and the U.S. sanctions and the
U.S.-NATO war against Russia and China is
all about what policies countries can take
to liberate their economies and their
governments from the U.S. attack.
The U.S. called any government protection
interference, as if the United States does
not interfere.
Any defense is called interference and a
distortion of the market, as if the market
is set by U.S. central planners on Wall
Street and in the State Department to create
a world in which the United States will suck
all of the surplus from the rest of the
world into its own economy, as if this is
natural.
And if you recognize that the essence of
this unipolar U.S. strategy is finance, that
that’s not necessarily military. Obviously,
they’re going to grab the oil of Syria, grab
illegally the oil of Iraq. But it’s by
finance that they can operate much without
the military overhead.
Well, then this is why we focused on
de-dollarization and what that means in
practice, starting with the most obvious
policy, simply avoiding the use of the
dollar and pricing trade in their own
currencies, making swaps.
The question is, how are they going to go
on to the next stage? That’s really going to
be how it involves restructuring their
domestic economy as well as the
international economy.
RADHIKA DESAI: Yeah. And, you know,
taking imperialism seriously also, I mean,
the reason why we emphasize this is that in
so much of the dominant discourse, you have,
imperialism is completely erased.
Like, for example, I was listening to all
the commentary on the BRICS in the
mainstream press.
And as I was listening, I thought, OK, so
these people are comparing BRICS and the G7
and BRICS and the G20 as though there is no
history of imperialism, as though the G7 is
not, in fact, a collection of the former
imperialist countries and still would-be
imperialist countries that are trying to to
control the world.
So in so recognizing imperialism requires
jettisoning all those sanitized expressions.
For example, instead of talking about U.S.
imperialism, people use terms like U.S.
hegemony.
The U.S. has never achieved anything like
hegemony, as I’ve argued in geopolitical
economy. But what we do have are ceaseless
attempts to try to achieve that, which have
been very destructive, which have caused
ceaseless wars around the world and so on.
You have terms like globalization. I find
it so appalling that the term globalization
became so popular, not just in the
mainstream, but also among many who call
themselves critical and even Marxist
scholars. Why is that?
Because they use terms like globalization
or rather by using terms like globalization,
what we are completely forgetting is that
this is an attempt to force the rest of the
world to open up to the imperialism and
corporate power of the West.
All the free trade and free markets is
not necessarily for the West. It’s there to
open up the rest of the world’s economies,
the poor countries, so that they are
available as markets and investment outlets,
but equally importantly, as sources of cheap
labor and raw materials.
And for example, also the use of the term
globalization also means that you have to
say that from the late 20th century onwards,
you got a second wave of globalization,
whereas in the late 19th and early 20th
century, there had been a previous wave of
globalization.
What are you talking about? That was not
a wave of globalization.
That was a wave of imperialism and the
competitive imperialism that was in train at
that time, that was occurring at that time,
culminated in the First World War and
eventually also the Second World War,
because the Second World War occurred
ultimately, because at the end of the First
World War, the Versailles, so-called
Versailles settlement, settled nothing.
It simply laid the groundwork for a new
war to emerge. So taking imperialism
seriously involves recognizing that.
It also involves recognizing that today’s
discourse of human rights and democracy and
so on is just the dressed up, the old
discourse of the civilizing mission and the
white man’s burden and so on in a new dress.
So it involves recognizing and seeing
right through that, which unfortunately too
many people don’t do and which is why we
feel we need to keep saying this.
Also, the idea of the rules based
international order. The fact of the matter
is, and this is also quite interesting,
because if you take imperialism seriously,
you would recognize that the United Nations
itself is the formation of the United
Nations and the Charter and so on were
themselves the result of the struggle of the
vast masses of the people and nations of the
world against imperialism, the recognition
of sovereign equality, etc., even though
they were compromised.
But the fact that they had to be
recognized in principle and only then
compromised was an achievement of these
groups and institutions like NATO were
created precisely because the imperialist
countries did not want to have to deal with
the unwashed masses of the world in
institutions like the United Nations.
And one final point, you know, back in
the day, in the early days of capitalism and
well into the 20th century, the Western
world, the imperialist world set a standard
of civilization.
They said that if a country meets the
standard of civilization, which means if
they are another imperialist country, then
they will be dealt with, you know, with all
the respect due to another sovereign
country, you know, with limits on how they
would be dealt with in war as well as in
peace and commerce and so on.
But of course, this did not include the
vast majority of the countries of the world
that were regarded as uncivilized against
whom anything could be done. The most brutal
acts of warfare, the most life-threatening
sanctions and so on could be used.
And this kind of thinking continues. It
doesn’t take that name, but in the name of
human rights and democracy, when sanctions
are imposed on people, this is just a new
standard of civilization being imposed. So
taking imperialism seriously involves
recognizing all these things.
MICHAEL HUDSON: Well, I think that what
neither Marx nor even Lenin anticipated
after World War I was that the most
problematic international disturbance was
going to be not private sector debt but
intergovernmental debt.
And that’s what led to the, you just
mentioned, the Treaty of Versailles, which
really meant something radical that Europe
had never experienced after any of its wars,
the Napoleonic Wars and the early wars.
All of the allies would forgive all of
the mutual support and the cost of fighting
the war together. And they expected that the
United States would, there were not going to
be any inter-ally debts.
But the United States said, well, before
we entered World War I, we let you fight it
out, you know, so we could come in, send a
few troops and then claim that we saved it
all and you owe us a lot of money.
You owe us so much money that you’re
going to, you European countries are going
to have to go into depression for the next
20 years. But a debt has to be paid.
And the Europeans said, well, our whole
Western civilization is based on the
principle that all debts have to be paid. If
you say we owe you the money, we’re willing
to go into 20 years of depression.
The silver lining is this is going to
really hurt the labor force and we can hold
them down and we can get even, the class war
will be won in Europe and we can make
Germany pay.
And Germany was the number of the most
potentially industrialized continental
European country. Germany was the country
that had the most industrialized banking
system. And Europe, the Allies were just as
happy to crush Germany in order to get the
money for the Allies to pay the United
States foreign debt.
That’s what my whole Super Imperialism
was about that. And I don’t need to go over
it here again. But all of this role of
government, not as leading to socialist
development, but as the leading of finance
and through government as the mode of
imperialism, even more than the private
sector, was completely unanticipated.
Even Marx, when he gave a speech before
the Chartists in the mid-19th century, said,
strangely as it might seem, he endorsed free
trade with India because he said the
structure, the dynamics of industrial
capitalism are so powerful that it’s a new
mode of production and it’s going to
modernize the backward countries like India,
Asia, Africa, South America.
He thought that somehow British trade and
other capitalist countries trading with the
rest of the world was going to involve
replicating their system and making them
industrial capitalist countries too, leading
to a kind of equality that would all end up
moving towards socialism ultimately.
But that isn’t what happened. Instead,
the trade has imposed backwardness on
countries by supporting client oligarchies,
supporting military dictatorships, and
making them trade dependent, not
independent, and most of all, preventing
their governments from playing the role that
governments played in the industrial
capitalist takeoff in England, Germany, and
the United States.
This is providing basic infrastructure
and natural monopolies for the private
industrial sector. Well, finance capitalism
has basically taken these infrastructure
investments and made them all financial
exercises.
Nobody expected that countries would all
move against what was the financial, the
economic self-interest of industrial
capitalism to be something as twisted as
what’s actually emerged from World War I and
especially World War II, and especially the
Korean and Vietnam wars of the United States
that led to the dollar standard.
RADHIKA DESAI: Well, you know, Michael, I
think you made two points about Marx and
what he thought, which I find I couldn’t
quite agree completely. In fact, I couldn’t
quite agree.
Because, first of all, you talked about
how you thought that Marx thought that
capitalism and imperialism were going to
develop India. That is not so.
In fact, if you read the pamphlet, “The
Future Results of British Rule in India”,
Marx ends by saying that, and not only he
qualifies this by saying that the British
are not doing this out of any kindness of
their heart or anything, but that you and I
know, I don’t think you would disagree with
that.
But he specifically points out that the
only way in which India will really enjoy
the fruits of development is if there is a
socialist revolution in England or equally
if India gains independence.
So there is absolutely no doubt in my
mind that while Marx thought that there
would be some inadvertent forms of
development in India, he actually, even back
then, you know, in the early, late 1840s and
early 1850s, Marx was very clear that
national independence was a prerequisite to
development for the reasons exactly that you
have recognized.
All I want to say is Marx recognized it
too. And of course, what I’ve shown in
various of my writings is that Marx actually
understood very well the centrality of the
role of the state in economic development.
And then the second point, I think you,
of course, rightly point out that Marx did
not anticipate the governmentalization of
finance. I mean, at one level, I agree with
you, but then, you know, it’s a bit like
saying that Aristotle did not imagine that
there were airplanes, you know.
In a certain sense, it’s really worth
reflecting on that a little bit, because I
think you raise some very good points.
So basically if you look at what Marx,
Marx’s conception was, you know, what would
how would capitalism develop and why was
socialism necessary and how would it come
about?
Essentially, what Marx is saying, if you
examine this clearly and I bring this out
very clearly in my latest book, Capitalism,
Coronavirus and War, in a fairly long
discussion about this, what Marx is
basically saying is that capitalism requires
competition, competition naturally results
in monopoly.
And once a capitalist economy reaches the
monopoly phase in which most sectors of the
economy are dominated by one or a small
number of big corporations, at that point,
society will have become ready.
Capitalism will become ready for
socialism. It will because it’s very simple.
What he’s saying is that insofar as
capitalism is historically progressive,
insofar as capitalism, by dragging humanity
through much mud and gore and by creating a
lot of misery and anarchy, nevertheless
develops the forces of production.
It is because of the virtues of
competition. But once competition is no
longer there, there is no reason to keep
capitalism.
So capitalism had already reached its
monopoly phase in the early part of the 20th
century. And since then, essentially,
humanity has been suffering the cost of
keeping capitalism alive in a small number
of countries, you see.
MICHAEL HUDSON: Well, you’re absolutely
right about what Marx said, that there had
to be a revolution. But he said a revolution
is what industrial capitalism is all about.
He said industrial capitalism is
revolutionary because in England and Europe,
it’s gotten rid of feudalism. It’s the
strategy of industrial capitalism is to free
economies from the landlord monopoly, from
the landlord class and from predatory
finance.
So when he said he expected capitalism to
spread to the rest of the world, he meant
the capitalist revolution against
backwardness, the revolution against feudal
monopoly and the revolution that he thought
would indeed lead to socialism.
So you’re right. Marx took an overall
broad social view of economics and didn’t
just limit economics to prices and incomes.
It was a transformation of society that Marx
thought was going to appear towards
socialism.
And that’s what has been [derailed] by
World War One and everything the last
century has seen.
RADHIKA DESAI: We’re going to have to
reserve this point for our discussions of
rent, because I think that the revolution
you’re talking about is already Ricardo’s
point. And then Marx, of course, goes
further than that.
But let’s go on. So, of course, we also
have already pointed out our next point,
which is that our understanding is much
closer to Marx, as you will have seen in our
discussion we just had about the finer
points of Marx.
And the key point that people forget
about Marx, even many so-called Marxists, is
that Marx understood that capitalism was
contradictory. This is often forgotten.
And if it wasn’t contradictory, then we
wouldn’t have to get rid of it and we
wouldn’t have imperialism. But both of these
things are true.
The next point, then, is that we
understand that capitalism is contradictory
and crisis-prone.
MICHAEL HUDSON: The crisis of today’s
finance capitalism is not one of domestic
overproduction within the production and
consumption of the real economy. It’s turned
out to be debt deflation.
And internationally, the foreign dollar
debt burden has become a kind of neocolonial
leverage to impose austerity, as we’ve said,
and other anti-labor policies on the non-US
economy.
So the kind of crises and internal
contradiction that the international economy
is suffering now, as it’s being polarized,
is not basically what Marx talked about in
Volume One. Although if you read Volume Two
and Three, you can see his focus on finance.
Certainly I filled that out.
So let’s talk a bit about what this
crisis is and the way it’s taking form
today.
The United States government is the
world’s largest debtor, and it says, we’re
the unique nation. We’re the only country
that does not have to pay our foreign debt.
And in fact, there’s no way that the
government foreign debt, which means the
bank reserves of the whole rest of the world
that are kept in dollars, none of this can
be repaid.
It’s just they can trade it with each
other, but they’re never supposed to ask to
be repaid. Only the U.S. private sector and
the U.S. government can ask other countries
to repay their debt.
That is the internal contradiction that
has driven the world economy apart and is
splitting it and is forcing other countries
to either face permanent sort of neo-feudal
dependency on the United States or to say,
well, we get to develop, too. It’s not going
to be just the monopoly of the European
garden keeping our jungle as a jungle.
So I think the basic point that we’re
making is that the global majority needs
public investment in infrastructure. It
needs to modernize the economy and it needs
to create prosperity.
And that means freeing their economies
from U.S. dollar debt. It’s bad debt in the
sense that it can only be repaid by
siphoning off their economic surplus, by
forcing them into bankruptcy financially and
by stifling their growth.
That’s the contradiction, that the
European garden can grow and the jungle
cannot grow because any growth that it has
is going to take the form of paying debt
service to holders of U.S. dollar bonds,
including their own domestic oligarchy.
Most dollar debt of Argentina isn’t
really owed to the United States, although
it’s in dollars. It’s owed to the Argentine
ruling class that holds its debt in the form
of dollars. While it wrecks the Argentine
economy, it’s been doing that now for an
entire century.
That’s why I was a little surprised to
see Argentina included in the new members of
the BRICS yesterday. I’m not sure exactly
how you can have Argentina as a full-fledged
BRICS member as long as its oligarchy
supports the United States and remains in
control of the government.
RADHIKA DESAI: Well, that’s a very
interesting point, Michael, and I would say
that it’s very likely that that oligarchy
itself has become considerably less powerful
and it is also itself running out of
options. It can no longer rely on the United
States, but we will have to see.
But I just want to come back to many of
the points you were raising. So the point
we’re making is that capitalism is
contradictory and crisis prone. And one of
the things you pointed out is that, you
know, somehow the garden is growing and the
jungle is not.
But the reality is the opposite. The
reason why this BRICS summit is so historic,
the reason why the West is essentially so
afraid of what’s going on at summits like
the Johannesburg summit is precisely that
the so-called garden, the European
countries, the imperialist countries have
been trapped in a syndrome of slow growth
for the last several decades.
Whereas these other countries, China in
particular, which is why, of course, every
opportunity is taken in the Western press to
tell you why China’s growth is going to end
very soon.
But China, of course, and many other of
these so-called jungle countries or what
Trump used to call shithole countries, those
shithole countries are doing much better
than you, folks. So this is, of course, a
major issue.
But I also wanted to say, you know, I
completely agree with you that the current
that at the this moment of crisis in the
world. And I would say that, quite frankly,
we’ve been living in a crisis ridden world
for the last many decades, really going back
to the 1970s, because that crisis that hit
in the 1970s was never resolved.
Neoliberalism was trotted out as a
solution to the crisis, but it never
resolved the crisis. It never restored
capitalism’s vigor. And instead, it simply
saddled the world economy with the debt that
you’re talking about and with the financial
speculation and financialization that you’re
talking about.
But if you’re trying to understand the
whole crisis, I would say, first of all,
that any given crisis is never any one
thing.
Of course, there is a financial crisis
today. But today’s crisis is composed both
of today’s crisis is composed of a financial
crisis. But there is also an underlying
productive crisis, a crisis of low
investment, low growth, low profits, et
cetera.
Furthermore, there is a crisis of not
sufficiently expanding demand, which has
been with us for a long time.
So, you know, one of the ways I’ve tried
to deal with this is that, you know, Marx
and I’ve actually in my latest book, I have
the most developed form of that table. I’ve
actually created a table, you know, because
in capitalism, there are at least two forms
of crisis.
One is vertical, that is, it has to do
with the exploitation of the working class
by the capitalist class. And the other is
horizontal. It has to do with the various
ways in which various capitalists relate to
one another, namely via competition.
So both the mechanisms of competition and
exploitation lead to crisis and they lead to
crisis in practically every sphere that
capitalism requires for its existence.
So there are the two core spheres of
value production, namely production and
exchange or markets, basically the
production and markets. And there you have
four different forms of crisis that can
occur, contradictions that occur.
And then there are other realms that have
to be transformed in order for capitalism to
exist. Capitalism must create money. It must
create credit mechanisms. It must have a
state. It must relate to the environment and
so on, essentially by privatizing it.
And of course, then once you create
states, there are international relations.
So in practically every one of these
spheres, there are forms of crisis.
There are monetary management can lead to
deflation or it can lead to inflation, etc.,
etc. There are many crises, there are credit
crises and so on.
So there are many forms of crisis. And
any given capitalist crisis is usually a
concatenation of several different crisis
mechanisms that are working at the same
time.
But nevertheless, yeah, I mean, having
said that, I completely agree that
capitalism is crisis prone and
contradictory.
And today, the financial crisis we have
today is underlain by a crisis of the
productive system itself, which is partly
also why finance accumulates, because it’s
when you don’t have enough investment
opportunities, productive investment
opportunities that people hold back their
money and they invest in speculation rather
than production.
It’s when companies are not borrowing to
invest productively that you have to go out
and find all the workers who will borrow
from you in order to finance their cars and
their education and their houses and so on.
So underlying this, there is a productive
crisis as well. But yes, on top of that,
productive crisis has been built over the
last many decades, layer upon layer of
financial crises.
MICHAEL HUDSON: Well, you can see the
crisis in the United States. Why cannot
there be investment in the United States?
The largest companies, the Standard &
Poor’s 500, have spent 92 percent of their
profits of their net income on stock
buybacks and on paying out of dividends.
Only 8 percent is to invest.
They can’t find anything to invest in.
Apple has said we cannot find a single penny
to invest. So we’re paying more money in
stock buybacks and dividends than we’re
actually investing. We’re asset stripping.
And finance capitalism is primarily
extractive. It has loaded the economy down
with debt so much by debt financed housing,
by making its labor have to earn a high
enough wage to pay its housing debt, its
education debt, its automobile debt, its
credit card debt, that it’s unemployable.
So, of course, there are no investment
opportunities left in the United States and
Western Europe. That’s why the garden is
deindustrializing and is going to turn into
a jungle, because the only way that you can
make money is financially by asset
stripping, by deindustrializing your
economy, by cannibalizing it.
And that’s the clearest in the U.S. and
British economies. That’s what Thatcherism
and Reaganomics is all about.
RADHIKA DESAI: Absolutely. And we are
nearly at an hour. So I think it’s just as
well because we are down to our final point,
and that is that we understand in this show,
in this geopolitical economy hour, that
imperialism is declining.
It’s very fashionable to show how radical
you are by saying that, you know,
imperialism was always very strong and it’s
either just as strong today as it ever was
or stronger today than it ever was.
But the fact of the matter is that the
large part of the present crisis, among the
many contradictions of capitalism that are
part of the present crisis, is the simple
fact that imperialism has been declining for
a very long time.
And today it has reached a point, a very
critical point, where it looks as though the
kind of control that the imperialist
countries could exercise over the rest of
the world is slipping from its grasp.
MICHAEL HUDSON: Well, down through World
War I, the German banking system was highly
industrialized. It was working efficiently
with governments and heavy industry.
But that’s not the way the rest of the
world went. It took the Anglo-Dutch-American
system. And it’s declining because the
system basically is like that of the late
Roman Empire.
It created great wealth for the
wealthiest 1% or the 10%, but it
impoverished the 90%. And if you’re going to
impoverish the market, then you’re going to
have the kind of crisis that Marx described.
And yet Marx did not think, see that it
would, nobody anticipated that it would be a
financial crisis, because Marx hoped that
industrial capitalism’s self-interest would
lead it to prevent finance from operating
the way it used to, by what he called usury
capital, and actually become productive.
The Western economies since World War I
have erased the whole distinction between
productive and unproductive investment,
productive and unproductive labor.
The GDP and national income accounts
don’t draw any distinction between
production and what is really a transfer
payment to the rentier sector, to the
finance, insurance, and real estate sector,
or to monopolies.
So there’s not even a way that the
seemingly empirical statistics can explain
why imperialism and why finance capitalism
is declining.
RADHIKA DESAI: Yeah, and you know, too,
and again, there’s just so much to say here,
but we’ll just end by a couple of more
points.
But you know, imperialism essentially is
declining the way I look at it, because, you
know, think about it this way, the high
point of imperialism, since which point it
has been declining gradually, too slowly for
me, but nevertheless declining, is 1914.
1914 was the high point of imperialism.
In the previous decades, not only had
Britain acquired its big empire, but a
number of other countries appeared that
they’d also tried to acquire empires. And so
the world was essentially divided up into
these big empires.
So that was a high point of imperialism.
But it was also the moment at which the big
crisis of the imperialist world order broke.
The wars between the imperial powers
substantially weakened them.
And then that, combined with the rise of
communism and the struggles for
decolonization in third world countries,
essentially put the world onto the long and
slow road of the decline of imperialism and
so on.
But that moment also coincided with, I
would say, the peak of capitalism, according
to Marx anyway, because really, by this
point in time, capitalism in its homelands
had already entered the monopoly phase.
At that point, capitalism really didn’t
have that much more to give to the rest of
the world, I mean, to the world in general.
That is to say, it had done what it could in
terms of developing the forces of
production.
And now the point was that they would be
better developed if we had other forms of
production, socialists, whatever, some or
the other version of socialism.
And this was, by the way, witnessed when
you saw that the Soviet Union, once it was
stabilized, it managed to become the second
industrial power in the world in a matter of
decades. From being the most backward
country in Europe, it became the second
industrial power because it showed you what
planned production could do.
So and also, of course, the very fact
that capitalism had reached the monopoly
phase and what Hilferding called the finance
capital phase in which large banks
essentially controlled vast swathes of the
productive apparatus.
Essentially, what this told you is that
the moment for planning had already come
because that’s what a big corporation is.
It’s a giant planned economy.
So the only question that arises is why
should we allow these giant planned
economies which only exist because of our
labor, which only exist because we create
the laws and so on that allow them to exist.
So why not socialize? And that was a sense
in which the moment for socialism had come.
And so, of course, we have had now
socialistic experiments as well. And they
have also stood up against capitalism.
But the point is that in the homelands of
capitalism, what we are witnessing today is
the cost that both the working people of
these countries, as well as the rest of
humanity, is paying for keeping capitalism
alive in these countries.
Coming back to the BRICS in closing, one
cannot but be aware that most of the
countries of the BRICS are not socialist.
But the interesting thing is that in
practically every case, you can show that
where they have done well, where they have
alleviated poverty or industrialized or what
have you, they have done so by the adoption
of non-capitalist means.
And it is the freedom to adopt such
means, which is the crucial issue at stake
in the confrontation between this group of
countries and the G7.
MICHAEL HUDSON: Well, I think what we’ve
been describing is that U.S. imperialism has
backfired to destroy its own economy. And
above all, by de-industrializing and
de-unionizing the labor force, by focusing
on external exploitation of what America can
get from other countries.
Instead of creating an economic surplus
at home and within, the United States has
followed the same kind of self-destructive
dynamic that destroyed the Roman Empire.
It cannot re-industrialize, leaving the
debt overhead in place any more than the
BRICS countries can industrialize without
freeing themselves from their foreign debt
overhead.
Because the financial system has priced
U.S. labor out of world markets as a result
of making labor pay for what we’ve described
all along, the housing, education, health
care, et cetera.
And yet the economic historians now say,
well, you know, there really wasn’t a dark
age, because the wealthiest 1% of Romans in
the late Roman Empire got so rich that the
economy actually grew. It’s true that 99% of
the labor were reduced to serfdom, but that
1% actually made a growing economy.
Well, that’s what seems to be happening
in, that’s Bidenomics. That seems to be
what’s happening in the U.S. economy now.
The wealthiest 1% to 10% are making so much
money that it exceeds the deprivation and
the indebtedness and the reduction and
shrinkage of the 99% economy.
And so the only hope that the United
States has of maintaining this kind of
prosperity for the wealthiest financial
class is to freeze the status quo, to block
any kind of active government policies that
promote labor and industry at home or
abroad.
And the industrial capitalism today is a
dinosaur. It’s what was leading the late
19th century onwards to what seemed to be
socialism. But instead, we’ve got finance
capitalism.
And if you have knowledge, if you explain
what we’re going to be doing in the coming
shows of how this mixed economy strategy,
every economy that’s developed has been a
mixed economy with the government to play a
major role.
If you let the private financial
interests take over this role of government,
you’re going to have the kind of shrinkage
that’s de-industrialized the U.S. economy.
And that role of government has to be the
core focus of how the BRICS economies are
going to develop. And that requires freeing
themselves from the dynamics of finance
capitalism and finance imperialism that
we’ve been discussing throughout all of our
shows.
RADHIKA DESAI: Yes, exactly, Michael. So
let me just bring this to a close by making
one final comment, which is really many of
the secrets of what is the United States,
when what is the United States is a long
list of industrial decline, financialization,
inequality, social breakdown, political
lockdown, you name it, cultural decay.
All of this is happening. The one clue to
understanding why all of this is happening
is that the United States got its chance to
try to be the leading imperialist country
and grabbed it with both hands precisely at
the moment when imperialism was actually
declining.
So with that thought, let’s just let’s
bring this to a close. We will be back in
September, hopefully with many other
interesting shows. So until then, thanks for
watching and looking forward to doing this
again in a few weeks. Bye-bye.
Michael Hudson is President of The
Institute for the Study of Long-Term
Economic Trends (ISLET), a Wall Street
Financial Analyst, Distinguished Research
Professor of Economics at the University of
Missouri, Kansas City. He is the author of
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