Inspire Us Podcast – S6 EP5
Broadcast Date: Wednesday, August 20
This transcript is from the Inspire Us Podcast S6 EP5, recorded with Professor Michael Hudson. We are two Master’s students in Development Economics based in London, and through our podcast we explore global political economy, development, and critical perspectives on pressing issues.
The episode was broadcast on August 20, and in this conversation we spoke with Professor Hudson about rentier capitalism, financialization, debt, and the structural challenges facing Britain, Europe, and the global economy today.
What follows is the official transcript of that discussion.
ALEX: So, yeah. How did you meet Steve Keen?
MICHAEL HUDSON: Well, how did I meet him?
ALEX: Yeah.
MICHAEL HUDSON: A group of Georgists, of all people, brought me to Australia. I had been given a round-trip ticket to China that I was able to stop off in Australia and the man who became my webmaster, Karl Fitzgerald, brought me to Sydney and arranged for a meeting, a joint talk with Steve Keen. And that must have been maybe 15 years ago.
And ever since Steve and I have gone around the world giving lectures — Germany, Washington, D.C., Chicago, just about everywhere. So we became very good friends because essentially we have the same approaches, although he’s much more mathematical than I am and I’m historical. So what he’s covering in the mathematical field, I’m covering in the history of economic thought, which he also covers.
Basically, my focus is much more on classical theory of value, price, and rent. And I’m focusing on rent, which is why the Georgists brought me there, trying to deal with Australia’s awful financialization of real estate that’s been bidding up real housing prices in Australia at enormously high prices that prevent Australians from spending much on the domestic market for anything besides the rent. Where are you located by the way?
ALEX: What does economic history help us understand when looking at rent and financialization?
MICHAEL HUDSON: Well, I guess you’d read about Ricardo and the whole development of rent theory in the Corn Law debates in 1815, when at that time Ricardo said if we don’t prevent the landlords from getting all the rent, this rent is going to absorb all of the income over and above the subsistence wage and there won’t be any profits.
What he did not recognize — and nobody of his era imagined — that once you ended the hereditary landlord class, there was still going to be economic rent. But it was all going to be paid to the banks. And 80% of bank lending is to real estate in the form of real estate mortgages. So the whole financial system is based on rent. And naturally that means that the bankers have thrown their interest behind the real estate interests, because they know that whatever the government does not collect in land taxes is going to be available to be paid in interest.
So instead of — in 1815 the financial interests supported Ricardo, because the banks were interested mainly in foreign trade financing. And they said if you make Britain the workshop of the world, then it’s going to be exporting its manufactures and it’s going to be importing raw materials and food from other countries. And that’s going to increase international trade.
And that will create increase in the market, first of all for our letters of credit to finance this trade, and our foreign exchange dealings. And second, it’ll enable the stock market to begin buying into foreign transportation facilities — canals, transport and everything to serve the foreign trade.
They had no particular interest in industry at all at the beginning. So when James Watt developed the steam engine, there were no banks around to finance industrial investment. It was only much later that they began to finance industrial investment, and they’ve really never cared. They want to focus bank lending on money that you don’t have to work hard to earn. They want money for economic rent, for land rent, for monopoly rent, and for financial speculation.
But I asked before, where are you calling from, where are you located?
ALEX: London — close to, because back when we had Steve Keen on the podcast the first time, he had mentioned that he was staying at your place.
MICHAEL HUDSON: Yeah. Where Steve was staying, right?
ALEX: Yeah. He was just right around the corner. So, yeah.
MICHAEL HUDSON: Okay, now I get it. What are you studying?
ALEX: Development economics, both of us master’s.
MICHAEL HUDSON: Do you find that helpful?
DARA: I think so, personally.
MICHAEL HUDSON: I mean, what’s interesting about development economics and rent is that while the classical economists and industrial capitalism wanted to get rid of economic rent in their own countries — in Britain, Germany, France — they wanted to minimize economic rent so that the industrial employers would not have to pay their labor enough money to buy high-priced food and, in time, high-priced housing.
But they were all for economic rent abroad. When they made their foreign investments — Britain, France — they wanted to buy mining properties, infrastructure monopolies, transport monopolies, communication monopolies. So there was, from the very beginning, from 1815 on, this idea: western and industrial capitalist countries will prevent other countries from industrializing by essentially making them rentier economies.
That’s the big trend — what has shaped the last two centuries of the Western economies.
DARA: And for you that’s very intentional?
MICHAEL HUDSON: It’s not only intentional, yeah, it’s a direct opposition. The whole — for me, the classical distinction between earned and unearned income, that price is the excess over cost, rent is the excess of price over intrinsic cost value. And industrial capitalist countries want to minimize this difference. Without rent, they want the economic surplus to be paid to them as profits.
But financialization, essentially, to the extent that it supports real estate and monopolies and financialization, it polarizes the economy. It shrinks the amount of income available to pay profits, because the labor force — the workers, like in the United States and England — have to pay so much more money for their rent. They have to pay monopolies like Thames Water, you know, for the water, instead of low-cost public water like they used to have.
Uh there’s no way that England can be an industrial country since Margaret Thatcher and Tony Blair turned it into a rentier economy.
DARA: Because I mean, that time is heavily debated here. Lots of— Sorry, Michael. Can you hear me?
ALEX: Maybe let’s turn up — we can turn up the mic.
DARA: Yeah. Shall we turn up the mic?
MICHAEL HUDSON: Yeah.
DARA: No. So obviously the Thatcher period— Oh, you can hear? Okay, great. So the Thatcher period is heavily contested and very contentious topic. And, you know, some people say it took us from the dark ages — you know, the ’70s we had strikes, the government were really at the helm of the unions. And that Thatcherite period, that Big Bank period, many people here in this country really revere.
Would you not say there’s any advantages to Thatcherism? For you, is it just a net negative?
MICHAEL HUDSON: Yeah. Yes.
DARA: That’s my question. So for you, is it just a net negative? You don’t see any advantages to Thatcherism and how it took us from the dark ages of the ’70s?
MICHAEL HUDSON: But England — Britain — has been left as a rentier economy. I think the reason that so many voters voted for Brexit was they knew that it was all about the City of London and the financial sector. And they thought that they wanted to get rid of the financial sector that was sponsoring all this awful right-wing politics that was making life so awful.
They did not reverse all of the giveaways that Thatcher and Blair had made to the financial sector by privatizing the public utilities, by dismantling council housing, essentially creating a real estate bubble that’s made the banks rich, as they’ve got rich off financing Thames Water and all the other public utilities, and this is what’s de-industrialized Britain.
Is there any consciousness of that there? Do we get into any of that in your development financing?
DARA: Um, no, not really. That doesn’t get discussed very often, but I guess in political discourse Thatcher’s era is very often discussed.
MICHAEL HUDSON: I mean, I studied, needless to say, development financing in the 1960s, and it was really about how other countries are supposed to somehow industrialize. But there was no recognition that they couldn’t industrialize as long as they remained financialized, and as long as the World Bank blocked them from producing their own food supply to feed themselves, so that they would rely on America’s grain imports and food imports, and essentially finance backwardness instead of development. And that’s what I wrote about in Superimperialism.
DARA: Do you think it’s possible for the US or the UK to re-industrialize, or is it a bit of a pipe dream?
MICHAEL HUDSON: It would take a— a political revolution, and they’re not ready to do that. It’s not possible to industrialize without realizing why Britain de-industrialized— de-industrialized by being financialized. It had been a mixed economy before Thatcher, public and private. And the role of the public sector was to minimize the cost of living for British labor— low-priced housing, low-priced medical care, low-priced education, and low-priced public services— so that you could have a living wage and not pay monopolies and landlords and the banks as much of your income as they now do.
So essentially most British income is now paid for the various forms of economic rent— land rent, monopoly rent, and financial speculation— and without undoing this, without wiping out this debt that’s mounted up, without de-privatizing the public monopolies— I think Thames Water should simply be taken out without any payment at all to the bondholders and the stockholders; they’ve already looted the company. There is nothing left. And after a company’s been looted, you don’t then pay them for the price of what it would cost to remake the company before it was looted. You should think of finance in Britain as a looting operation. That’s what it is to Britain.
DARA: Yeah. And I think many people here do see it like that. But the counterargument is we’re so strapped for cash in this country, the budget deficit keeps on growing. And I’m not sure if you’ve followed British politics, but I’m sure you’ve seen Rachel Reeves crying in the House of Commons and the reversal of the welfare reforms. So we’re quite encumbered by the financial situation. The argument is: how can we possibly nationalize our water systems? Where’s the money going to come from? Do you think it’s possible— is it paramount that they get even more indebted?
MICHAEL HUDSON: You don’t need money to— you don’t need money for any of this. You don’t need money to wipe out debts. You don’t— you don’t need money to enable the labor force and British companies to pay the debts they owe. You just write down the debts to the ability to be paid. You can say, “if Thames Water is unable to pay the debts after putting so much investment in,” it turns out they didn’t put in the investment at all— they paid it all out. It’s all been a fraud. They’re gangsters. There is no need to pay them.
You have to realize what is more important to Britain: to create a living wage in an economy that can afford to employ industrial labor, or to pay all of the financialized interest, the real-estate interests, the monopolists that have taken over the government and added to the economic overhead. Does the government want to wipe out the economic overhead or not?
DARA: And I guess because of our education, we’ve had many talks about debt forgiveness, but more in the context of Global North forgiving debt in the Global South— less so at the national level or at the individual level. But when you say “debt forgiveness,” people just look at you like you’re a crazy commie.
MICHAEL HUDSON: I don’t like the term forgiveness— that’s like a Catholic word. There’s a sin of Adam that we’re all holding and you have to be forgiven for by paying the Church to absolve you. That’s— you’re not forgiving— these are bad debts. You wipe out, you clear away the bad debts. It’s not debts you’re cancelling; it’s the bad loans. You’re clearing off the bad loans. The banking system has made bad loans.
There’s no way you can shift to— If Britain did what it tried to do in 1909 and 1910 and enact a land tax, which is what caused the constitutional crisis of that year, then the increase in the rent of location would be the tax base. You wouldn’t have to tax labor; you wouldn’t have to tax industry. That was the whole logic that was spelled out in 1910. But instead that wasn’t done. Instead, real estate has been untaxed. Finance has been untaxed. And monopolies, as long as they can multinationalize themselves, can avoid taxes. Real estate isn’t taxed if you simply register your ownership in the Jersey Isles or offshore and say, “Oh, it’s foreign-owned, I don’t have to pay any British income tax,” and then Jersey will have an account in the Cayman Islands— a whole corporate shell game that’s taking place.
So the fact is that the existing banking system cannot survive if you wipe out the debts that are the collateral behind the banks’ liabilities to their depositors and other crossparties— then they’re going to go under. And that’s why I don’t see the British willing to do more than something marginal.
There’s a certain character of thought among Englishmen that I found— it was called muddling through back in the 1960s, “if we can somehow make a little tactical change and get by it”. A tactical change won’t work anymore. It has to be a systemic change, and Britain is generations away from making that— as is the whole West of Europe and the United States. So the problem that Britain has is the problem of all the Western economies. They’re in the same boat.
And again, classical economics— the value, price, and rent theory— gave a way to look at all this, but Britain’s so bamboozled that when it talks about GDP growth, it includes in GDP all of the interest payments made to banks— that’s called providing financial services— as are late fees “services”; paying rents to landlords— that’s called providing housing services; paying monopoly prices— that’s just the cost of living. None of these would have been considered to be GDP by economists from Adam Smith, John Stuart Mill, Marx, and the whole 19th century. They would have said this is not an intrinsic cost of production and not value.
GDP— because it’s gross national product— is the value. What is the value of a product? It’s the actual socially necessary cost of production. Paying rising rents is not a cost of production, because this is mainly the site value of the land— the rent of location. It’s the monopoly rent. And when a monopolist raises its prices, when a landlord raises its prices, when a bank increases the interest rates, that’s not creating more of a product. That’s just— it’s a transfer payment, a zero-sum payment, not a product. So the whole way in which the economic curriculum depicts an economy as working is unrealistic in terms of the classical economists. That’s why when I went to school in the 1960s at least they still taught the history of economic thought, so that when one read Ricardo and Smith and one understood the whole idea, the whole concept, of economic rent. That’s what volumes two and three of Marx’s Capital were all about—rent and financial returns and interest. All of that has been stripped away from the curriculum, as if somehow this treatment of all income is being earned. There’s no such thing as unearned income, no such thing as unearned wealth. The billionaires actually earned their wealth by producing a profit. So that the owners, stockholders, and bondholders of Thames Water have actually earned the money that they paid themselves from Thames Water. And all the landlords— the Duke of— the Duke that owns most of the land under, is it Westminster, the whole area there— actually earns all the rents, the ground rent that he receives, that goes up and up. And the whole concept of earned income and unearned income has been wiped away from the teaching of how economies work.
DARA: Yeah, I think it’s sort of been merged into one. And I also read that even our productivity numbers prior to the global financial crisis— it was a big fugazi— those numbers were heavily linked to the financial sector and it wasn’t actual productivity. But yeah, on this topic of the rentier class—or the “rentier” class, however you want to pronounce it— how do we dismantle it? Because we’ve had like, what, 20 or 30 years of really low interest rates and people said, or in theory, that should be the euthanasia of the rentier— really low interest rates— but that didn’t seem to happen. So how do we dismantle this system?
MICHAEL HUDSON: I can see how Britain’s going to dismantle it. You have to cut the wages in half. You have to have half the population starve and leave the country. Then wait another generation, and there will be almost nobody left in Britain. Then you can restructure the economy, because the banks and— nobody will make any more money left in England, and it’ll be ripe for a restructuring. But you’re going to have to have 75% of your population disappear. And that’s going to take a few generations.
ALEX: Is that what we’re leading to? Because the thing is, in England we come across this a lot where everyone outside of London feels left behind, feels forgotten. It’s all about London. It’s all about the finance in London. But is that where we’re headed with this continued financialization?
MICHAEL HUDSON: That’s where we’re headed, yeah. Financialization is going to bring about the shrinkage of the British economy. It sucks all the revenue, all the income— via real estate, via bank loans, via financial takeover of more and more natural monopolies and the rest of industry— and it sucks it out. There will be no more direct investment. The cost of schooling, of housing, of healthcare will continue to go up. I think that Starmer has the solution. He says if we wreck the National Health Service then England will die off quicker. If we continue our current policies, people can’t afford to live in London anymore and they’re going to have to move out. And his other policies will wreck English industry and speed the parting guest. So stick with Starmer and just continue the destruction, and that will pave the way for people thinking there must be an alternative, and then they’re going to begin looking at history and they’ll find out there are plenty of alternatives. It doesn’t have to be this way. Starmer is running on the principle it does have to be this way— “There is no alternative,” as Margaret Thatcher said. So he’s sort of like the super-Thatcherite— I should say Blairite— because Blair and Starmer have gone further than Thatcher was politically able to do. They’ve perfected her financialization system.
ALEX: But how did this happen? Because you mentioned that before, you know, these countries knew to industrialize, that they didn’t want rent economies, and they were just doing that outside. How did this happen where now it consumed their whole economy?
MICHAEL HUDSON: It was necessary for the economics curriculum to be transformed— to transform the way in which people viewed how the world worked— and to get rid of thinking of economies in terms of earned and unearned income. To get rid of thinking in terms of rent as unearned income— the excess of price without value, empty pricing. They had to strip away the whole concept that financial wealth, rent-yielding wealth, monopoly wealth, was not wealth at all— it was predatory and parasitic. I’ve written about that in Killing the Host, and historically, politically, in Superimperialism. Those are the two main works where I’ve explained all of this.
DARA: Didn’t you say that it was linked back to ancient times, where people would be in debt because of agricultural produce? And because of that— well, sometimes the crops would fail— but you don’t want these people to be overly indebted because that will lead to the downfall of your economy. So that’s where this practice started from, with debt cancellation. So it has been common practice for years and years— but now, today, it seems to not be discussed whatsoever. I mean, I don’t think in the House of Commons they’re even talking about debt cancellation. It’s been completely lost within public discourse, which is a shame.
MICHAEL HUDSON: Well, first of all, the Western countries, including Britain, have financialized politics. So you’ve turned politics over to the major donors to the political class. This is most nakedly apparent in the United States. But also Britain has always pretty much been run by the upper class, except to the extent after 1815 when the rising industrial bourgeois class overthrew the landlord class that had dominated British politics since the origins— since the war— the warlords, Norman warlords, conquered it on behalf of the Church and pledged loyalty and fealty to the popes.
So, all of this— there was a class consciousness very strong after World War II. And also in World War II, so many British men were killed that the women took much more of an administrative position, and they were more supportive of the mixed-economy idea that everybody needed to be able to make a living wage— to break even. And you had this whole flowering of British public investment and public utilities and public service. All of that’s been privatized and taken over and parasitized, largely under foreign influence.
And largely, in order to do all of this, you had to erase the consciousness, you could call it. It’s not only the class consciousness you had to erase; it’s the consciousness of the distinction between value and price, the distinction between earned and unearned income— the awareness of the fact that if you want an economy to survive and be resilient, you want to prevent unearned income from crowding out all of the earned income— the profits and other earnings that are used to build more factories, to hire more labor, to produce more goods and services, building more houses, etc. All of this is— Britain has sort of been maneuvered and steered into a blind alley, but so have all the rest of the British, or the European countries. They’re all in a blind alley now. Just look at Germany. And look at the United States. It’s a way of thinking. Western civilization never had the idea of general debt cancellations. That was universal in the Middle East—what’s now called West Asia. From one end of Asia to another there was the idea of keeping the economy in balance and not ensurfing the free agricultural class. None of that was built into Western civilization from the 8th century BC onwards. I’ve discussed this in The Collapse of Antiquity.
By the way, you’re recording this, right?
ALEX: I can double check, but yeah. Yeah, we’re recording?
MICHAEL HUDSON: And you’ll transcribe it?
ALEX: Yeah.
MICHAEL HUDSON: Okay, just wanted to make sure of that. Anyway, I’m sure your questions have sort of prompted me to take what seems to be an extreme answer, but we’re in an extreme situation. There is no solution within the current way in which the British tax system has been structured, and within the huge amount of debt that wage earners, that companies, that real estate has all taken on. The debts cannot be paid without sacrificing all hope for economic growth. So what’s more important to Britain—paying the existing creditors who’ve created this diversion of income to pay themselves, or the 90% of the population that wants to grow? The population of England agrees: all the money to the creditors. Don’t spend it on us, spend it on the creditors. That’s their morality. “Debts must be paid.” That was a problem that Britain had after World War I and after World War II. Well, the debts don’t have to be paid. And if you try to pay them, then you’re going to sacrifice your opportunities and the revenue that you would otherwise need for economic growth, because you’re paying it all to the banks.
DARA: So since we’re talking about Britain, would you advise Rachel Reeves to implement a wealth tax?
MICHAEL HUDSON: Absolutely. Absolutely. Of course. In the United States, it imposed the income tax in 1913. It was very high. You didn’t have to begin to pay the tax until you reached a certain income level. And the income level at which you began to be taxed was so high that only 2% of the American population had to file an income tax return. That’s wonderful. In Britain today it would be certainly the top 20% I’d say that should be taxed. The bottom 80% of Britain should not pay an income tax. There’s no way that your labor force can pay an income tax and also pay their rents and the cost of their hitherto public services that have been privatized. Something has to give.
DARA: I guess the counterargument to that is, you’re scaring away all the wealth. And we need more ingenuity and innovation, and that’s something that the UK and many other European countries lack. I think Europe does look to America admiringly, because their tech sector is thriving, they have better productivity numbers. So the argument here is that with this wealth tax, are we sure we want to do this? This will be the end of the Labour government. No one will vote for them again.
MICHAEL HUDSON: It should be the end of the Labour government. Put it this way: Britain doesn’t have a wealth tax. What they want to do is to say, “Give taxes to the wealthiest 20%, not to us.” If the voters vote that they don’t want the income—“Give it to our betters”—that’s the English thing to do. Well, who am I to interfere with them committing suicide?
ALEX: Yeah. Are you familiar with Gary’s Economics? This ex-banker in London who is now advocating for a wealth tax—basically made a name for recognizing that there was this rent-seeking going on, and the divide between rich and poor is growing, and all the wealthy people are just owning all the land. They have so much money they don’t know what to do with it. They’re just buying more and more things, more assets, and the economy is just becoming more divided. And you were talking about how we need a political revolution in order to implement this. He’s quite small, but he is, I guess, leading that revolution.
MICHAEL HUDSON: The only way you can stop the current trend is by what you call a revolution, which is really a structural change. A structural change either requires a revolution or a public awareness that the economy has to be transformed to work in a different way than it’s working now. And right now the economy is leading towards more and more poverty and more and more concentration of wealth at the top of the pyramid. British incomes of wage earners are stagnant, maybe going slightly down. The wealth of the upper 20% is going up and up and up—in the stock market, the bond market, the real estate market, the financial markets, they’re all going up. And the reason this is happening is because that’s the way the economy is structured. Unless you restructure the economy, that trend is not going to change.
ALEX: Do you think it’s human tendency, that with financialization they’ve found an easy way to make money, and so why not just continue?
MICHAEL HUDSON: It is certainly the logic of people who are making money in financial ways. They think, “I’m getting richer and richer and richer, and more important—something I really enjoy: the rest of the economy is getting poorer.” The wealthy people love to see the rest of the economy getting poorer. That’s their ego. They think, “Boy, I’m getting richer, they’re getting poorer. Of course I want this to go on. Hey, what’s the change?” But the problem is, why do the 80%—the rest of the people—go along with this?
ALEX: Yeah. I guess it is an education problem. Not many people are even aware this is going on. I think even our generation now, we’re brought up in this world where we don’t know the world before financialization. This is what we think normal is, right? The banks, Visa, all these things—that’s just how it is. So I guess it is an education…
MICHAEL HUDSON: You put your finger on it. There’s this idea of social Darwinism: all of history has been moving forward through the survival of the fittest, to get to today’s optimum position. We’re the peak of history. It’s all been moving to today’s position where the wealthiest 20% get all the wealth, 10% get all the wealth, and the 1% get most of that wealth of the 20%—the 1%. That’s where history’s been moving towards, thanks to our wonderful management and our way of doing things.
And this idea that it’s a natural part of evolution and not completely unnatural—there’s been an intellectual counterrevolution against classical economic thought, and the idea of rentier income of being unearned, and the idea that finance should be privatised instead of being a public utility.
I guess the best way to put it in England is: why did China’s economy go forward and not ours? Well, when China had a revolution, the financial class and landowning class all fled to Taiwan. There wasn’t any financial class, so China had to do what the American colonies did before the Revolution: they printed their own money. And they just printed. Government doesn’t need a wealthy financial class to lend it money to operate it. The government can print the money. That’s what America did in the Civil War with the greenbacks. That’s what every European government—including Britain—did in World War I. Everyone said World War I was going to end in six weeks, six months, because the governments would run out of money. They all began printing the money. That’s what you could do today. The government doesn’t need a wealthy financial class to say, “Give us all the money and let us become the central planners.”
Britain has become a centrally planned economy. But the central planning has been taken out of the hands of the government, out of the hands of Parliament, and turned over to the banks. So you have to realize that the banks centrally planned the economy to make rentier gains for themselves at the expense of the economy at large. Is that so hard to understand? How can you politically make that clear enough for the voters to understand? I thought just saying it would be clear, but there’s immediate resistance.
DARA: Yeah, I guess there’s no real political appetite for change there [unclear audio]
MICHAEL HUDSON: I can’t hear you.
DARA: Oh, sorry. I just said, I guess there’s no political appetite for wanting to bring about this change, wanting to spread the message.
MICHAEL HUDSON: Of course not at the top. Because if you try to get to the top, they do to you what they did to Starmer’s predecessor.
DARA: Don’t you think part of it is that revolving door, or just how connected finance is to politics?
MICHAEL HUDSON: Just look at— I mean, America is a case study where the political campaigns for the primaries to decide what candidates are going to be listed on the two parties’ tickets— there are only two parties that legally can function in practice in America— and the campaign for all the primaries, the financial and real estate and monopoly interests give the money to candidates who are running to represent themselves as their lobbyists.
So essentially the politicians who were elected as a result of receiving enough campaign contributions to mount a television public-relations campaign ended up making the laws on behalf of the donor class— their campaign contributors. It’s not quite as naked outside of the United States, but you can be sure that in England Mr. Starmer has received a lot of support from Americans. Almost all the European politicians have been nurtured by the Americans over the decades through non-governmental organizations, liberal organizations’ support, and they’re chosen for opportunists who are able to use a populist rhetoric to attract voters on the one hand and then do the exact opposite in practice. A whole generation of Mr. Starmers.
ALEX: Yeah mentioned China. What can China tell us about this? Because on one side they’re a manufacturing powerhouse, but on the other side we started hearing about all these problems they had with their real estate market and the banking. What can we learn from China? What’s going on?
MICHAEL HUDSON: I’m disappointed in China’s not preventing the housing prices from going up by imposing a land tax. And the reason it hasn’t is— it’s part of Beijing’s letting the localities all be responsible for their own growth. How are the localities going to raise money to operate and expand their economies? They’ve leased their land to building contractors. The building contractors have got loans from banks, and China has followed the American model in financializing its real estate and letting more and more real estate be bought on credit. And the increase in the land market price has been bid up by the banks— land is worth whatever a bank will lend against it— and banks lend more and more, as you see in Australia, the housing prices go up.
And China has not made an attempt to change its relations between the central government in Beijing and the localities so that there’s revenue sharing with the localities, so they don’t have to make their money by selling off land— tenure rights, meaning rent-extraction rights— to contractors. There’s not much— I haven’t seen much discussion in China of what’s causing this rent increase. I’ve tried to do it and I have not got much of a response there.
DARA: And I also wanted to ask you, you said central banks are one of the worst developments in financial history.
MICHAEL HUDSON: Yes. The central bank— the role of central banks is to take money creation and financial regulation out of the hands of the national treasury, and run the regulation and money-creation policy on behalf of the commercial banks that are members of the central banks. Central banks work for the member banks, not for the treasury, and hence not for the purposes that a national government would hold to increase the prosperity of the overall country. You’re right, central banks are the problem. I had an article on that— on America’s central bank— and I’m writing a book that’ll be published in January on exactly how this has occurred.
ALEX: But so what’s the logic behind having central banks? Why did they originally want to get it out of the hands of the treasury?
MICHAEL HUDSON: Simple. The logic is to impoverish the population on behalf of the financial class. That’s the logic: “We can get rich if we take power away from the government. We can gain control of fiscal policy, of financial policy, and we can make ourselves rich at the economy’s expense.” That’s the logic— and it’s worked.
DARA: So when people say it’s about monetary stability and price— that’s all bollocks?
MICHAEL HUDSON: Don’t default on the debts, keep paying the debts. Stability means keep polarizing, keep starving yourself— that’s stability. Stability will be reached when 80%— 75%— of Britain’s population disappears. That’s stability.
ALEX: Right. And so would you think it’s the same also for the European Union and the euro?
MICHAEL HUDSON: Yes, absolutely. The euro is even worse. Just look at Germany.
ALEX: Really?
MICHAEL HUDSON: Yes.
DARA: Why? Why is Germany a bad example?
MICHAEL HUDSON: What’s the first stability that European leaders want? Stability and support from the United States. The European Union is subordinate to NATO. So essentially the European Union is a NATO Cold War policy. Its role is to fight Russia, and now China as well— to be an aggressive force. So the stability is preventing democracy. The stability is: if there is a reform policy that’s against the Cold War— like the AfD, the Alternative für Deutschland— ban it. If the voters support and elect a politician against war with Russia, as Romania did— cancel the elections. That’s stability. Stability is maintaining the race to the bottom. Don’t interrupt the race to the bottom. Don’t interrupt the polarizations, because that is where the trends are all leading. Don’t interrupt these trends— that’s where history is moving. It’s part of nature. It’s the survival of the fittest. That’s the rhetoric that shapes the consciousness of voters.
ALEX: It’s interesting that you say that the European Union is almost an attachment of NATO, because here in Europe they really try to tell us that these two entities are completely different.
MICHAEL HUDSON: Of course— if they can make you believe that, you won’t see what the problem is.
ALEX: Well, one of my professors— I’m not sure if you’ve heard of him— have you heard of Costas Lapavitsas?
MICHAEL HUDSON: Yes.
DARA: Yeah. Well, I’m sure you’ve read his book The Left Case Against the EU, and he goes on to say that this is a neoliberal plot— also talks about very similar things to what you just did— and that the whole idea that it was meant to unite Europe for cooperation and to prevent wars is just a lie. And this was just to make the rich richer and the poor poorer. It’s quite paradoxical because a lot of people on the left are the biggest advocates for the EU. They don’t see it as this neoliberal plot, whereas the right are the ones arguing— well, in the UK the right do not want to be a part of the EU. And I think in Europe in general the right are the ones who are typically against the EU. So it’s a bit paradoxical how those on the left, who would side with the working class and the ones who are exploited, seem to be the ones who love the Union the most.
MICHAEL HUDSON: It’s not only the working class that’s exploited. Industry is exploited; the capital, the industrialists are exploited; everybody’s exploited— industrial capital as well as labor is exploited. That’s why— if you can exploit both together— then you’ve de-industrialized the country and made all of the income growth available to the rent extractors.
DARA: Very, very interesting. I just… so for you it’s very important to dismantle the EU as well.
MICHAEL HUDSON: Yes. It’s dismantling itself.
DARA: More countries should copy us and have Brexit.
MICHAEL HUDSON: It’s dismantling itself.
DARA: And they would be more prosperous if they got away from the EU.
MICHAEL HUDSON: Unfortunately, that’s the case.
DARA: But even countries like Eastern Europe?
MICHAEL HUDSON: There’s no way Germany can be more prosperous as long as it’s supporting the Wehrmacht— the old Nazi party— any Germany led by Mr. Merz is going to attack Russia and will end up ultimately being— if it gives missiles to Ukraine or sends missiles into Russia or sabotages Russia— Russia’s essentially going to attack Germany at some point.
DARA: Well, I was also going to ask you, because I think in your book Killing the Host you said you didn’t even want to get into economics and that your passion was music and the history of culture.
MICHAEL HUDSON: Yeah.
DARA: I just wanted to ask you, do you have any regrets? Is there a part of you that wished you still—
MICHAEL HUDSON: No. Because I could do in writing about economics what I couldn’t do as a composer. I can write books in a way that— the organization— it’s like modulation of one idea to another. I’m able to express the aesthetics that I developed in music toward my writing style. And the whole approach I have to history is something unfolding toward an end— toward, you could say, a central tonality— and the modulation that I’ve developed. No. So I’m very glad that I’ve found I’m much better in this than I was in music. These are not the times for music, anyway. These have to be the times for economic history— and for a revolution.
ALEX: Well, Michael, thank you so much for speaking with us. It was a real pleasure.
MICHAEL HUDSON: Pleasure. Thank you.
ALEX: Thank you.
MICHAEL HUDSON: I can understand you clearly.
