By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “The Bubble and Beyond.”
Parts U-V in the Insider’s Economic Dictionary
Underdevelopment: The term coined by Andre Gunder Frank to describe the policies which former European colonies and more contemporary third-world countries have been turned into indebted raw-materials exporters rather than balanced economies capable of feeding themselves. (See World System.)
Unearned income: See Free Lunch.
Unexpected. Whenever bad economic news is announced in the United States, the media almost always attach the adjective “unexpected” to it. This is because it is deemed politically incorrect to expect bad news – to expect unemployment to rise, or to expect retail sales to be down. To accurately expect bad news may be realistic, but to anticipate this reality is something like becoming a premature anti-fascist. So it has become almost obligatory for reporters to show that their heart is “in the right place” by attaching the label “unexpected” to bad news. The word is intended to work as a deadener on the brain, because “unexpected” is taken by most listeners or readers to mean “there’s no reason for this folks. Don’t try to think about putting it into an explanatory system.”
This is like calling every stock-market loss “profit taking,” as if people are cashing out on the money they’ve made rather than people losing money.
Usury: In antiquity, “usury” (from Latin usus fructus, “use of the fruits”) referred to interest charged for any purpose, regardless of whether it was levied on individuals against their land or personal freedom, or charged to merchants for financing their trade. However, the Biblical sanctions of Exodus, Deuteronomy and Leviticus against charging usury were aimed at agrarian usury, not commercial lending. Such debts stemmed mainly from taxes and other fees owed to public collectors, and thus did not reflect productive loans. Since the Middle Ages the term has been limited to interest charges in excess of the legal maximum as set by national usury laws.
On a society-wide level, usury leads to economic and political polarization, and thus is worse than merely a zero-sum activity. As Francis Bacon observed in his essay on usury: “Usury bringeth the treasure of a realm into few hands, for the usurer, being at certainties, and the other at uncertainties, in the end of the game most of the money will be in the box, and a State ever flourisheth where wealth is more equally spread.”
Utopia: Originally a theocratic authoritarian view of the future (such as Plato’s Republic or Thomas More’s Utopia) in which wise philosophers or rulers created a uniform society. More recently, free-market economists have created a utopian image along almost opposite lines, an individualistic society ostensibly resulting simply from the removal of government regulation, thanks to the workings of the invisible hand of personal self-interest. (See Crusade and Fundamentalist.)
Value: The classical economists used the term “value” to connote the intrinsic, technologically or socially necessary costs of production, and reduced these costs to the labor expended directly plus that embodied in the capital equipment, buildings and raw materials used up in production. This labor theory of value enabled economists to exclude economic rent, interest and other property claims as mere transfer payments, elements of market price in excess of value as classically understood. By contrast, today’s post-classical era uses the term “value” simply as a synonym for price, regardless of the degree to which prices exceed the necessary costs of production. (See Watered Costs.)
Value-free economics: The effect of “value-free” thought is to prevent people from making value judgments questioning the evolving status quo. The classical concept of value is rejected by depicting all prices as containing real value rather than acknowledging the institutional overhead of rent accruing to property owners, or financial charges levied by the economy’s money managers. The FIRE sector is counted as producing national product, not as an overhead. Tocay’s post-modern economic vocabulary and national-income accounting framework leaves little room to acknowledge New York State Attorney General Eliot Spitzer’s wholesale prosecutions of Wall Streets banks, mutual funds, pension funds, accounting firms and the FIRE sector in general for violating their legal fiduciary responsibility.
Veblen, Thorstein: American economist who emphasized the institutional context for finance and real estate, his Absentee Ownership (1924) described urban development mainly as a game of real-estate promotion, and traced how financial managers were taking over industry and loading it down with watered costs. Veblen coined the term conspicuous consumption, the latter criticizing individualistic analysis by showing the degree to which personal tastes were socially engineered by advertisers and other vested interests, a term which he also coined. He also juxtaposed the idea of conspicuous consumption to that of diminishing marginal utility. Post-classical economists accused Veblen of being more a sociologist than an economist as such, and the discipline narrowed its scope to exclude as “externalities” the dynamics on which Veblen focused his analysis and wit. But he in turn coined the phrase “strategic sabotage” to describe how economic theorists sought to exclude from discussion the factors most important in shaping economic life.
Vested interests: A term coined by Thorstein Veblen to describe the rentiers with their property and financial claims, and who used their control of government to protect these claims and shift the tax burden onto industry, agriculture and consumers.
Virtual reality: A kind of parallel universe created by interlocking sets of hypotheses based on deductive method. See Decontextualization, Junk Science, Neoclassical Economics, and Social Market.