The Delphic Oracle Was Their Davos: A Four-Part Interview With Michael Hudson: A New “Reality Economics” Curriculum Is Needed (Part 4)

By John Siman, who is also the author of Part 1, Part 2, and Part 3  in this series

John Siman:I want to spell out the implications of the points that Socrates brought up, and with which you and I agree. That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome? Or is it universally the nature of oligarchy in any historical setting to be rapacious?  And if so, where is it all leading?

Michael Hudson: If Antiquity had followed the “free market” policies of modern neoliberal economics, the Near East, Greece and Rome would never have gained momentum. Any such “free market” avoiding mutual aid and permitting a wealthy class to emerge and enslave the bulk of the population by getting it into debt and taking its land would have shrunk, or been conquered from without or by revolution from within. That’s why the revolutions of the 7thcentury BC, led to reformers subsequently called “tyrants” in Greece (and “kings” in Rome) were necessary to attract populations rather than reduce them to bondage.

 So of course it is hard for mainstream economists to acknowledge that Classical Antiquity fell because it failed to regulate and tax the wealthy financial and landowning classes, and failed to respond to popular demands to cancel personal debts and redistribute the land that had been monopolized by the wealthy.

The wealth of the Greek and Roman oligarchies was the ancient counterpart to today’s Finance, Insurance and Real Estate (FIRE) sector, and their extractive and predatory behavior is what destroyed Antiquity. The perpetuation of this problem even today, two thousand years later, should establish that the debt/credit dynamic and polarization of wealth is a central problem of Western civilization.

JS: So what were — and are — the political and social dynamic at work?

MH: The key is the concept of wealth addiction and how it leads to hubris — arrogance that seeks to increase power in ways that hurt other people. Hubris is not merely over-reaching; it is socially injurious. The wealthy or power injure other people knowingly, to establish their power and status.

 That is what Aristophanes meant when his characters say that wealth is not like bananas or lentil soup. Wealth has no object but itself. Wealth is status — and also political control. The creditor’s wealth is the debtor’s liability. The key to its dynamic is not production and consumption, but assets and liabilities — the economy’s balance sheet. Wealth and status in the sense of who/whom. It seeks to increase without limit, and Socrates and Aristotle found the major example to be creditors charging interest for lending “barren” money. Interest had to be paid out of the debtor’s own product, income or finally, forfeiture of property; creditors did not provide means of making interest to pay off the loan.

This is the opposite of Austrian School theories that interest is a bargain to share the gains to be made from the loan “fairly” between creditor and debtor. It also is the opposite of neoclassical price theory. The economics taught in universities today is based on a price theory that does not even touch on this point. The liberty that oligarchs claim is the right to indebt the rest of society and then demand full payment or forfeiture of the debtor’s collateral. This leads to massive expropriations, as did the Junk Mortgage foreclosures after 2008 when President Obama failed to write down debts to realistic market values for real estate financed on loans far beyond the buyer’s ability to pay. The result was 10 million foreclosures.

 Yet today’s mainstream economics treats the normal tendency to polarize between creditors and debtors, the wealthy and the have-nots, as an anomaly. It has been the norm for the last five thousand years, but economics sidesteps actual empirical history as if it is an anomaly in the fictional parallel universe created by the mainstream’s unrealistic assumptions. Instead of being a science, such economics is science fiction.It trains students in cognitive dissonance that distracts them from understanding Classical Antiquity and the driving dynamics of Western civilization.

JS:This gets us back to the question of whether universities should just be shut down and started up all over again.

MH:You don’t shut them down, you create a new group of universities with a different curriculum. The path of least resistance is to house this more functional curriculum in new institutions. That’s what America’s Republican and pro-industrial leaders recognized after the Civil War ended in 1865. They didn’t shut down Harvard and Yale and Princeton and the Christian free-trade Anglophile colleges. They created state colleges funded by land grants, such as Cornell in upstate New York, and business schools such as the Wharton School at the University of Pennsylvania,  endowed by industrialists to providing an economic logic for the state’s steel-making and related industrial protectionism. The result was an alternative economics to describe how America should develop as what they saw as a new civilization, free of the vestiges of Europe’s feudal privileges, absentee ownership and colonialist mentality.

 The Republicans and industrialists saw that America’s prestige colleges had been founded long before the Civil War, basically as religious colleges to train the clergy. They taught British free trade theory, serving the New England commercial and banking interests and Southern plantation owners. But free trade kept the United States dependent on England. My book America’s Protectionist Takeoff describes how the American School of Political Economy, led by Henry Carey and E. Peshine Smith (William Seward’s law partner), developed an alternative to what was being taught in the religious colleges.

 This led to a new view of the history of Western civilization and America’s role in fighting against entrenched privilege. William Draper’s Intellectual Development of Europe, and Andrew Dixon White’s History of the Warfare of Science with Theologysaw the United States as breaking free from the feudal aristocracies that were a product of the way in which antiquity collapsed, economically and culturally.

JS: So business schools were originally progressive!

MH: Surprising as it may seem, the answer is Yes, to the extent that they described the global economy as tending to polarize under free trade and an absence of government protectionism, not to become more equal. They incorporated technology, energy-use and the environmental consequences of trade patterns into economic theory, such as soil depletion resulting from plantation monocultures. Mainstream economics fought against such analysis because it advocated markets “free” for polluters, “free” for nations to pursue policies that made them poorer and dependent on foreign credit.

JS: So this is how the Wharton School’s first professor of economics, Simon Patten, one of the founders of American sociology, fits into this anti-rentier tradition! That is such a revelation to me! They developed an analysis of technology’s effects on the economy, of monopoly pricing and economic rent as unearned income that increases the cost of living and cost of production. They explained the benefits of public infrastructure investment. Today that is called “socialism,” but it was industrial capitalists who took the lead in urging such public investment, so as to lower their cost of doing business.

MH: The first U.S. business schools in the late 19thcentury described rentiers as unproductive. That is why today’s neoliberals are trying to rewrite the history of Institutionalism in a way that expurgates the Americans who wanted the government to provide public infrastructure to make America a low-cost economy, undersell England and other countries, and evolve into the industrial giant it became by the 1920s.

JS: That was Simon Patten’s teaching at the Wharton School — government-subsidized public infrastructure as the fourth factor of production.

MH: Yes. America’s ruling political class tried to make the United States a dominant economy instead of a rentiereconomy of landlords and financial manipulators.

JS: How did the robber barons fit into this story?

MH: Not as industrialists or manufacturers, but as monopolists opposed by the industrial interests. It was Teddy Roosevelt’s trust-busting and the Republicans that enacted the Sherman antitrust act. Its spirit was continued by Franklin Roosevelt.

JS:Is today’s economy a second age of robber barons?

MH: It’s becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free market — that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly rent and financial extraction.

JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring. It certainly wasn’t in Paul Samuelson’s textbook that we were given.

MH: There’s little logic for neoliberalism beyond a faith that short-term greed is the best way to optimize long-term growth. It is natural for the wealthiest classes to have this faith. Neoliberalism doesn’t look at the economy as a social system, and it excludes as “externalities” concerns with the environment, debt dependency and economic polarization. It only asks how to make a short-term hit-and-run gain, regardless of whether this is done in a way that has a positive or negative overall social effect. Realistic economic logic is social in scope, and distinguishes between earned and unearned income. That is why economists such as Simon Patten and Thorstein Veblen decided to start afresh and create the discipline of sociology, to go beyond narrow individualistic economics being taught.

Today’s mathematical economics is based on circular reasoning that treats all that has happened as having been inevitable. It is all survival of the fittest, so it seems that there is no alternative. This policy conclusion is built into economic methodology. If we weren’t the fittest, we wouldn’t have survived, so by definition (that is, circular reasoning), any alternative is less than fit.

 Regarding the fact that you had to read Samuelson when you were in college, he was famous for his Factor Price Equalization Theorem claiming to prove mathematically that everybody and every nation tends naturally to become more and more equal (if government stands aside). He denied that the tendency of the global economy is to polarize, not equalize. The political essence of this equilibrium theory is its claim that economies tend to settle in a stable balance. In reality they polarize and then collapse if they do not reverse their polarizing financial and productivity and wealth dynamics are.

The starting point of economic theorizing should explain the dynamic that lead economics to polarize and collapse. That is the lesson of studying antiquity that we have discussed in our earlier talks. Writers in classical antiquity, like Bronze Age Near Eastern rulers before them and the Biblical prophets, recognized that a rentier economy tends to destroy the economy’s productivity and widespread prosperity, and ultimately its survival. In today’s world the Finance, Insurance,and Real Estate [FIRE] sector and monopolies are destroying the rest of the economy, using financial wealth to take over the government and disable its ability to prevent their operating in corrosive and predatory ways.

JS: Why aren’t more people up in arms?

MH: They’re only up in arms if they believe that there is an alternative. As long as the vested interests can suppress any idea that there is an alternative, that matters don’t have to be this way, people just get depressed. In our third interview you spoke about Socrates and the Stoics producing a philosophy of lamentation and resignation. By his day there seemed no solution except to denounce wealth. When matters got much worse in the Roman Empire, wealth was abhorred. That became the message of Christianity.

 What is needed is to define the scope of the alternative that you want. How can the economy grow when households, business,  and government have to pay more and more of their revenue to the financial sector, which then turns around and lends its interest and related income out to indebt the economy even more? The effect is to extract even more income. Rising government debt and tax cuts for the rentiers lead to the privatization of public infrastructure and natural monopolies. Higher prices are charged for tolls to pay for public healthcare, education, roads and other services that were expected to be provided for free a century ago. Financialized privatization thus creates a high-rent, high-cost economy — the opposite of industrial capitalism evolving into socialism to finally free society from rentier income.

JS:Wouldn’t that be based on the insatiable desire [ἀπληστία, aplêstia] for money and the super-rich [ὑπέρπλουτοι,hyper-ploutoi] oligarchs in Book 8 of Plato’s Republic? So we get back to my question: Is the behavior of the super-rich a constant in human nature?

MH:Money-love [φιλοχρηματία, philochrêmatia] has always been extreme because wealth is addictive. But their dynamic of credit — other peoples’ debts— increasing at compound interest is mathematized and the economy is put on automatic pilot to self-destruct. Its business plan to “create wealth” by making financial gains at somebody else’s expense, without limit. This kind of financial wealth is a zero-sum activity. The wealth of the creditor class, the One Percent, is achieved by indebting the 99 Percent.

JS:Why is it a zero-sum activity?

MH:A zero-sum activity is when one party’s gain is another’s loss. Instead of income paid to creditors being reinvested in means of production to help the economy grow, it’s spent on buying more assets. The most wasteful examples are corporate stock buyback programs and financial raids. And the largest effect of financialization occurs as loans and Quantitative Easing simply bid up the price of real estate, stocks, bonds and other assets. The effect is to put housing and a retirement income further out of range of people who have to live by working for wages and salaries instead of living off absentee ownership, interest and financial asset-price gains.

JS: Why is this being done instead of investing in the economy to help the population live a better and more prosperous life?

MH:The tax and regulatory system is set up to make financial gains or create monopoly privileges. That is quicker and more certain, especially in an economy shrinking as a result of financialization and the austerity it imposes. It’s hard to make profits by investing in a shrinking economy suffering from debt deflation and a squeeze on family budgets to pay for health care, education and other basic needs.

JS:So it becomes more about extraction. Let’s come back to Global Climate Change and rising sea levels as a foundation of American foreign policy.

MH:Since the 19th century, American policy has been based on the recognition that GDP growth reflects rising energy use per capita. Rising productivity is almost identical with the curve of energy use per worker. That was the basic premise of E. Peshine Smith in 1853, and subsequent writers, whom I describe in America’s Protectionist Takeoff: 1918-1914. The policy conclusion is that if you can control the source of energy — which remains mainly oil and coal — then you can control global GDP growth. That is why Dick Cheney invaded Iraq: to grab its oil. It is why Trump announced his intention to topple Venezuela and take its oil.

          If other nations are obliged to buy their oil from the United States or its companies, then it’s in a monopoly position to turn off their electricity (like the United States did to Venezuela) and hurt their economies if they don’t acquiesce in a world system that lets American financial firms come in and buy out their most productive monopolies and privatize theirpublic domain. That’s why America’s foreign policy is to monopolize the world’s oil, gas and coal in order to have a stranglehold on the rate of growth of other countries by being able to deny them energy. It’s like denying countries food in order to starve them out. The aim isto exploit Europe, Asia, Africa and Latin America what Rome exploited its Empire.

JS:Would you be comfortable using words like evil to describe what’s going on now?

MH: Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel vision, distracting attention from understanding how economic society actually works in destructive ways. On that logic, post-classical neoliberal economics and the Chicago Boys are evil because their ideology breeds ignorance and leads its believers to act in ways that are injurious to society, preventing personal fulfillment through economic growth. Evil is a policy that makes most of society poorer, simply in order to enrich an increasingly wealth-addictive rentier layer at the top. Werner Sombart described the bourgeoisie as floating like a globules of fat on top of a soup.

JS: This is now happening on a path that follows an exponential extreme. I guess global warming makes it particularly evil. We’re not simply talking about taking advantage of other people within a society, we’re talking about destruction of the planet and its environment.

MH: Economists dismiss this as an “externality,” that is, outside the scope of their models. So these models are deliberately ignorant. You could say that this makes them evil.

JS: That is what I’ve suspected since we started the Iraq War in 2003.

MH: America’s military buildup, its anti-environmental policy and global wars are part of the same symbiotic strategy. The reason why America will not be part of a real effort to mitigate global warming is that its policy is still based on grabbing the oil resources of the Near East, Venezuela, and everywhere else that it can. Also, the oil industry is the most tax-exempt and politically powerful sector. If it also happens to be the primary cause of global warming, that is viewed as just collateral damage to America’s attempt to control the world by controlling the oil supply. In that sense the environmental impasse is a byproduct of American imperialism.

JS:What’s hopeful in the United States right now? What is a possible good outcome?

MH:T he precondition would be for people to realize that there is an alternative. Starting with wiping out of student debts, they can realize that the overall debt overhead can be wiped out without hurting the economy — and indeed, rescuing it from the financial rentier class inasmuch as all debts on the liabilities side of the balance sheet have their counterpart on the asset side as the savings of today’s financial oligarchy, which is doing to the U.S. economy what Rome’s Senate did to the ancient world.

JS: How can people proceed from here?

MH: Understanding must come first. Once you have to have a sense of history, you realize that there is an alternative. You also see what happens when a creditor oligarchy gets strong enough to prevent any public power from writing down debts and to prevent attempts to tax it.

You have to do to America today what the Republicans did after the Civil War: You have to have a new university curriculum dealing with economic history, the history of economic thought and the real world’s long-term development.

JS: And what would be the premise for such economic history?

MH:T he starting point is to realize that civilization began in the ancient Near East, and made a turn to oppose a strong public regulatory sector in Classical Greece and Rome. The long-term tension is the eternal fight by the oligarchy of creditors and large land owners to reduce the rest of society to serfdom, and to oppose strong rulers empowered to act in the economy’s long-term interest by creating checks against this polarization.

JS: So how much longer does this go on — for months, for years, for decades?

MH: It always goes on longer than you think it will. Inertia has a great elastic self-reinforcing power. Polarization will widen until people believe that there is an alternative and decide to fight for it. Two things are required for this to happen: First, a large proportion of people need to see that the economy is impoverishing them, and that the existing picture of what is happening is misleading. Instead of wealth trickling down, it is defying gravity and sucking income up from the base of the economic pyramid. People are having to work harder just to stay in place, until their life style breaks down.

Second, people must realize that it doesn’t have to be this way. There isan alternative

JS: Right now most people think that government regulation and progressive taxation will make things worse, and that the wealthy are job creators, not job destroyers. They think that the system needs to be bolstered, not replaced, because the alternative is “socialism” — that is, what the Soviets did, not what Franklin Roosevelt was doing. But today bailing out the banks and giving subsidies to new employers is said to be for our own good.

MH: That’s what the Romans told their provinces. Everything they did was always to preserve “good order,” meaning open opportunities for their own wealth grabbing. They never said they were out to destroy and loot other societies. Madeline Albright followed this rhetorical pattern in describing as being, like the Romans and France’s brutal mission civilisatrice, a program to uplift the world free-market efficiency. For performing this service, the imperial power takes all the money that its colonies, provinces and allies can generate. That’s why the U.S. meddles in foreign politics, as we have just seen in Ukraine, Libya and Syria.

JS: You’ve described the greatest meddling as distorting the narrative of history to depict creditor and rentier drives toward oligarchy as being democratic and helping to raise living standards and culture. Your books show just the opposite.

MH: Thank you.

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  1. larry

    There is an alternative, MMT. He has a position at UMKC with an MMT-oriented economics department. So, why did he fail to mention it? Surely, a missed opportunity?

    1. Watt4Bob

      As long as we accept the fallacy that MMT is an ‘alternative’ we fall victim to the enemy’s mythology, the mythological ‘fact’ that we can’t afford to change, and TINA but to keep doing what we’re doing.

      We must educate ourselves, we must understand that MMT is not an alternative, is actually the way the economy works right now.

      Once there is a broad understanding that that is so, it then becomes clear that what is standing in our way is the political debate over policy, that debate is currently dominated by the oligarchs, who have purchased our government and frozen the rest of us out of the debate over economic policy.

      Simply put, ever since the Thatcher/Reagan era, there has been no one representing our collective interest in the debate over economic policy.

      That is why MH states that our job is to educate ourselves, and to make sure that knowledge is broadly held.

      To believe that MMT is an ‘alternative’ is to stop short of fully understanding our economy.

      MMT is the way things actually work right now, but MMT is firmly in the hands of a ruthless class of oligarchs who totally control the political debate, and who jealously guard, and viciously defend that control.

      Our job is to fight our way back into the political debate.

      1. Adam Eran

        My (late) mother expressed her skepticism about MMT, asking me what countries were following its precepts. I told her that it was the same countries as were following the law of gravity.

        I’d suggest that the Republicans have understood the MMT dynamics since their principle “Two Santa Clauses” principle says to run up deficits as large as possible when in office, and complain as bitterly as possible about the deficits when out of power. Naturally, the beneficiaries of that large deficit are their constituents.

        1. GF

          Finally, someone stating what’s been obvious for many decades. It used to be explained as “deficits don’t matter” when Rs are in power and the Ds would have to clean up the mess when they came in. Except the mess was never cleaned up other than for the enriching the FIRE segment and their minions part. The 99% always were left out of the cleanup.

    2. rob

      Maybe because MMT isn’t an alternative.
      It is just the loose description of what the money power is using to swindle the world right now. It isn’t an alternative, if it is only describing the system as it is, and lays out no context for who and what the system was designed for.

      MMt is describing the bankers money system. It is the tool the wealthy are using to create wealth inequality.
      a structural change would be voiding the federal reserve act, and passing a bill like
      HR 2990 112th congress the need act, that would end the banks free ride to create money, and end the federal reserve as a private entity, and transfer the role of the fed into the treasury, so that the money created in this country stopped creating national debt for the citizens to be liable for. It would be the structural change that is needed to actually be an alternative to the way things are right now.

      1. albert

        “…HR 2990 112th congress the need act, that would end the banks free ride to create money, and end the federal reserve as a private entity, and transfer the role of the fed into the treasury…”

        That would be a good start, but chances of that happening are about the same as a UFO landing on the White House lawn. One of the things JFK tried to do (along with eliminating the Mafia and the CIA) was to enable the Treasury to print money. Note that the US was still on the Gold Standard then. The first nail in our economic coffin was the Federal Reserve Act of 1913(for a steaming load of bull, read the wiki). The second nail was the elimination of the Gold Standard in 1971. The 3rd nail was the elimination of, or the ignoring of laws regulating banks.

        There’s not much space for more nails, but the Elite are working on that problem.

        . .. . .. — ….

        1. rob

          I agree the passage of that bill isn’t even really possible right now. Not with the people who hold office.
          But the point is really that it is “on the shelf”, waiting to be re-proposed and tweaked as needed.
          The hard work of writing legislation has already been done. The fact that it is “in writing”, means that the ideas can be debated, WITH the words as they are written.
          The ideas don’t have to be approximate. We don’t have the security of things like “in theory”, and “semantics”, being good enough to excuse flubs. When something is written, it can be read, and discussed, and everyone has the same info. there is no mystery. there is no secret some have ,while others don’t.
          They say, we can’t get there from here….. but with a map, we can get to where we need to be to get there from.

          And the real thing is far too often people who mean well, are having discussions , without knowing people have actually been working out solutions for eight decades to our current predicament.. The problem has been with us too long for this many people to be ignorant of who the sides are. and what their interests are.

    3. David J.

      The first M in MMT is Modern. What Mr. Hudson and Mr. Siman have done in this wonderful, 4 part tour de force is to offer us a lever by which we can evaluate pretty much all of Western history. Archimedes would be pleased. MMT, in this context, is subsumed by the long view offered by these gentlemen.

      For myself, I plan to dig in and do some reading. And some talking, too.

    4. False Solace

      Hudson mentioned MMT in Part 2. Personally I’m happy this series discussed his very fascinating research, rather than another intro to a topic that twenty other writers could do.

  2. Sound of the Suburbs

    It is much easier to see the flaws in Left wing ideologies.

    They are put together in a few minutes down the pub, on a Friday lunch time.

    Let’s wipe out the Bourgeoisie to create a better society.

    The Right put a lot more time and effort into it.

    In 1947, Albert Hunold, a senior Credit Suisse official looked for a group of right wing thinkers to form the Mont Pelerin Society and neoliberalism started to take shape.

    They spent decades scrabbling around for suitable ideas to bolt together into a right wing ideology. They made sure all the ideas fitted together and were logically very consistent.

    Only time would reveal the flaws in this cleverly, crafted ideology.

    It is cleverly, crafted but extremely rigid as it is not actually the way things work, and this is why they have to avoid acknowledging problems and coming up with solutions along the way.

    If they added debt, their whole stable equilibrium model would fall apart. If things don’t naturally reach a stable equilibrium you need Governments and regulations to manage things and the whole ideology disintegrates.

    They can’t add debt, but it is private debt that will sooner or later bring this ideology crashing down. The whole thing runs on debt and an economy can only take so much.

    The usual unsustainable growth model of neoliberalism that requires ever more debt.

    This is the UK:

    Everywhere else is pretty much the same:

    At 25.30 mins you can see the super imposed private debt-to-GDP ratios.

    China has just seen their Minsky Moment coming and the wheels are going to come off this thing fairly soon.

    1. rob

      “foreign affairs” the council on foreign relations periodical had a story a bunch of years ago, that an alternative to the american QE program, would have been to give each person in this country a check for @$55,000 US.
      That means my wife and I, would have had an extra $110,000 dollars, to do with as we saw fit, for the same cost of the QE program spent to juice wall st.. There would be little to no private debt here….. The country would have soared back to life…. rather than everyone be sacked with debt to this day. a decade lost in productivity. The time cost of the bankers screwing everyone, and everything…. and they got 85 billion a month for years….and the whole time having them wag their finger at the population and chiding us for our being irresponsible… the gall of it.

  3. rob

    a reality based economic class for all , is totally what is needed.
    First we need a “truth and reconciliation commission”, because what the “truth” is, is disputed by those in power. The key to our control is the secrecy in how our system works.
    All the history, that should be understood by everyone,is where economics and government come together. as well as, how academia is used to disseminate untruths.
    Look at the story of MMT,
    It is not a story of anything progressive, it is actually regressive, status quo propaganda.
    The story that no structural change is needed to fight back against the money power in this country, which is behind the perverted behemoth of wall street and our political straight jacket.. It is a lie at worst, and gullibility at best.
    The fact that the federal reserve is a private banking consortium, who essentially is a contractor for the gov’t, all the while enjoying the power to create money at will(Which is a hell of a perk if you are in the banking business), and the gov’t is prohibited from creating money(except coins), but is bound by the federal reserve act, to create debt for the money the federal reserve creates, and trades with the gov’t to fulfill it’s transaction..and keep their(the banks) books free of debt.. while the debt goes to the people …. is a problem of the highest order in this country.
    A reality based economics class would have to include what has been a plan since it’s first inception in the thirties, “the chicago plan” where there was first an answer to the private bank created money system we have that was created by the federal reserve act in 1913., and later modified in 2011 and 2012, in the HR 2990 112th congress, “NEED act” , which lays out a plan to roll the fed into the treasury and stops creating debt for new money created and has a plan to retire the old debt as it comes due, so as not to disrupt financial markets. The new plan has a three part strategy which if done at the same time will hopefully be able to finally quell the money power of this nation.

    The history of the fight against the bankers money system has been an ongoing struggle since before alexander hamilton and robert Morris wanted a national bank that could tax to give its bondholders a never-ending stream of income. Just like the JP Morgan syndicate got passed in 1913. , the federal reserve act, is that thing that gives the rich not only a stream of money, it also creates a whole stratification where they can get “cheap” money, first… The system is akin to a solar system around the center of money creation… and the close planets get “first use” (at the lowest rate ,of course)
    The rich get richer, the poor get the picture…
    the golden rule….. those with the gold make the rules.
    If you don’t have gold, but the right to create money every time you make a loan, it is still a golden goose, still a free lunch…

    And real education is what is needed. class based…. a peoples education.for the rest of us… not that 1% fairy tale…. which is what economics profession is spouting .

    1. Paul O

      Looks like a well organised web site so I may at least dig a little further.

      In a quick browse I was hoping for some discussion on the difference between Weberian (Economy and Society) and ‘Smithian’ concepts of money à la Wolfgang Streeck, but such is hard to find anywhere. I think you are still essentially holding to money as social institution at least having the possibility of being neutral. Which could still be considered a status quo position.

      1. rob

        The site is new and still forming. but interesting and connects to a broader message.
        The fact that there are conflicting theories as to money and its nature, always has the “distance” to forgive inaccuracies.I understand there is a lot of semantics about what money is and isn’t. I think of a lot of that “nuance” is put on after the creation of the money, like the creation of a painting, where the “experts” come out and describe “what the painting is saying”, what it means on a deeper level”, and all that.. Maybe sometimes it does, to some people.
        But the fact is, the art is the art
        And in money, I am of the opinion that
        from how the game has been played so far,
        we ought to treat the money as just the law.
        the society uses it. the govt(of the US) can create it virtually for no cost or certainly no debt, and it is.
        The concept should be taught, so the citizenry have a clue as to what is being done in their name, as it is also their responsibility to oversee the democratic republic they are born into …. it is pretty status quo.
        After the money is created, it should be spent into the economy, for things benefiting all; like heath care,education,childcare,infrastructure,food security,clean water,environment,etc.
        and that isn’t status quo, that could be revolutionary. Then it could be status quo.
        I think the important thing is that the original sin of money creation, not be creating a debt. Then that deed is done…
        and after that with the money already in use by the population, it is what ever it will be , just like now…for everyone else in the world who can’t create money like the banks can.
        The concepts you posed are the things people like to discuss, and should. blogs,forums, conventions,media,lectures, debates….all good in my opinion if people are willing to actually talk. and to listen.

  4. Alex morfesis

    Gr8 and thorough… let us not forget the Grange, the national Grange and all it did (& still does)…

    1. diptherio

      My local community Grange meeting is this Monday. Nationally it is, sadly, a dying organization. Literally. On a survey for local chapters, one of the questions was, “Is your youngest member over 70 years old?”…many answer “yes.”

      But it is an org that does deserve to survive, which is why a group of us have revived our local chapter. Fortunately, the old-timers are fine with us ditching the weird anachronistic formalities and running things in a way that makes sense for lefties in 21st century…so no referring to me as “Master,” thank you very much, “Chairperson” is just fine.

      1. Susan the other`

        I didn’t realize the Grange was so ideological. I thought it was more like trade pact. They were an enlightened cooperative.

  5. hemeantwell

    Money-love [φιλοχρηματία, philochrêmatia] has always been extreme because wealth is addictive

    From what I’ve been able to glean regarding Roman society, wealth acquisition was strongly driven by the demands of a political order that was relatively unstructured and unstable, depending on imperial whims, favoritism, influence purchasing. In the eyes of a pleb it might look like elites were just whooping it up — and that was certainly true — but their fun had a systemic driver to it. To be sure you’re in favor, or that your coalition is holding up, you need sesterces.

    That’s what the Romans told their provinces. Everything they did was always to preserve “good order,” meaning open opportunities for their own wealth grabbing. They never said they were out to destroy and loot other societies.

    This is largely true, but I was gobsmacked to find Caesar, in his Commentary on the Gallic Wars, serving up an extended quote of a Gallic “state” leader exhorting his followers to fight Caesar in order to escape slavery. Caesar even allows the guy to distinguish between earlier conflicts, in which another state would invade, plunder, and then leave, from conflicts with the Romans, in which the state would be occupied forever and its people enslaved. Brunt cites Caesar as boasting the wars gained 1,000,000 slaves, a figure he regards as inflated, but he also notes that other writers of the time didn’t strongly dispute it.

    1. hemeantwell

      I’ve got it on Kindle, so why not let Caesar report Critognatus’ speech:

      The Cimbri, after laying Gaul waste, and inflicting great calamities, at length departed from our country, and sought other lands; they left us our rights, laws, lands, and liberty. But what other motive or wish have the Romans, than, induced by envy, to settle in the lands and states of those whom they have learned by fame to be noble and powerful in war, and impose on them perpetual slavery? For they never have carried on wars on any other terms.

  6. Carolinian

    There’s little logic for neoliberalism beyond a faith that short-term greed is the best way to optimize long-term growth.

    Or as George H.W. Bush said: Voodoo economics. But he didn’t stick to that position very long once Reagan took him on board.

    Thanks again to NC for the great series. However this non economics person will very humbly repeat my objection that while money equals power, power doesn’t necessarily have to be about money. I recently read a book about the history of the Plains indians and for them power was represented by horses–a kind of wealth to be sure–but also by bravery and skill at violence. So perhaps what we are really talking about is not economic systems and theories but this will to dominate that causes power to corrupt and creates the mindset that “too much is never enough.” In other words the problem is really all about psychology with economics as a subbranch. A future era of better psychologists may produce better economists. Or here’s hoping.

    1. Roger Boyd

      Horses are not native to the American continent, so this would be after the arrival of the Europeans and the mass die offs due to smallpox etc. Early explorers found large scale agricultural communities, but these were wiped out by disease and European attacks. The result was a warrior culture required to fight the invaders, hence the reverence for horses.

      1. Carolinian

        In the case of the Comanches the warrior culture were the invaders of the southern Plains and panhandle area of Texas. They wiped out other native American tribes.

        The excellent book I’m talking about is called Empire of the Summer Moon. And I’m not sure reverence is necessarily the word for their attitude toward horses since they would freely eat them if required. But they were considered the greatest of the Indian horsemen. Larry McMurtry talks about all this in his fiction books.

      2. JBird4049

        Horses are not native to the American continent

        Horses evolved in North America; they died out at about the same time most of the Americas megafauna did between ten and twelve thousand years ago.


        Pretty much everything Africa has now the Americas had then with a few extra like gigantic bear sized sloths. The debate over why is contentious. Humans exterminating everything does not explain why the same types are still around outside of those continents or the large animals still here. The last Ice Age was ending but again Africa and Asia. It was a lot of species especially for arrows and spears. Was it a disease? Meteor? Space Elves?

        I think the consensus is that it was more than one. Say climate change and humans. North America is more vulnerable to climate disruption than Africa and throw in hungry humans also suffering with their unfamiliar hunting techniques and good bye.

  7. rod

    “They’re only up in arms if they believe that there is an alternative.”

    “Evil essentially is predatory and destructive behavior. Socrates said that it ultimately is ignorance, because nobody would set out intentionally to do it. But in that case, evil would be an educational system that imposes ignorance and tunnel vision, distracting attention from understanding how economic society actually works in destructive ways.”

    “If we don’t go for it then somebody will and we’ll lose out” was the frustrating bottom line for an iron worker I was speaking with about the proposal to drop a new NFL tax payer subsidized practice facility into our already development gridlocked area. Every point I made to him circled right back to this justification.

    He just couldn’t conceive of an alternative and I wasn’t prepared enough to offer him others.

    Because nowadays we must consider the economic tradeoff on everything–just like we are told.

    which brings up that sweet definition of evil by MH–within the context of JS’s question about enabling Climate Change

    1. Watt4Bob

      As soon as that guy becomes more concerned about feeding his kids, and less concerned about football stadiums, it’s possible he’ll be much more focused, more understanding, and willing to listen to your opinion.

  8. georgieboy

    MH: It’s becoming a second Gilded Age. An abrupt change of direction in economic trends occurred after Ronald Reagan and Margaret Thatcher were elected in 1979/80. The result has been to invert what the 19th-century economists understood to be a free market — that is, a market free from a privileged hereditary class living on unearned income in the form of land rent, monopoly rent and financial extraction.

    JS: I was in my first few years of college when Thatcher came in in 1979, and when Reagan was elected in 1980. I asked my economics professors what was going on, but I could not find a single professor to coherently describe the U-turn that was occurring. It certainly wasn’t in Paul Samuelson’s textbook that we were given.

    This interview with Mr. Hudson has been a fascinating education. Thank you, Yves.

    That said, there is a tendency, at least in the tone of the interview, to ascribe a kind of insuperable power to top-down manipulation and control by the oligarchies of which Hudson speaks. My sense is that, instead, sometimes the mass of people want to be so free of one perceived set of problems that they support stepping into another — as in the early 1980s.

    MMT and “intelligent jubilee” (i.e., the opposite of what Geithner/Obama/Benanke did) supporters — of which I am one — might do well to consider what preceded the so-called Reagan revolution:

    Rising inflation and unemployment in the 1970s were perceived to becoming inescapable in the US political landscape of the time.

    The bad news about life in the Soviet Union was leaking out faster and faster in the late 1970s, once the American media lionized the cause of refuseniks like Natan Sharansky during the Carter years. (Remember Peter Jennings covering the trials and persecution of sweet, innocent, Natan Sharansky — the wolf who dropped his sheep’s clothing once he arrived in Israel?) Sometimes bad guys provoke important news about other, more powerful, bad guys.

    Thousands of American workers came home from Moscow after Carter cancelled US participation in the 1980 Olympics — with shocking tales of just how crappy the Russians had it.

    Reagan beat Carter and Anderson 51-41-7 in 1980, and Reagan then whooped Mondale 59-41 in the 1984 popular vote. Job growth had picked up, the American media was generally happy to lead cheers for the US while pummeling the nasty Soviets. It felt like the Bear that is misfortune had been satisfied with catching the Russkis.

    The old joke points out that we humans instinctively know we can’t outrun the Bear; the natural tendency is to therefore sometimes focus on outrunning our neighbors, so the Bear is satisfied to get them. Our ancestors were selected for that feature.

    As ‘hemeantwell’ noted, the fact that Caesar brought home lots of slaves casts a broader light (than Mr. Hudson’s interview) on for whom Caesar’s revolution was intended. How might MMT advocates wrestle with the push and pull of similar ‘social identity’ competitions when the Bear is seen to be coming?

    1. JEHR

      Is it possible that the bear is just as frightened of the eagle as the eagle is of the bear?

      1. deplorado

        The bear was frightened, I can tell you, I lived behind the Iron Curtain.
        But there was a lot of talk about peace. A lot. Like – everywhere. And it was not fake. People looked on Americans with genuine interest and a bit of trepidation, and of course (what proved unhealthful) desire to emulate. And they wanted to be friends and learn from them. Look at C-SPAN videos of 1989, 1990 – for example one of Soviet banking officials at a seminar with US bankers – and you will see genuine, practically childlike belief that what the US experts and and banking practitioners were saying was gospel.

        Btw I don’t know whether the same talk of peace was present in the US at the time. What continually strikes me is how talk of peace is utterly absent in MSM now, has been for the last 20 years that I have observed.

        Lots of common sense things are absent from MSM.

  9. JEHR

    It’s so beneficial to have Mr. Hudson and others who have studied ancient history from the point of view of how money and indebtedness works to share all this learning with us. How little is the difference between ancient oligarchs and modern ones! We think our civilization is so wonderful and enlightened when it is just another part of the old system of inequality playing itself out over and over again. I too wonder how long the wheel of fortune will take to complete this particular circuit, but with climate change skulking so near, it may not be long.

  10. Roger Boyd

    Neoliberalism actually started with Carter in the late 1970’s, and it was Volcker’s monetary assault that helped lose him the election (and of course the Iran hostage crisis). The same in the UK, with the Labour government bringing in the IMF and fighting with the unions in the later 1970s to cause the “winter of discontent” that brought in Thatcher (and without the Falklands War Thatcher would have been out after one term). Labour could have called an earlier election and probably won, but decided not to in a huge tactical mistake.

    The outcomes were not so predetermined and could have been Carter-Callaghan rather than the Reagan-Thatcher duo that did so much to force the world along the neoliberal path, and bring us “New” Neoliberal Labour (that Thatcher actually stated was her greatest achievement)

    1. eg

      My only quibble would be to point out that you are referring to the neoliberal implementation — it’s tenets are rather older, dating back at least to the 1938 Walter Lippmann Colloquium.

      1. icancho

        And well before that, as demonstrated clearly in Quinn Slobodian’s recent “Globalists”.
        This stimulating book considers the historical development of the nexus of ideas and policy initiatives that fall under the umbrella term ‘neoliberalism’— the political-economic structures and processes that have given us expanding ‘globalizing financialization’, legal trade agreements that constrain national sovereignty, massively increasing asset and income disparities, and the consequent precariousness and stress— even misery— afflicting most of us.

        Though neoliberalism’s origin is commonly associated with the Mont Pèlerin Society, founded in 1947, and prominently with the figures of Ludwig von Mises, Friedrich von Hayek, and more recently with Milton Friedman and the “Chicago Boys”, Slobodian demonstrates that neoliberalism’s roots reach much deeper— into the collapse of the Austro-Hungarian Empire— indeed of all traditional off-shore empires— following WW1, and in subsequent decolonization and the rise of new nations with aspirations of their own. In large part, neoliberal order, with its international trade deals, was a response to the “problem” posed by the demands of these diverse new nations to join the ‘developed’ world on an equal footing with their erstwhile colonial overlords, and to take sovereign control of their own resources.

        So, contrary to conventional understanding, neoliberalism did not spring fully-formed, post-WW2, from the foreheads of Walter Lippman, von Mises, or Hayek; indeed, the cast of characters playing their parts in this developing drama is a rather large one, and their origins, interconnections, and contributions are many and diverse, and often surprising.

  11. Scott1

    Mankind survived the collapse of Rome. Barbarism was ascendent in the West. Civilization rose again. This time the collapse will result in barbarism at the best.
    The world problem is Climate Change. Climate change is a product of overpopulation & portable energy as that which creates Climate change.
    The US Treasury creates currency when Congress Votes a Bill that requires it. What is required is an MMT principled Fund that pays for renewables, energy capture, nuclear power and those new machines that suck CO2 out of the air & turn it into clean hydrocarbon fuels. The machine has been invented by Carbon Engineering. Takes up 30 acres. Hundreds of thousands are needed to stabilize CO2 levels in the atmosphere.
    Methane was never factored in very well into the 1970s understanding of what was then called Ecology. Now we know that the Methane being released by fracking and permafrost melting is already happening and will keep happening and accelerating so that there will be a Methane Bubble Melt. 10 to 15 years and all the Methane will melt.
    I see what was expected to happen to earth with a population of 9 billion as happening at 7.5 billon or exactly where we are now.
    The expectation was that 9 billion was sustainable. 13 billion was said to be sustainable for 3 weeks.
    Coral reefs are dying. Insects are dying. Diatoms are the bottom of the food chain in the oceans. They are dependent on coral reefs. Birds depend on insects and their populations are dwindling.
    I consider MMT, the work of conceptual art that allows currency to be generated by bills passed by governments, or a World government, as a Last Chance Concept.
    “The civilized work for what they want, while the barbarians steal what they want.” In my civilization I am paid to do work. Concepts are made real as money is given out for what is not yet real. The young want to have families and the old want the world they helped build and make safe survive. Such compulsions are innate and often ethical. It is simply unethical to leave the world worse than you found it.
    Idea to idea to real & Ideal is ideal. The American philosophy is ethical eclectic pragmatism.
    Climate Change is not just to be fought because it will get hotter but because the food chain will collapse.
    Other than from the MMT Funding for what it will take to possibly protect the food chain, what have we?

  12. Susan the other`

    I think evil takes on a life of its own. Over the course of civilization it gets standardized. But what I see happening right now is a bunch of apoplectic, frantic “oligarchs” with egg on their face begging us all to help them change. And none of us feel much warmth toward them. Somehow in the late 70s we the people, the laborers, small farmers, and mom & pops and small business got blamed for everything that went wrong. And austerity was force-fed to us. What went wrong was actually military hubris. Now there’s an example of non-productive interest inflating away the empire. If the money had been used rationally we’d have created an equal, balanced society and encouraged others by our example. Humans have always chosen the things that work best. Somewhere, mid-century we freaked out and decided that we needed to control oil and growth but we were literally overtaken by our own successes – big agriculture, population growth and ponzi economics. The thing we have to do now is bring this mess back down to Earth. Requiring a fundamental change. To change everything and turn it around. No more little tweaks of denial. Instead of the once successful “industrial” capitalism, what we must have now is environmental capitalism. Value and share the gains of preserving the planet. It sounds like a full reversion to a time before money, which is the symbol of material exploitation. And it just so happens we still have the instinct for cooperation. The gains can be distributed to everyone. We just must find ways that preserve rather than destroy the planet. Same idea, different god. There are plenty of jobs to go around. We have good science and technology. We’re not total idiots, yet. It only takes a minority of people to see the light and everything will change. I do think we are already there, except for the shouting, as they say.

  13. Summer

    But those holding and near the levers of power are really sick and deluded individuals.

    And we have to understand this about the nukes (post 1945): They exist in case the USA loses a big war or doesn’t get its way.

    Yes, that is the level of depravity that has developed.

  14. flora

    Thanks so much for this series of posts on the ancient world and its comparison to today.

    I once read Seneca’s “Letters from a Stoic” and was surprised to see/realize the considerable apparent overlap between stoicism – which was itself the continuation of an earlier tradition – and the early Christian church.

    There is much in this series of posts to ponder.

  15. The Rev Kev

    A great article this with lots to chew on. What he says rings true from what I have read. After the second Punic war, Roman veterans found that the wealthy had seized their small farm holdings while they were gone and incorporated them into their own estates. These were to become the great Latifundium. Meanwhile, the dispossessed Romans veterans made their way to Rome and joined the plebs there. Over time, as the Roman army could not recruit these same type of landed men as the smaller holdings were being eliminated, the Romans had to resort to a professional standing body which no longer owed their allegiance to Rome but to whatever Roman general paid them – with disastrous results. Caesar was not the first here and the name Sulla also comes to mind. By the end of the empire the Romans were resorting to paying barbarian tribes to fight for them which worked, until it didn’t. So in short, the greed of the wealthy in Rome destroyed the very thing that had made Rome so successful and resilient.

    1. animalogic

      I don’t wish to mount a defence of the Republican Elite; the system did pressure towards money-love. However, there were counter balancing features.
      Money was vital, but so was virtue. Honour, courage, dignity were required.
      A Roman aristocrat had to perform the minimum set required military campaigns. Only intellectual freaks such as Cicero could climb the hierarchy without making somekind of significant military achievement. Caesar won the Laural crown (?) through genuine acts of bravery. Roman aristocrats risked their lives & died in war.
      And their troops knew it.
      Other factors also tended to mitigate against the oligarchic instinct. For instance, Senators were legally barred from trade or money lending (& yes, they often got around such bans. ) Sumptuary laws were tried (& failed).
      It should also be remembered that for all the economic polarisation, Roman citizenship was highly valued. The Roman’s won the 2nd Punic , essentially because Hannibal fundamentally miscalculated — Roman allies, Latins etc did not go over to Hannibal in hordes. They stayed loyal.

      1. Mel

        In Systems of Survival, Jane Jacobs meditated on different power structures. Some required virtus, steadfastness, etc., others, notably money power didn’t.
        Somebody, somewhere, wrote about alchemy’s response to money, in seeking the Philosopher’s Stone. That would be a chemical that could be transformed into anything in a chemical reaction, rather as money could in the market. I thought it was in Graeber’s Debt…, but it’s not showing up there.

        1. Amfortas the hippie

          Philosopher’s Stone= the Replicator Tech in Star Trek.
          costless production of basic needs.
          add in warp drive(=unlimited expansion, limited time-cost), and the inherent human traits that cause all the problems(ie: greed, etc) are overcome without having to fix/eliminate them…just give them somewhere to go.(this is why i’m all for asteroid mining)

          1. Mel

            Boz Scaggs explained how money’s unlimited shape-shifting power makes it infinitely attractive:

            If you can be
            Anyone you want to be,
            Why’d you want to be
            Someone else?

  16. Jeremy Grimm

    Several things trouble me about this post.
    People believe there is no alternative — I disagree with that view. I’d restate the assertion as great efforts are and have been made to convince people there is no alternative. You don’t need to be my age to learn a little about tax rates in the Eisenhower years. The economy did all right then. My impression talking with young people isn’t that they believe there is no alternative, instead they have no idea how to make things change for the better, and neither do us old farts. Our democracy is broken. It no longer cares for the public good.
    Money addiction — I have trouble reconciling that concept with the short-term biases of the wealthy and their seeming lack of interest in economic growth. They aren’t happy with a bigger slice of pie from a bigger pie. They want grow their slice from the pie relative to everyone else — even if the pie grows smaller. Money as power, and an insatiable lust for power is more consistent with the actions of the oligarchs.
    I think the concept of growth which shows up in several parts of the post needs some adjustment. Growth is tied to the consumption of fossil fuels as is increased CO2 in the atmosphere. Fossil fuels are nearing points of declining and unstable production. Unless growth can be decoupled from fossil fuels all the imperial control of what fossil fuels remain will do little but extend our time at the expense of others as we all race toward a point of collapse.
    Some of the discussion of Neoliberalism confuses me. — Neoliberalism is not the same as laissez-faire or neoclassical economics.
    “That leaves the question facing us today: Is the American oligarchy and state as rapacious as that of Rome?” — I’m not sure this post really answered that opening question. I believe the American oligarchy, while continuing in the long tradition of oligarchic depredation, is much more rapacious than that of Rome and much more dangerous as the world rushes toward collapse. After the fossil fuels are gone there are no more. The Climate is already lurching into chaos and may have already crossed a point of no near-term return to the relatively mild and stable climate immediately preceding the Anthropocene. Thermonuclear weapons scattered in many hands adds existential danger to the threats posed by the American oligarchy and Power Elite structures and their insane lust for power.

    Other than these quibbles, this is a remarkable series of posts presenting what to me is a very new view of the ancient world. It offers a much better understanding of the ancient world and some of its key literature and early writings. Time to order some books [I still haven’t ordered a copy of “Forgive Them Their Debts” and now have to add a copy of this most recent book.]

  17. animalogic

    “The Republicans and industrialists saw that America’s prestige colleges had been founded long before the Civil War, basically as religious colleges to train the clergy. They taught British free trade theory, serving the New England commercial and banking interests and Southern plantation owners. But free trade kept the United States dependent on England.”
    This view is some what different to my understanding. Regardless of what the colleges taught there was no unity of interest between New England & Southern planters. Indeed, their interests were so diametrically opposed on “free trade” that it was either “a” major or “the” major cause of the US War of Succession (ie civil war).
    It was Acts or Bills, such as the Morrill Tariff Bill of 1861 which drove succession. Southern (not Northern) interests were inherently free trade. Tariffs forced the South to pay more for better English goods or settle for lesser quality products from the North.

  18. McWatt

    Had lunch with one of the “Chicago Boys” that Hudson describes as the source of economics current woes.

    After that lunch, which was a discussion of many of Michael’s themes, I completely agree with his assessment of what they have wrought. While the Chicago Boys may profess to have Mill and Ricardo as hero’s, as Hudson does, Mills and Ricardo’s theories are obliterated by the way the Chicago Boys have completely fallen in love with Ayn Rand’s philosophy. Everyone is on their own. The rich are rich because they are naturally better at stuff than those who are not. They hate government regulation, they view government as the creator of problems, they have no compunction for watching the population sink into debt and penury. After all “it’s their own look out”.

    Funny, when you read things abstractly on a wonderful site like Naked Capitalism, but then witness this terrible philosophy first hand, suddenly things are not so abstract. Michael’s right.

  19. Joe Well

    Don’t abolish the academy or even create new universities. Abolish economics. We ready have sociology, history, and political science, which do what Hudson wants economics to do. And we have finance and accounting, which do what the average person thinks economics does.

    There’s a historical precedent: geography once had its own university departments and now it’s just part of the remit of the other social sciences.

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