Yves here. Michael Hudson said he both enjoyed and very much appreciated the robust discussion among members of the commentariat last weekend about what to call China’s economic model. He’s keen to continue the discussion. To advance that end, Michael has graciously given us a lecture being subtitled in Chinese for release in a few weeks. It summarizes a series of talks and will also be included in his my book to be published later this summer, “The Destiny of Civilization: Industrial Capitalism, Finance Capitalism or Socialism.” As you can see, Michael focuses on finacialization as a central point of difference between the two systems.
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 “and forgive them their debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year
Nearly half a millennium ago Niccolo Machiavelli’s The Princedescribed three options for how a conquering power might treat states that it defeated in war but that “have been accustomed to live under their own laws and in freedom: … the first is to ruin them, the next is to reside there in person, the third is to permit them to live under their own laws, drawing a tribute, and establishing within it an oligarchy which will keep it friendly to you.”[1]
Machiavelli preferred the first option, citing Rome’s destruction of Carthage. That is what the United States did to Iraq and Libya after 2001. But in today’s New Cold War the mode of destruction is largely economic, via trade and financial sanctions such as the United States has imposed on China, Russia, Iran, Venezuela and other designated adversaries. The idea is to deny them key inputs, above all in essential technology and information processing, raw materials, and access to bank and financial connections, such as U.S. threats to expel Russia from the SWIFT bank-clearing system.
The second option is to occupy rivals. This is done only partially by the troops in America’s 800 military bases abroad. But the usual, more efficient occupation is by U.S. corporate takeovers of their basic infrastructure, owning their most lucrative assets and remitting their revenue back to the imperial core.
President Trump said that he wanted to seize Iraq’s and Syria’s oil as reparations for the cost of destroying their society. His successor, Joe Biden, sought in 2021 to appoint Hillary Clinton’s loyalist Neera Tanden to head the government’s Office of Management and Budget (OMB). She had urged that America should make Libya turn over its vast oil reserves as reparations for the cost of destroying its society. “We have a giant deficit. They have a lot of oil. Most Americans would choose not to engage in the world because of that deficit. If we want to continue to engage in the world, gestures like having oil rich countries partially pay us back doesn’t seem crazy to me.”[2]
U.S. strategists have preferred Machiavelli’s third option: To leave the defeated adversary nominally independent but to rule via client oligarchies. President Jimmy Carter’s national-security advisor Zbigniew Brzezinski referred to them as “vassals,” in the classical medieval meaning of demanding loyalty to their American patrons, with a common interest in seeing the subject economy privatized, financialized, taxed and passed on to the United States for its patronage and support, based on a mutuality of interest against local democratic assertion of nationalisticself-reliance and keeping the economic surplus at home to promote domestic prosperity instead of being sent abroad.
That policy of privatization by a client oligarchy with its own source of wealth based on the U.S. orbit is what American neoliberal diplomacy accomplished in the former Soviet economies after 1991 to secure its Cold War victory over Soviet Communism. The way in which client oligarchies were created was a grabitization that utterly disrupted the economic interconnections integrating the economies. “To put it in a terminology that harkens back to the more brutal age of ancient empires,” Brzezinski explained, “the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected and to keep the barbarians from coming together.”[3]
After reducing Germany and Japan to vassalage after defeating them in World War II, U.S. diplomacy quickly reduced the Britain and its imperial sterling area to vassalage by 1946, followed in due course by the rest of Western Europe and its former colonies. The next step was to isolate Russia and China, while keeping “the barbarians from coming together.” If they were to join up,warned Mr. Brzezinski, “the United States may have to determine how to cope with regional coalitions that seek to push America out of Eurasia, thereby threatening America’s status as a global power.”[4]
By 2016, Brzezinski saw Pax Americana unravelling from its failure to achieve these aims. He acknowledged that the United States “is no longer the globally imperial power.”[5]That is what has motivated its increasing antagonism toward China and Russia, along with Iran and Venezuela.
The problem was not Russia, whose Communist nomenklaturalet their country be ruled by a Western-oriented kleptocracy, but China. The U.S.-China confrontation is not simply a national rivalry, but a conflict of economic and social systems. The reason why today’s world is being plunged into an economic and near-military Cold War 2.0 is to be found in the prospect of socialist control of what Western economies since classical antiquity have treated as privately owned rent-yielding assets: money and banking (along with the rules governing debt and foreclosure), land and natural resources, and infrastructure monopolies.
This contrast in whether money and credit, land and natural monopolies will be privatized and duly concentrated in the hands of a rentieroligarchy or used to promote general prosperity and growth has basically become one of finance capitalism and socialism. Yet in its broadest terms this conflict existed already 2500 years ago. in the contrast between Near Eastern kingship and the Greek and Roman oligarchies. These oligarchies, ostensibly democratic in superficial political form and sanctimonious ideology, fought against the concept of kingship. The source of that opposition was that royal power – or that of domestic “tyrants” – might sponsor what Greek and Roman democratic reformers were advocating: cancellation of debts to save populations from being reduced to debt bondage and dependency (and ultimately to serfdom), and redistribution of lands to prevent its ownership from becoming polarized and concentrated in the hands of creditors and-landlords.
From today’s U.S. vantage point, that polarization is the basic dynamic of today’s U.S.-sponsored neoliberalism. China and Russia are existential threats to the global expansion of financialized rentierwealth. Today’s Cold War 2.0 aims to deter China and potentially other counties from socializing their financial systems, land and natural resources, and keeping infrastructure utilities public to prevent their being monopolized in private hands to siphon off economic rents at the expense of productive investment in economic growth.
The United States hoped that China might be as gullible as the Soviet Union and adopt neoliberal policy permitting its wealth to be privatized and turned into rent-extracting privileges, to be sold off to Americans. “What the free world expected when it welcomed China into the free trade body [the World Trade Organization] in 2001,” explained Clyde V. Prestowitz Jr, trade advisor in the Reagan administration, was that, “from the time of Deng Xiaoping’s adoption of some market methods in 1979 and especially after the collapse of the Soviet Union in 1992 … increased trade with and investment in China would inevitably lead to the marketization of its economy, the demise of its state-owned enterprises.”[6]
But instead of adopting market-based neoliberalism, Mr. Prestowitz complained, China’sgovernment supported industrial investment and kept money and debt control in its own hands. This government control was “at odds with the liberal, rules-based global system” along the neoliberal lines that had been imposed on the former Soviet economies after 1991. “More fundamentally,” Prestowitz summed up:
China’s economy is incompatible with the main premises of the global economic system embodied today in the World Trade Organization, the International Monetary Fund, the World Bank, and a long list of other free trade agreements. These pacts assume economies that are primarily market based with the role of the state circumscribed and micro-economic decisions largely left to private interests operating under a rule of law. This system never anticipated an economy like China’s in which state-owned enterprises account for one-third of production; the fusion of the civilian economy with the strategic-military economy is a government necessity; five year economic plans guide investment to targeted sectors; an eternally dominant political party names the CEOs of a third or more of major corporations and has established party cells in every significant company; the value of the currency is managed, corporate and personal data are minutely collected by the government to be used for economic and political control; and international trade is subject to being weaponized at any moment for strategic ends.
This is jaw-dropping hypocrisy – as if the U.S. civilian economy is not fused with its own military-industrial complex, and does not manage its currency or weaponize its international trade as a means of achieving strategic ends. It is a case of the pot calling the kettle black, a fantasy depicting American industry as being independent of government. In fact, Prestowitz urged that “Biden should invoke the Defense Production Act to direct increased U.S.-based production of critical goods such as medicines, semiconductors, and solar panels.”
While U.S. trade strategists juxtapose American “democracy” and the Free World to Chinese autocracy, the major conflict between the United States and China has been the role of government support for industry. American industry grew strong in the 19thcentury by government support, just as China is now providing. That was the doctrine of industrial capitalism, after all. But as the U.S. economy has become financialized, it has de-industrialized. China has shown itself to be aware of the risks in financialization, and has taken measures to attempt to contain it. That has helped it achieve what used to be the U.S. ideal of providing low-priced basic infrastructure services.
Here is the U.S. policy dilemma: Its government is supporting industrial rivalry with China, but also supports financialization and privatization of the domestic economy – the very policy that it has used to control “vassal” countries and extract their economic surplus by rent-seeking.
Why U.S. finance capitalism treats China’s socialist economy as an existential treat
Financialized industrial capital wants a strong state to serve itself, but not to serve labor, consumers, the environment or long-term social progress at the cost of eroding profits and rents.
U.S. attempts to globalize this neoliberal policy are driving China to resist Western financialization. Its success provides other countries with an object lesson of why to avoid financialization and rent-seeking that adds to the economy’s overhead and hence its cost of living and doing business.
China also is providing an object lesson in how to protect its economy and that of its allies from foreign sanctions and related destabilization. Its most basic response has been to prevent an independent domestic or foreign-backed oligarchy from emerging. That has been one first and foremost by maintaining government control of finance and credit, property and land tenure policy in government hands with a long-term plan in mind.
Looking back over the course of history, this retention is how Bronze Age Near Eastern rulers prevented an oligarchy from emerging to threaten Near Eastern palatial economies. It is a tradition that persisted down through Byzantine times, taxing large aggregations of wealth to prevent a rivalry with the palace and its protection of a broad prosperity and distribution of self-support land.
China also is protecting its economy from U.S.-backed trade and financial sanctions and economic disruption by aiming at self-sufficiency in essentials. That involves technological independence and ability to provide enough food and energy resources to support an economy that can function in isolation from the unipolar U.S. bloc. It also involves decoupling from the U.S. dollar and from banking systems linked to it, and hence from U.S. ability to impose financial sanctions.Associated with this aim is creation of a domestic computerized alternative to the SWIFT bank-clearing system.
The dollar still accounts for 80 percent of all global transactions, but less than half of today’s Sino-Russian trade, and the proportion is declining, especially as Russian firms avoid dollarized payments or accounts from being seized by U.S. sanctions.
These protective moves limit the U.S. threat to Machiavelli’s first option: destroy the world if it does not submit to U.S.-sponsored financialized rent extraction. But as Vladimir Putin has framed matters: “Who would want to live in a world without Russia?”
[1]Niccolo Machiavelli, The Prince(1532), Chapter 5:“Concerning the way to govern cities or principalities which lived under their own laws before they were annexed.”
[2]Neera Tanden, “Should Libya pay us back?” memo to Faiz Shakir, Peter Juul, Benjamin Armbruster and NSIP Core, October 21, 2011. Mr. Shakir, to his credit, wrote back: “If we think we can make money off an incursion, we’ll do it? That’s a serious policy/messaging/moral problem for our foreign policy I think.” As president of the Center for American Progress, Tanden backed a 2010 proposal to cut Social Security benefits, reflecting the long-term Obama-Clinton objective of fiscal austerity at home as well as abroad.
[3]Zbigniew Brzezinski, The Grand Chessboard: American Primacy and its Geostrategic Imperatives(New York: 1997), p. 40. See the discussion by Pepe Escobar, “For Leviathan, It’s So Cold in Alaska,” Unz.com, March 18, 2021.
[5]Brzezinski, “Towards a Global Realignment,” The American Interest(April 17, 2016) For a discussion see Mike Whitney, “The Broken Checkboard: Brzezinski Gives Up on Empire,” Counterpunch, August 25, 2016.
[6]Clyde Prestowitz, “Blow Up the Global Trading System,Washington Monthly, March 24, 2021..
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“Financialized industrial capital wants a strong state to serve itself, but not to serve labor, consumers, the environment or long-term social progress at the cost of eroding profits and rents.”
Tis not thy name that is my enemy;
Thou art thyself, a rentieroligarchy
What’s Oligarchy? It is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What’s in a name? That which we call a oligarchy
By any other name would smell as rancid.
IS there a path other than the three suggested by Niccolo Machiavelli ?
And as far as China policy goes had the policy makers not thought that China could be bound by tiny threads of commerce just as Gulliver is bound by the Lilliputians ? And of course those policy makers arranged US tax policy to encourage the transfer for US industry to China.
The fault lies with the politicians and especially Dr. Kissinger who ramrodded Nixon’s China policy..
Successful revolt would be the only alternative
We were all being told that the problem for US industry was that it had to move to places where labor was less expensive to employ – had to, no alternative. Whereas it seems the policy was far more devious (or perhaps both were true.) This is a totally clarifying paragraph:
“The United States hoped that China might be as gullible as the Soviet Union and adopt neoliberal policy permitting its wealth to be privatized and turned into rent-extracting privileges, to be sold off to Americans. “What the free world expected when it welcomed China into the free trade body [the World Trade Organization] in 2001,” explained Clyde V. Prestowitz Jr, trade advisor in the Reagan administration, was that, “from the time of Deng Xiaoping’s adoption of some market methods in 1979 and especially after the collapse of the Soviet Union in 1992 … increased trade with and investment in China would inevitably lead to the marketization of its economy, the demise of its state-owned enterprises.”
Maybe the TPP’s hidden gotcha’s were a part of the same deviousity? (I just made that word up.)
Michael Hudson writes about China’s “socialist economy”. Perhaps so, but China’s foreign relations are indistinguishable from conventional imperialism. “China’s demand for commodities and its role as an investor and creditor in the global periphery are closely connected. In the past two decades, China’s outward activities have perpetuated commodity-based development models in the Global South, which are linked with negative socio-ecological effects. … risks for continued extractivism remain high.”
“China has exacerbated commodity dependence in many countries in Sub-Saharan Africa and Latin America and the Caribbean.”
Source:
Shifting the Course? The Impact of Chinese Finance on Extractivism in Latin America and Sub-Saharan Africa, by Bernhard Tröster and Karin Küblböck, Journal für Entwicklungspolitik [Journal of Development Policy], vol. XXXVI 4-2020, Vienna, Jan 2021, pp 101-102
https://www.oefse.at/publikationen/detail/publication/show/Publication/shifting-the-course/
Good that you pointed out that Blob criticism of extractivism by China amounts to objections about conventional imperialism as practiced by the usual suspects.
If we’re in Cold War 2, perhaps there is an opportunity for a Non-Aligned Movement 2 to play off the extractors against each other.
The Chinese observed and learnt from their teachers – The British.
There have been many imperialisms throughout history. On the Arab conquest of Sind (now in Pakistan) in the 8th century:
The policy of “al-Hajjâj, the Umayyad governor of Irâq, which was applied throughout Sind …: ‘Kill anyone belonging to the combatants (ahl-i harb); arrest their sons and daughters for hostages and imprison them. Whoever submits … grant them amân (protection) and settle their tribute (amwâl) as dhimmah.'”
Al-Hajjâj was a cousin of Mohammed al Qasim, the conqueror of Sind.
“if they did not submit, they were attacked and, if defeated, the combatants were liable to the death penalty and their families to imprisonment … Arab response was dependent on whether the city or region was taken by force (anwatan) or by treaty (sulh).”
“The Arabs’ first concern was to facilitate the conquest of Sind with the least number of Arab casualties, while at the same time preserving the economic infrastructure of the area. Hence, where Sindî resistance was intensive or prolonged, the Arab response was equally intensive: a massacre lasting three days occurred at Daybul; 6,000 combatants were killed at Râwar; somewhere between 6,000 and 26,000 at Brahmanâbâd … Conversely, a number of places were taken by treaty (sulh) and experienced few if any casualties, either Arab or Sindî.”
“the Arab concern with securing a financially viable Sind impelled them to exempt artisans, merchants, and agriculturalists.”
In Sind more than 60% of towns submitted. By contrast, in Egypt only 8% and in Syria 36%.
Al-Hajjâj felt that amân should issue from strength and not weakness. He wrote: “if the Sindîs sincerely request amân and desist from treachery, they will surely stop fighting. Then income will meet expenditures and this long situation will be concluded.”
Later Al-Hajjâj wrote: “It is acknowledged that all your procedures have been in accordance with religious law ,,,
Source: MacLean, Derryl N. (1989), Religion and Society in Arab Sind, Brill, ISBN 90-04-08551-3
PhD thesis at Institute of Islamic Studies, McGill University, 1984
CIA bot? WTF?
Hello Fernando is a Walter Becker song.
I don’t see Hudson arguing that China is sainted. Nevertheless, they, apparently, are following a tradition that goes back to the Bronze Age of the central state severely circumscribing the power of a wealthy elite, while the US is doing the opposite. It reminds me of the Tokugawa shogunate making all the daimyo maintain elaborate mansions in Edo and spend half their time there, so they had to spend money in capital and not become isolated back in their home provinces, where they could cook up mischief.
Only skimmed the reference, but it seems pretty nuanced. Sub-Saharan Africa may be getting a slightly more balanced (internal development vs. extraction) deal than Latin America (mostly extraction—of course, if you go to Venezuela, what you get is oil, don’t know how that skews things?). Also, it mentions policy pronouncements of stronger environmental goals in foreign investment, but certainly says there is not much action in that area yet.
With the top of my head cut off—I mean, off the top of my head—it’s saying: China needed a lot of raw materials to do industry, and needed them not to be controlled by their Western adversaries, so they invested directly; things are changing in China which MAY affect the extractive focus; how it comes out depends on China’s newer policies, but even more on the governments of their trading partners being willing/able to advocate for their people.
China as bad as the West? Wait for the next installment… ((If we have time for one?))
Somehow it is comforting to see financialization as an historic outcome, the struggle of state v corporate control of money and the possibility of walking back corporate control. How to do that without revolution? Can legislation and politics do that? Or will it be all geopolitics writ large? The comparatively speedy transition of China from 1949 and the US from 1776 might be hopeful. Chinese advantage comes from them being the best traders on the planet for 5000 years. It is evident every day in agricultural markets. Chinese and Indian tracks and responses to global warming seem to be crucial. Or maybe I’m just spending too much time on the tractor.
Tell us more, Farmboy.
What are reading, seeing that gives you insight to Chinese and Indian traders in agricultural markets and shows their response to global warming?
There is a big contradiction about to cause even bigger problems. Overpopulation. The reason China and India have a trading advantage is their large population base. Gotta feed all those guys. When policy in China turns, even slightly, toward conservation v. production they will have a social backlash – and it is going to be very difficult to keep the environment safe from corrupt overproduction. Nobody is more aware of that future than China. But as AOC reminds us, it’s not what but how. Financialization might not be a dirty word much longer. I remember back in the 70s there was a big push to shift from industrial economics to service economics. I always assumed it was the first step to protect the environment. But we didn’t help the planet that much because we shifted all our industrial production to China. Where is China planning to shift it? The one thing we have learned in the meantime is that fiat is and will be very useful. Imo that’s because controlled financialization is the best method to avoid exploitation of the environment – no profits required. Our brave new world will require a lot of planning and conservation. One day it will come to balance out. We’ll still need to produce the basics. That will be destructive enough – so instead of using financialization frivolously we must use it to maintain sufficient sustainable “economies.” We can do it only if we stop profiteering. And for China? China will have to stop reinvesting in things that aren’t really sustainable. Big challenge – a world of green jobs, all financialized, but earning no profits.
I think the only way to achieve a walkback of corporate control is through swift application of anti-trust measures while corporations are at a relatively weak moment – Many large orgs are still indebted in the court of public opinion since their 2008 bailouts, and many more have just joined them due to covid. Breaking up companies effectively would reduce their ability to influence and to collect rent.
China has just done so effectively with Ant Group, and did so in the past with Tencent and others
There is nothing socialist about China. The word ‘socialism’ is not equivalent to ‘government ownership’ or ‘government control’. Government control is widely and routinely a fixture of contemporary capitalism–with or without national variants–and has nothing to do with a system of cooperative self-rule…aka socialism. Sometime, read Karl Marx and the bit he says about the state’s withering away. As Hugo Chavez well understood, it has to be *made* to wither away–just having “good thoughts” doesn’t do the trick. As he said when asked whether Venezuela had achieved socialism, he rightly responded “Of course not–but that is what we intend.” Socialism cannot exist where the state exists, for the state is a capital formation–capital being alienated labor. When there is socialism, working people rule themselves through free, collaborative association. That is socialism–no party, no state, no ruler to give orders. That’s not China.
That’s not really accurate. Communism is the point at which the state withers away, but a socialist country is the transition between those two poles, thus you have a state that uses its power to disassemble the forces of capital and the structures that hold it up; the courts, welfare institutions, bureaucracy become irrelevant as class structures fall apart. Whether you believe the CCP would do this is yet another question–Dengism suggests that socialism with Chinese characteristics would keep market socialism for another century at least–but the existence of a state is not ipso facto proof that it isn’t socialist.
The entire project of Marx’s analysis was to lay bare the mechanism by which the proletariat of his time was exploited by the systemic depredations of capital. Capital is nothing other than alienated labor–the value of the workers’ efforts that is stolen from them as “profit” by another actor: a class, a party, a state. Marx’s expression in Capital was “personifications of capital”–it need not be a class. Istvan Meszaros, in Beyond Capital, elucidated this point. In the ongoing discussion/argument about “what is China,” we can be quite sure that it is not a classless society, that capital is firmly entrenched in the center of matters, and the multimillionaire “comrades,” red princelings, and sundry other parasites gathered at the Shanghai Stock Exchange aren’t there to sing the “Red Flag.” The state is a crystallization–a “personification”–of capital as surely as a class, Supreme Leader, or any other actor extracting value from workers’ efforts and sequestering it in the form of projects and accounts of its choosing. Marx wrote next to nothing about “communism” for the simple reason that his focus was rightly on explaining the operations of capital and the necessity for the working class to achieve self-rule. Where there is a state, there is no socialism…and that should be most obvious in an authoritarian panopticon such as China’s.
Some things have happened since Marx. “The state is a state of society: just as there is a liquid, a gas, and a solid state of matter, the state is a state of society. Thinking about the state in this way helps us to avoid instrumentalist, anti-statist, and certain naïve Marxist readings of the state. This goes hand-in-hand with Marx’s understanding of the state as an illusory community: it is a community, but it is illusory insofar as it is made up of monopolies — no matter how much that idea may seem like a paradox.
Anarchists and some Marxists will say that we shouldn’t take power, because power is already what a society possesses in common. But what do, say, the Argentine people really have in common? Everything they have in common is already in the state: a language, institutions, history, natural wealth, taxes, a health care system, rights, and so on. All of that is in the state, without being something that came from the state.
Socialism is not nationalization. Socialism is not the democratization of access to goods but the democratization of control, ownership, use, and management of them.
Now, the state centralizes all that is common, it appropriates it. The state is just that: the faculty for monopolizing and centralizing what comes from society. One cannot imagine the state beyond society because, as I said before, the state is a way of society’s being.
The strength as well as weakness of a state, materially speaking, is derived from society itself. In Latin America, resources were nationalized when society reached the conclusion that this is what was needed, because they belonged to Bolivians, Ecuadorians, Venezuelans, and so on. Before Evo, Correa, or Chávez, the people were already beginning to feel this way.”
I think the best way to think about China is that it is neither capitalist (at least as understood in the West) or socialist, but a hybrid society where the existing power structures are very adept at picking the more efficient tools they can identify from history to achieve their ends and solidify power. In many respects, China is a red in tooth and claw free market capitalist society – social protections are woefully weak (its health system is, if anything, worse than the US’s) and there is often an extreme dog eat dog attitude at all levels. But it is also highly central State oriented at a macro level, and there are weak property rights (with the contradiction that much of the wealth of ordinary Chinese is bound up in home ownership). There is also a strong commitment to maintaining a high level of employment, in addition to strong commitments to regional equality, paralleled to lip service paid to economic equality.
In short, you can pretty much pick any policy sector you want in China to support almost any label you want to stick onto China. This isn’t unique to China, but it does take it to quite an extreme.
If the social protection (pension, healthcare, sickpay etc.) is weak or absent because the redistributive system is very weak, can you even talk about socialism then?
Socialism does include:
1) the dual economy: state-owned and privately owned companies. China – check.
2) the state has the ultimate power, not the private companies. China – check or ?
3) the state use the revenues from the state-owned and private companies to redistribute wealth according to some more or less universal (if not leaning towards the universal, then it would be an oligarchy) system. China – ?
4) redistribution of wealth to provide a social safety net. China – ?
Branko Milanovic describes China as the exemplar of what he terms “Political Capitalism” in contrast to “Liberal Democratic Capitalism” as exemplified by the US in his “Capitalism Alone.”
Interestingly, he claims that both systems face the same challenge — to prevent the emergence of a self-sustaining hereditary elite, which is to say, an oligarchy.
Friedrich Hayek and his conservative epigons blame government meddling in the economy on Marxism, much as Michael Hudson does.
In his Law and Public Opinion (1905), A.V. Dicey presents and illustrates five factors that in his opinion led to the spread of socialist/collectivist ideas in Britain starting about 1865. At no point does he mention socialist or German influence or any foreign influence at all, thus flatly contradicting Hayek.
… Dicey’s identification of the prime movers of these changes [i.e. state intervention in the economy]: “This legislation was favoured and promoted by Liberals, … [who] … supplied arguments for State intervention in matters of business with which in England the State used to have little or no concern…” The “Liberals” to whom Dicey referred were the champions of private enterprise, industrialization, free trade, etc. In other words, the very class with which Hayek identifies himself, the business class, was primarily responsible for the growth of collectivism. The socialistic inclinations of the working class played second fiddle to those of the business class in the trend toward state intervention in the economy. Indeed, the trend toward big government started long before the first Labour M.P.s trod the halls of Parliament.
Now whom should we believe: Hayek, an Austrian economist ignorant of English political history – although he had lived in Britain since 1931 – who presents his theory in conclusory fashion, failing to mention a single historical fact that would tend to back his version, or Dicey, a celebrated legal scholar intimately familiar with the doings of Parliament in the 19th century, who explains his grounds in considerable detail? It is obvious that Dicey is right and Hayek wrong.
In other words Hayek committed the very mistake that Dicey had cleared up four decades earlier – attributing the spread of socialist ideas exclusively or principally to the working class. Furthermore Hayek compounded the error by also claiming that socialism was lock, stock and barrel a foreign import to Britain.
Thus we see that Hayek plays a vital role in the care and feeding of capitalist ideology in the late 20th and the 21st centuries by providing two of the stock items of present-day free-market propaganda — firstly his humbug about “individual” property (since corporations are not individuals at all, but collectively owned bureaucratic molochs) and secondly in obscuring the historical truth regarding the origin of “big government”, the great bugaboo of the free-market crowd. It is more convenient to dismiss big government as the insidious work of left-wing zealots than to acknowledge that it is a response to internal needs of the capitalist system in the course of its development.
Source: From “Why Hayek Sucks. A critique of The Road to Serfdom”, by Carl Stoll
https://blueplanetnotes.blogspot.com/2018/08/why-hayek-sucks.html
Thank you for your illuminating comments!
“Friedrich Hayek and his conservative epigons blame government meddling in the economy on Marxism, much as Michael Hudson does.”
What is this parallel between Hudson and Hayek, if it’s clear to you, it certainly isn’t obvious. Please explain.
China could just “win” by subsidizing the purchase of homes thru foreign shell companies and using its indiividual citizens to purchas property and lands in other countries, like the USA, drive up the cost if housing to the point of societal destabilization.
If I led China, that would be my Cold War 2.0 plan.
That still buys into the Western idea that China’s goal is some sort of victory a la US’ Cold War 1.0. They do not want to dominate the global financial market or become a global hegemon, they just want it so that, idk, they aren’t completely surrounded by military bases and countries in East Asia can actually work multi-laterally instead of being hemmed in by IMF/Global Bank/US and Western intelligence services.
also, the Ameristocracy aren’t stupid, well at least the one’s that make the big calls.* The second their rules become inconvenient for them, they’ll ignore them. Those sacred property rights they hold in high esteem would get tossed aside and they’d just seize the homes and say F.U.
*My faith in the truth of this statement fades daily.
It already has. Check out house prices in Vancouver BC and Toronto.
My step son has 30 or so cousins in BC. Not one owns a house.
Add the San Francisco area to that list as well, though also keep in mind that those real estate “investments” are often a way for Chinese families to try and get their wealth out of China.
Australia has been selling a lot of residential property to the Chinese over the last decade, it really ramped up the last few years. It’s really noticeable at local residential real estate auctions.
The American economic model only produces oligarchy and economic inequality. Most countries aren’t going to want to reproduce that destabilizing system within their borders.
Brzezinski was always obsessed with Eurasia and geopolitics. He never understood that every historical empire was based in part upon universalist values that have widespread appeal. The American political economy is devoid of any values with that kind of allure.
Diversity and representation are a poor substitute for egalitarianism.
I’ve often thought that one of the very worst mistakes made in the mid-20th Century was to let European immigrants like Brzezinski and Kissenger take such powerful posts in the US administration. There seems to be something particularly toxic in mixing the prejudices and obsessions of mid European refugees and putting them in the driving seat of the most powerful military and economy in the world.
Certainly Kissinger only made one positive contribution to human society. Otherwise, a war criminal, sociopath and general waste of skin.
It was Keynesian capitalism that won the battle against Russian communism.
The Americans could clearly demonstrate the average American was much better off than their Russian counterparts.
Today’s opioid addicted specimens might have struggled.
Look around the world and you’ll see your premise falsified by local oligarchs everywhere more than willing, in fact eager, to exploit their fellow citizens and enrich themselves by participating in the American system of privatizing public assets. Note also their preference for US dollar boltholes.
So “Kingship” had to be curtailed to pave the way for what we know as Capitalism…
The King lost power to the landed gentry
…the English Civil War provided the basis for a major acceleration of enclosures. The parliamentary leaders supported the rights of landlords vis-a-vis the King, whose Star Chamber court, abolished in 1641, had provided the primary legal brake on the enclosure process. By dealing an ultimately crippling blow to the monarchy (which, even after the Restoration, no longer posed a significant challenge to enclosures) the Civil War paved the way for the eventual rise to power in the 18th century of what has been called a “committee of Landlords”, a prelude to the UK’s parliamentary system.
http://en.wikipedia.org/wiki/Enclosure
So the landlords, “landed gentry,” more than the Crown, was the impetus for the enclosures:
During the agrarian upheaval of the 16th and 17th centuries, the gentry increased its landed property as a result of enclosures and the sale of secularized church property. In order to receive capitalist rent, the gentry often leased land to big capitalist farmers. Members of the gentry often engaged in agriculture and industry themselves and exploited their hired workers. By investing capital in commercial companies, they obtained capitalist profits.
http://encyclopedia2.thefreedictionary.com/Gentry
This is a paper from 2004 that explicates some of the differences in thinking East/West based on the game of Go: “ LEARNING FROM THE STONES: A GO APPROACH TO MASTERING CHINA’S STRATEGIC CONCEPT, SHI (https://fas.org/man/eprint/lai.pdf)
Some what dated but the under-lying principles are worth the read.
A linchpin that holds China together is their governance system, I would judge, and it not only enables them to resist western demands but also to formulate their own ways of operating. Yeah, China is authoritarian blah, blah, blah but take a look at the leaders that the western democracies throw up by comparison. People like Trump, Boris, Macron, Biden, Merkel. Yes, we live in representative democracies but we won’t answer the question of who is actually being represented in those democracies (hint – it’s not us).
This being so, I will link to this Chinese guy talking about their own governance system that appeared in Links some time ago and I have to say that it is not the worse system in the world. It would be good if we could adopt a much modified version of this here in the west though I doubt that that would ever happen. Too many rice-bowls would be broken that way. So it starts off by saying ‘On twitter, as a Chinese, the most frequently asked question for me is, why don’t you oppose the CPC?’ –
https://twitter.com/thinking_panda/status/1305784641262026752
Yay, this must be Eric li, a Shanghai finance guy, who is interested in political matters. Check this older video “Eric X. Li: A tale of two political systems”
Thanks, your post, and that of Rev Kev above, are quite thought provoking.
As skeptical as I am of the ability or even the intent of the U.S. electoral system to produce wise and humane representative governance, I cling to the notion that this might some day change and that, insufficient as it so often proves to be, it is the only tool currently available to mitigate the worst abuses of our system. More fool me, perhaps.
Also, having roots in the U.S. working class and small business sector, I can’t help but feel a bit aggrieved at China’s role, in collusion with our own capitalist class, in labor arbitrage and the deindustrialization of the U.S. But then, if were a Chinese worker or small business owner, I would be nothing but grateful toward a government that so much improved my standard of living.
That description is rather rose-coloured… Especially by using Xi as an example of someone who climbed up the ranks through hard work and fierce competition. The author is rather aware of the problem, if you read carefully.
In the beginning, he writes “Whether you come from a grassroots family or a political family, you have to go through every step”
The next few tweets describe how “you” might start your career, from those grassroots up. Then, in 1983, he switches from “you” to the career of Xi , saying “If you work hard and are lucky enough, you will become the highest official in a district or county. As President Xi did in 1983, […]”.
Thing is, Xi is notoriously not from such a grassroots family, and didn’t get to that position through hard work and luck. He was just a few years out of school, and he got the job because his father was a member of the politburo then. (His father founded the Shenzhen SEZ)
How often have you read a similar story about glorious meritocracy in the west? Powerful people are smart (low admissions rates!) and hard working, and faced great competition, and took up onerous responsibilities, only the best survive, everyone can do it from grassroots families to well-connected elites, and please don’t notice that the latter seem remarkably overrepresented?
This is similar to what I was bringing up on the last Hudson post. I mentioned that historically, meritocracy is important to Chinese governance, using civil service exams as a universal path to government power. I like that the twitter thread sheds some light on how that centuries old process is very much alive in the Chinese government of today.
You’re comments are a very important thing to understand about meritocracies, in that yes they do technically give a path to power for all, but they are better at reinforcing where power was to start with, by giving insiders easy paths to success and providing the rhetoric cover to justify their position.
It also should be pointed out of course that the USA has its own meritocratic system that tends to put the same wealthy people, and political families, back in to political office, and other positions of power in the economy. The interesting question to me is then, what is different about meritocratic systems in China that the political leaders have not sprung for the same type of financial looting of their country?
what is different about meritocratic systems in China that the political leaders have not sprung for the same type of financial looting of their country?
I’ve seen it suggested the opening of China led to many of the self-serving types to drift into business while ignoring power via the Communist Party, leaving the relative mass membership organization more socialist than the central committee. At 91 million members, the central committee still has to respect the Communist street level. The central committee rules through the mass party and inertia. Then the more well to do Chinese who come to the US and Canada want their own exit strategies just in case but have effectively their voice. The big power players can’t rely on them or don’t have to listen to them.
“The interesting question to me is then, what is different about meritocratic systems in China that the political leaders have not sprung for the same type of financial looting of their country?”
Except they have? China is absolutely rife with officials making bank (Xi’s sister is big in real estate, just as an example), and inequality in general is similar to the US. Including the billionaires, the sneering PMC, businessmen using the precarious position of lowly workers to extract long hours and obedience.
The article mostly notes that they are not letting Americans loot the country much, which doesn’t require very much virtue. The US is not getting much looted by foreign rich people either (though it ‘s probably more welcoming in letting foreigners become part of the US elite). China may have less of a looting financial sector, but it’s real estate sector seems to offer every delight as an alternative, with equally shady billionaires.
When rev kev says that it is not the worst in world, I can only agree. But at least in the “looting by elites” part, it doesn’t look like an improvement on the west. And they do get the Orwellian stuff on top – I get nervous when people in the west belittle that, as something they would willingly trade away.
Elite corruption is rife in almost any society. The point here is that the Chinese state has kept a tight grip over banking and finance, where the US is the leader in control of banking and finance by a rent-seeking oligarchy, which also controls the state. This leads to the US bulls#$t economy, which specializes in marketing and financial trickery, not making and doing useful things.
It looks like in China, a career in the party and state is the road to power and riches. In the US, a career in banking and finance is the road to power and riches.
“The U.S.-China confrontation is not simply a national rivalry, but a conflict of economic and social systems”.
Yes but this is too restrictive, for, China is a nation that always considered “Chinese Traditional Governance” as something that encompasses a larger field than economic and social systems:
— Education under CTG was available to all social classes and its ultimate function was to produce qualified state administrators
— Traditionally the economy was always in the hands of the individuals and their families. That means locally and regionally while the state monopolized activities that spanned the whole territory. Fernand Braudel invoked this particularity of the traditional Chinese system for the non-emergence of the notion of capital in China. In his view long distance trade was the catalyst for the emergence in the minds of the merchants of “the reason that is at work within capital” as early as the 12th century in the Italian City-States and in the big trade fairs of Champagne.
The present story of “The Ant Group” is the modern adaptation of this principle, of limits to private activities, that is starting to fix the legal framework limiting the role of large private corporations. This limitation of the scope of private activity is in essence protecting the nation from monopolies. and in combination with state ownership. it further helps to avoid the trap of rent seeking and uncontrolled debt pushing.
The fact is that socialism proved to be compatible with CTG and this explains how and why it is being integrated inside its larger framework. The fact is that the Chinese worldview is first and foremost pragmatic and ideology is shunned as a principle. This explains why the state eventually recourses to financialization when it helps to generate returns to finance social policies like pensions for old age for example.
I think it’s easier to see this as yet one more example of the two tendencies in economic management which have dominated much of history: making stuff, or making money. (If you prefer, productive vs extractive economies).
The first assumes that the amount of wealth is basically limited, and so you can only become wealthy by rent-seeking of some kind or another. This means either acquiring and owning land and living off the rents, acquiring an office of some kind with an income attached, exploiting a monopoly, or charging fees for the transit of goods and people. Once, it meant securing a paid position or a grant of land from the King. Now, it means profiteering from monopoly services, operating motorway toll booths and buying public utilities at knock-down prices. Pretty much all of this involves clever financial manipulation. The question people ask is “given that I have (or hope to acquire) this economic asset, how do I use it to my maximum financial advantage?) In some ways, it’s the default economic model, because it’s easy, and it applies not only in the US, but in places as varied as resource-rich states in Africa and parts of the former Soviet Union.
Where the ruling class doesn’t own land and can’t easily extract rents, you can get investment and growth, but that’s tedious, and involves education, training, capital, infrastructure. When the ruling class can live by rent extraction (as appears to be the case in the US today) that’s what they default to. The problem is that other countries where the ruling class is more traditionally capitalist/bureaucratic wipe the floor with them.
I vote for local and individual economic empowerment. Decentralization and diffusion of power across the spectrum. The centralizing power of the “Socialist” East and the rentier oligarchy of the West can collapse with fossil inputs. Rather than descend into historical feudalalism and barbarism, how about intentional restoration of ecologies and community?
“I vote for local and individual economic empowerment.”
So might we all. However in Britain the phrase “Dictatorship by Parliament” is commonly used. The US is also a Dictatorship, a “Dictatorship by Renters.”
The Renters are heard and heeded. Form where else does a Congressperson raise $2 Million easily every two years to keep their position? The common Citizens? Ignored, manipulated and treated with inner contempt.
Indeed. Economic, ecologic and politic ideas are controlled by the wealthy, and we Americans are distracted by consumerism.
“China also is providing an object lesson in how to protect its economy and that of its allies from foreign sanctions and related destabilization. Its most basic response has been to prevent an independent domestic or foreign-backed oligarchy from emerging.”
This is still early days and what has been demonstrated thus far, does not allow for hyper enthusiastic romanticizing, idealization, and gullibility. Cultural and historical differences aside, the ultimate forecasted trajectory does not appear to be dissimilar from other historical outcomes. How could it be any other way? As human animals and their behavioral patterns are genetically and biologically deep rooted. In other words,
1. “The fact that most party officials pretend to be role models in public and extort bribes in secret has made the CCP the party of hypocrites. But the hypocrisy does not stop at the party, it infects the whole society; the discrepancy between the CCP’s moral high ground and the excessive greed and immoral behavior of the exposed party officials has forced the Chinese people to be hypocritical as well. It is a common knowledge of the people that corruption is a result of the monopoly of power by the CCP and thus cannot be eradicated by the party itself.”
https://digitalcommons.odu.edu/cgi/viewcontent.cgi?article=1030&context=management_fac_pubs
2. “More specifically, billions of dollars in soft loans and kickbacks were arranged through contracts with Chinese state companies to help get the former prime minister off the hook over his thefts from 1MDB. China’s drive for maximum advantage is really creating a situation where you have all these opaque deals and opportunities for corruption and really elite capture on the level where elites are essentially making decisions based on China’s interests and lining their own pockets rather than what’s best for their own country.”
https://www.sarawakreport.org/2020/07/elite-capture-in-very-corrupt-country-malaysia/
3. “In many of the 80-plus countries that the BRI aims to connect, corruption is endemic. Among participating economies, the median credit rating is junk, so alternative lenders stay away. Chinese construction companies benefit because—backed by state financing and often state ownership—they are willing to take risks that others will not. They also know that, if the going gets tough, Beijing can intervene politically on their behalf. A willingness to handle huge financial deals opaquely provides even more opportunities for political leverage. By agreeing to inflate project costs, for example, Beijing can funnel money to its friends in high places. In Sri Lanka, Chinese construction funds were allegedly used for Mahinda Rajapaksa’s failed reelection bid, according to an investigation by the New York Times. Rajapaksa has denied the allegations.”
https://www.csis.org/analysis/corruption-flows-along-chinas-belt-and-road
4. https://www.nytimes.com/2020/08/12/business/china-hong-kong-elite.html
The historical record is littered with the same story, along with the accompanying failures of ‘ideal’ states and empires. It is the history of an apparently deterministic genetic/biological hard wiring and the failure to both acknowledge and overcome it. Whether or not compensations, or meaningful adaptations are available and can be applied remains to be seen. Thus far, they have remained spectacularly and scarcely absent for the short time that humans have dominated this planet.
I do wonder if more recent historical analogies are relevant, and if the US/.China relationship could be compared to the US/GB relationship when the “arsenal of democracy” was both prop and rival for Britain’s increasingly shaky empire. Britain 100 years ago was not unlike the US now with lots of “vassals” keeping it afloat. And the US with it’s size, resources and exploitable immigrant labor force could be compared to China today. Can the clock be turned back? Not for Britain and probably not for the US if the notion is that we would again be the industrial powerhouse we once were. Not only are our resources like oil depleted but those immigrant laborers produced middle class children more interested in managing than working in factories. Wall Street may have sent our industries to China but it did so at a time when US industries were already in decline. Japanese car companies established themselves by being better than “unsafe at any speed” US versions. The cyber revolution kept us in the forefront afterwards but now that too is fading.
Are the Americans actually in charge of the US?
More financial raiding seems to go on within the US than anywhere else.
The US has its second attempt at a Great Depression leading up to 2008.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
Luckily, the Japanese had already studied the Great Depression after their financial crisis in 1991 and knew how to avoid this fate.
https://www.youtube.com/watch?v=8YTyJzmiHGk
Save the banks.
As no country seems to be free of financial raiding, it would seem like an international elite are at work.
The top rung of the “anywhere” ladder.
Seems clear to me, from the treatment of Jack Ma, that the Chinese government has looked at the US experience and decided that no way, NO WAY, was the government going to be directed by the financial or tech industries.
Can’t say I blame them.
Does there really exist in the actual word the dramatic dichotomy between neoliberal financialization and Chinese industrial socialism?
In 1978 the share of industrial output produced by state-owned enterprise in China was close to 100%, since most industrial enterprises were then state-owned and worked within a central plan. By 1998 it was estimated that the state’s share in industrial output had already been halved to 50% and since then it is estimated to be a little above 20%. In agriculture, with the introduction of the private leasing of land almost the entire output is produced privately by self-employed farmers.
It is also the case that the work force employed in State-owned enterprises is 9% of total rural and urban employment about similar to the situation in France in the early 1980s (see Capitalism Alone). Aren’t these figures a strong argument for the proposition that the Chinese economy is now significantly capitalist?
It might also be more appropriate to view the historic role of the Chinese communist party as the entity that enabled some less developed nations to make the transition from feudalism to indigenous capitalism by engaging in comprehensive land reform, the abolition of quasi-feudal relations in rural areas as well as prosecuting a national revolution, with this transformation from feudalism to capitalism led by an extremely powerful state. Instead of the western bourgeoise it was, then, the Chinese communist party which brought capitalism to large parts of Asia.
But it is also appears to be the case that the U.S. and international organizations like the World Bank are currently involved in the financialization of development in which the state is primarily involved in risk-proofing developmental assets to better accommodate private investors. It appears, for now, that the CCP has chosen a different infrastructure strategy for the developing world.
,
As for Neera Tanden’s question, “Should Libya pay us back?”, Gadafi’s Libya certainly inflicted great and unwarranted costs on several foreign nations. This is a list of only the things I recall offhand:
Funding Islamic terrorism in the Philippines
Invading Chad
Funding Black September, especially the gory terrorist attack on the Greek ferry City of Poros
Bombing the La Belle discotheque in West Berlin to kill American soldiers
Libyan air force attack against Italy in 1980, resulting in an air battle involving American and French carrier-based fighters, in the course of which an Italian airliner was accidentally struck by a rocket and 80 Italian passengers were killed
Thanks very much for this post. Apparently, the end of history has not been reached, or at least not the neoliberal version of history. ;)
“The dollar still accounts for 80 percent of all global transactions, but less than half of today’s Sino-Russian trade, and the proportion is declining, especially as Russian firms avoid dollarized payments or accounts from being seized by U.S. sanctions.”
THIS … THIS … THIS
Or to quote The Mandalorian, ” … this is the way.”
I too lament the loss of Russia a socialist body. Not sure if there is a way to upend their descent into oligarchy, but it would help if China alone didn’t have to bear the burden. However, as I keep saying, what Keynes started with the idea of Bancor can be updated for modern times. You don’t need crypto, you just need state adoption outside the current #SWIFTBank-nee-Bretton-Woods construct. In that sense China and any other nation that wanted to free themselves from US Fed Reserve Account based sanctions (poor Venezuela) would essentially avail themselves of a monetary system equivalent of the good prince’s option #1.
#UKillItByNotUsingIt #RooBuxForTheRestOfUs
Sorry, but I don’t see much difference betw China and the US. Both want to annex territory, if for somewhat different reasons. Both want to keep their elites powerful and well-heeled. Both are exploitative of people, resources, and the environment, methods are slightly different. Both are deeply classicist and racist. Both want to know everything about their citizens, all the time. The biggest difference I see is that the Chinese are long-term planners and don’t really care that much for war, although if pressed into one, they will intend to win it.
I bet on the Chinese to prevail in the long term. With their thousands of years view, they will have do something to reduce/repair climate change, overpopulation, food insecurity, all that stuff, simply because their rulers have a long tradition of doing a good job for China — that is the country, the ideal, if not always all of its people.
OTOH, the US, and the west in general, is governed by people who have the altruism, sense of historical destiny, and general planning capacity of raccoons. If I were the Chinese, I would just wait for the West to self-destruct, even if the US does attack China it will lose (as usual) and China can wait for the smoke to clear and just walk in to an empty land. I only hope they really don’t want to bother personally governing a a few ragtag bands of Bai Tou barbarians living in the hills.
The West decides to destroy itself.
Thirty years ago and the West was triumphant.
The Berlin Wall had fallen and a uni-polar world was born.
The US reigned supreme.
China was insignificant and Russia was moving towards the West with Gorbachev.
The neoliberals would gradually throw it all away over the next thirty years.
It was the end of history and Western liberalism had won the day.
Of course it was Keynesian capitalism that had won out against communism.
The Americans could clearly demonstrate that the average American was much better off than their communist counterparts and they could easily prove that they had the superior system.
New ideas had come in during the 1980s, and by the early 1990s many places in the West were mired in recession as the first wave of pumped up asset prices collapsed.
In 1994, John Kenneth Galbraith wrote “A Short History of Financial Euphoria”.
“In London, tourists going down the Thames to the Tower will extend their journey to encompass the Canary Wharf development, perhaps the most awesome recent example of speculative dementia.”
Everything looked very positive with Russia under Gorbachev, but the West thought his reforms were too slow.
A BBC documentary covers a young, naive Jeffrey “Joe 90” Sachs and other US free market fundamentalists as they headed into Russia to make a right mess of things and pave the way for Putin.
https://thoughtmaybe.com/the-trap/#top
Part 3 – We will Force You to be Free (36 – 44 mins)
The neoliberals would tell Western workers it was their fault as their jobs moved off-shore, never working out why everything was stacked against the West in an open, globalised world.
Western companies couldn’t wait to off-shore to low cost China, where they could make higher profits.
Maximising profit is all about reducing costs.
China had coal fired power stations to provide cheap energy.
China had lax regulations reducing environmental and health and safety costs.
China had a low cost of living so employers could pay low wages.
China had low taxes and a minimal welfare state.
China had all the advantages in an open globalised world.
It did have, but now China has become more expensive and developed Eastern economies are off-shoring to places like Vietnam, Bangladesh and the Philippines.
Western businesses tried cutting costs here, but could never get down to Chinese levels and they needed to off-shore to maximise profit.
They gave away decades of Western design and development knowledge in technology transfer agreements.
China was a new, fast growing economy compared to the mature, slow growing economies of the West.
Investors would be able to achieve better returns in the new, fast growing Chinese economy and this is where the money headed.
US investors love China and know it’s the best place to make real money.
https://www.youtube.com/watch?v=CaELQS5kTso&t=727s
George Soros, Bill Gates, Warren Buffett, Elon Musk, Jeff Bezos …..
In the space of thirty years the neoliberals had lost it all.
@ Prof Hudson – my suggestion “stable state economies”
The Edo period in Japan is regarded as being economically a ultra low growth economy and was very largely closed to external trade. I mention it as I haven’t come across any comment about this economic system in any of your writings
Always enjoy reading Mr. Hudson.
I am also watching with a sense of morbid fascination at how, from I understand, a majority of the imaginary magic beans known as crypto are ‘mined’ .. ahem, conjured in China.
This in its essence means that Beijing is centrally holding the keys to what is meant to be a decentralised financial instrument. So if the crypto wet dream of mass adoption were to play out, the economic levers and keys would be ‘gifted’ to Beijing.
As ever, love the article and the well thought out responses.
And lest we forget, a bit of trivia regarding the catalyst of the casus belli for the U.S. entry into the second World War, a little-known fact I only found out about when I moved to the U.K.
In 1941, Roosevelt imposed an oil (and I believe rubber) embargo on Japan, an act he called “a noose around Japan’s neck.”
We all know how that turned out.
Taking a look at the Chinese politico-economic system over the past 3,000 years, despite the many dynastic changes, and subjugation and rule by foreign cultures, it had always reverted back to an imperial system where the emperor and his inner circle had near absolute power, and administration was left to meritocratically selected commoners. Political ideology and spirituality always played second fiddle to pragmatism and stability. Unlike Westerners, the Chinese people have been conditioned to feel that rule by a hereditary monarchy through capable Confucian mandarins as natural and righteous. Such a system inherently opposes the rise of an oligarchy that threatens central control, including the monopoly power to issue money, today’s credit. Laws are used to administer policies, and can be changed or cancelled if they come into conflict with pragmatism and stability. This also applies to the rules of the WTO, IMF and WB. The US demand for China to adopt neoliberal policies is thus fundamentally at odds with 3,000 years of Chinese civilization, and is a point of disagreement that cannot easily be resolved.
The 2500 year old cultural divergence around debt and excessive wealth accumulation.which Hudson describes, between East and West makes clear that a meaningful choice among political economies is possible.
Yet, too many in the Wesr fervently believe that “their” political economy reflects and best suits “human nature”, having long been instructed embrace this interpretation which is most beneficial to the (self-selected) control and acquisition crowd, whose happily espouse social Darwinism to justify that control and acquisition.
Too many U$ians, common folk and elite alike cannot, for example, imagine any relationship to “land” that they might have beyond “mining” its resources, sucking it dry, and then moving on, often leaving poisoned wasteland behind. The “modern” version of slash and burn.
Indeed, many U$ians, when offered other perspectives about how political economies might be shaped as, for instance, the consciously considered (and non-threatening) Buddhist Economics, immediately recoil in horror and attempt to attack the ideas presented as “woo woo navel gazing” and inappropriate for the “real world”.
Even the thoughtful assessment of capitalism presented by Marx is vilified and rejected without examination.
Of course, in the West, “Economics” is a religion, mysterious by design, incomprehensible, and manifest in the spreading of the Word, to those as yet deaf and blind to its earthly rewards.
Our cultural mythology, from God rewarding virtuous Puriians of the right ethical sort to Wild Westers wresting the frontier from the “savage” barbarian natives invites us to believe our system both superior to all others and founded in a special relationship with the Suoreme Being, as we claim to enlighten the world and lead it to paradise unimagined.
It all gets rather hazy, but it does justify endless war, brutal economic sanction and destruction of the environment upon which we all, all of life, depends.
And, if things do “go” our way, we have the trump card of nuclear annihilation.
Just so ya know who is boss.
Euphemistic evasion characterizes any “self reflection” in which our empire might rarely engage: torture becomes “enhanced interrogation” and hunger becomes “food insecurity”.
All good, clean, profitable fun, heaped quarterly.
No long term vision for us.
After all, what has posterity ever done for us?
Hegemony, “Full Spectrum Dominance”, militarily, and a “meritorious” professional manangerial class of “Organization” men and women, as Mumford termed them, eyes on the short-term profit prize, will not allow the of the many to keep them from their appointed tasks of ensuring that the few gain increasing wealth and total control over the “useless eaters” who so annoy their betters.
Following orders allows “collateral damage” to become mere “externality”, of neither moment nor concern.
Consider, when the U$ military “pullout” of Afghanistan occurs (if it does), will the U$ continue to pay to keep the 18,000 military “contractors” there? Will the U$ continue to pay the 300,000 strong Afghan Security Force?
Will the CIA leave?
Or, will we then go number 3?
Presumably, these and other U$ Interst’s “investments” will require continuing U$ “agency” in Afghanistan to “secure” privatization’ stranglehold on the “Good War” nation.
It was made quite clear, with the “off shoring” of millions of U$ jobs to China, from the seventies onward, that the elites had no interest in national self-sufficiency.
Legend has it that Kodak commissioned a “study” to determine whether Kodak owed Rochester New York, the city, its population, or the surrounding areas any essential loyalty.
The answer was in the negative.
Legend further has it that this assessment unleashed a vast corporate exodus to China and other “cheap” labor sites, continually reducing corporate taxation as a reward
For the bold move to free U$ corporations from the shackles of unuionized and organized labor.
Whatever the impetus, corporate “persons” felt free to boldly take a subsidized hike – leaving a nation and a people vulnerable and, with “Citizens United”, totally at the corporate whim of bribery and also in a position to craft the very legislation that would set the vultures and wolves of Wall Street free to do with a vengeance domestically what corporate “interests”, with the U$ military as garantor, have long done globally.
The U$ “notion” that “freedom” is about the “right” of the pathologically dis-eased to wreak havoc on people, life, and the planet as a cultural “imperative”, not only excuses destruction, but glories in it.
It postulates that all good things come from “men with guns”, from ruthless exploitation and extraction.
Those who profit from such assertion and behavior will not stop doing what they are doing simply because they are asked to do so.
Damon was/is correct; “History contains no example of a dominant power yielding to tongue lashings … sentiments and good sense” never win over the “material interests” of those who seek limitless wealth and total control.
Which is why I recommend the recent two-part discussion between Michael Hudson and Pepe Escobar, as they do speculate, a bit, about what might be done to change things.
Much appreciation to Michael’s long efforts to invite people to broaden their knowledge of history, connection, and possibility,
More power and imagination to all who understand that the existential moment requires the courage to actually think and not just repeat tired old status quo protection nonsense.
Language and culture both limit what we are able (permitted?) to consider.
The only way to a sane, sustainable, humane future, is to imagine and built it.
The elite have only “nothing will change” on offer.
We can do better.
Much better.
If we but dare imagine and have the courage to “insist”.
Re: Michael Hudson: America’s Neoliberal Financialization Policy vs. China’s Industrial Socialism
“But the usual, more efficient occupation is by U.S. corporate takeovers of their basic infrastructure, owning their most lucrative assets and remitting their revenue back to the imperial core.”
See, that sentence describes Canada: totally co-opted for its resources, its culture, its oil and gas, its lumber, etc.; co-opted by big box stores, Hollywood movies, and American propaganda. First time I’ve seen what kind of country we really are! Instead of weeping for what the US has become, I weep for what Canada has lost. Our self-described history ended in 1945-1950. From now on its USA! USA! USA! Ugh!
Canada is a remora of empires — from the Iroquois Federation, to the French then British Empires and now attached to the US hegemon.
The one part of the China-U.S. relationship that seems overlooked in this conversation is the role of China as the source of low-cost manufactured goods sold by those rapacious U.S.-based MNCs. Much as the political class seems to be on board with U.S.-China great power rivalry, the U.S. “industrial” business class is completely reliant on Chinese manufacturing and no way would they support a real war with China. (This is where IMO the Machiavellian historical analogies – and the current references to Russia, Libya/Iraq/Iran, Cuba/Venezuela, etc., not ascribing those to Hudson – fail.) To pick only the most obvious case, how is the U.S. supposed to go to war with China when ALL OUR iPHONES ARE MADE THERE?
Michael Hudson is a smart guy so I presume he has a view on this. To me, the financialization and great power aspect perspectives miss a key part of the story.
I’m normally in full agreement with Hudson, but when it comes to China my views have sharply diverted from his.
China gets a lot right that the Anglo sphere has screwed up but ultimately the label that best suits them is “Mercantilists”.
China has enjoyed trade terms with the rest of the world that are unmatched in their one sidedness. The benefits China accrued form the post WWII, American led trading system weren’t just limited to defensive mercantilism or arbitrated labor to gain an unfair advantage. There were a great many other aspects of it that made the net effect on their trade “partners” economies much more corrosive than any form of mercantilism that has come before it.
Labor debasement and currency manipulation are bad enough, but the outcomes from China’s other undercutting practices went far beyond merely having a financially deflationary effect on the US. They were also largely responsible for deflating away and “crapifying” many important sectors of our entire economic and institutional “ecology” as well. The reason that these effects aren’t talked about more often and therefore aren’t factored into evaluating the true impact they’ve had on us (and other countries) is that they are more difficult to quantify in a formalized way that can be easily written down in an economic report.
The effects that aren’t really mentioned much include include pricing, missed opportunity, sector imbalances etc.
For instance, when China siphons off highly valuable IP from foreign firms economists will acknowledge the losses stemming the failure of the invested R&D to become future revenues for the company. But that’s far from the only loss for an that has occurred.
We can also include:
The overall value our system assigns to an education in things like engineering and design. the companies that hire keep losing out on profits from hiring and keeping them there’s another obviously deflationary effect at work because the true value of their input to the corporation and the rest of the economy ends up being hidden. The credit for the economic activity and productivity gains are “registered” as being generated by them company and the government that stole the IP and over produced the product at an undervalued price as well as the governmental system that allowed the practice. The company and government who went through the long process of building up a sufficiently transparent, rules based, and reliable system of relationships between education, finance, production and R&D to generate those things are left out of the equation. All the economic and political costs (the net inputs of establishing the system, protecting it, going through trial and error with different ways of doing things, funding liabilities, making enemies, the time differential between investment and net gain etc) of it’s real creators remain as a burden for the parties that acted responsibly and played by the rules but the profits went to the ones who broke them.
Thus the inevitable result is that the whole ecosystem of highly educated workers and the institutions that produce them are undervalued and become under funded and underpaid.
When this kind of hollowing out happens across many different industries and professions it results in huge distortions of pricing and valuation for entire sectors of the economy, when combined with the more commonly recognized forms of wage suppression from underselling in more traditional manufacturing sectors you end up with the global economy we see today.
The nations targeted by economic pirates like China create massive deflation and misalignments in the global economy and to compensate victims have to create demand to avoid a recessions.
The biggest problem though is that since the economies being effected are bound by trade pacts with their tormentors that forbid them from creating economic gains by subsidizing their own production and capacity in the same way they do they are left with only being able to generate that demand through things like credit, asset inflation etc. That is, the FIRE sector.
But it gets even worse for the US since we not only have to financialize to keep our own economy inflated, we also get to essentially do the same thing for the rest of the planet as well since when Chinese underselling has a similar effect on third parties they have to adapt by either passing on the distortion to us by upping their own underselling practices or buying more dollars. Both of which further inflame the imbalances in the US economy.
The same problems that the dominance of the FIRE sector that Hudson constantly points to China not having isn’t a huge surprise. China gets to play the game effectively infinite lives when it comes to pumping up their industrial sector at the cost of their FIRE and R&D sectors because when they overproduce or introduce imbalances from politically directed industries the results of overproduction, misinvestment, malinvestment and valuation distortions are just dumped on someone else.
China’s system isn’t performing so well relative to others purely by its own merit. If China’s economy didn’t have the ability to export deflation and siphon off knowledge gained from American industrial and academic institutions they would have been damned. None of those institutions were something the CCPs society would have been able to create on it’s own. They could have never tolerated the political and cultural trade offs that come with making systems as bottom up, transparent and rules based as they require to take off.
Now that they can just get them from us they walk away with all the upsides without any of the downsides, while we get the most of the downsides and not much of the upsides.
They never had to change their system to benefit from there creation. It was a non reversible relationship, America’s system without China would have just meant sending low paying jobs to places like Africa, India, south ease Asia, South America etc.
It’s hard to imagine what China would look like without the US and the liberal international order and rules based trade system.
If China’s success with keeping the FIRE sector in line while growing the industrial sectors could not have happened with being allowed to shunt the negative multipliers of their actions into the rest of the world than saying there responsible for the growth they enjoyed isn’t a credible view.
It also means it can’t be replicated into other regions. We can’t have a world made of economic and political China clones. The huge productive gains they they made without financial problems along the way was the result of a one time bonanza of asymmetrical economic exchanges that the planet can probably never do again.
Why doesn’t your description of this include any responsibility on the part of the US political and finance/industrial classes who willingly sold out their blue collar fellow citizens during the many decades of this process?
A process that began long before China as described in Judith Stein’s “Pivotal Decade”
I would be curious to hear Hudson’s take on David Harvey’s chapter about China in A Brief History of Neoliberalism.