Michael Hudson Asks Our Readers: If Democracy Winds Up Creating Financial Dominance, What Do We Call China?

Yves here. I hope readers will take Michael Hudson’s query to heart. His work has demonstrated how the financial sector tends to gain power and increase inequality if unchecked via debt jubilees or other methods to keep it from acting as a rentier and creating debt peonage. He wonders what would be the most fitting label for countries that like China have adopted substantial elements of a modern market economy but are taking steps to restrict the influence of financiers.

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

The inability of democracies to resist financial oligarchies from gaining power

Aristotle described democracy as the political stage immediately preceding oligarchy, and tending to evolve into it. Ever since his epoch in classical antiquity, democracy has not been able to protect populations from the financial sector using debt to reduce them to bondage (in antiquity), expropriate their lands by debt foreclosure, take their property and demand a rising share of their income as debt service. The result of financial patronage is debt dependency – and in modern economies, debt deflation.

Plato’s Republic describes Socrates as recognizing creditors becoming “wealth addicts” (“silver-lovers”) and injuring society. He proposed what seemed to be utopian: rule by “philosopher kings,” individuals who would not have property of their own, so as to be immune from wealth addiction that seems to be a universal human phenomenon caused by privatization of financial wealth.

The three political forms discussed by Aristotle and Plato were democracy, oligarchy and aristocracy. But of course there was another form, which Herodotus discussed: kingship. (Cite his debate about the virtues of each system) That was the political form that had characterized the Bronze Age Near East. The key feature of this – which Herodotus did not note – was the ability of rulers to proclaim their most paradigmatic act: Clean Slates cancelling debts, liberating bondservants and restoring lands that had been forfeited to creditors. Looking back over the past five thousand years, that financial characteristic – control of monetary and debt relations by the palace – has been the most distinguishing feature between “democracies” (including their evolution into privatized oligarchies and aristocracies) and palatial states.

What terminology should we use for today’s world to describe what makes China (and Soviet Russia a century ago) distinct from the Western “democracies”? We cannot realistically call them “palatial economies,” because they do not have kings. But they do have centralized control over money and debt, with the state being the main creditor.

American rhetoric contrasts democracy to “autocracy.” Should we call them socialist states? Centrally financed states (certainly not centrally planned, except for decisions about credit and debt). Enlightened states? Public-credit states?

Or perhaps simple Socialist state, or Socialist Non-Financialized Economy.

The important characteristic is that banking and financed are public functions. In modern geopolitics, “democratic” means financialized. It is still, as Aristotle described, pre-oligarchic. But this dynamic is creditor-driven. And creditors not only control the supply of money and credit, but also the legal system governing creditor privileges (“rights”) to appropriate the assets and income of their debtors.
This financial dimension is the main characteristic neglected by modern political theory and popular language. It is important to stress that the antonym of “democracy” is not well described by pejorative words such as “autocracy” or other journalistic terms. There is no single term for a socialist state in which banking and debt laws are public utilities. But some term needs to be proposed – and “enlightened despotism” or “philosopher-king” state sound anachronistic. Or perhaps de-financialized state, social-credit state (problems with the SocCred movement), or social-creditor state.

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  1. LadyXoc

    Mr. Hudson is a leading light in my firmament. There is an almost religious (and unchallenged, unparsed) belief in America that Democracy=Capitalism. This is exploited by US gov, in particular to advance foreign policy agendas (“they don’t like our freedoms” in Iraq, which was primarily a resource control war). I see that Ant Group has been heavily fined by the Chinese state. Looks like effective anti-trust control to me. It is God’s funniest joke that the Chinese, the most financially literate people on the planet, are governed by Communism (or a form of it). However, I believe they will school the West in the use of money and effective government. The US is a centrally planned economy: just not by the government but by the FIRE sector. More on China please.

    1. dummy

      Hudson is making a major ontological error here.
      Debt jubilees of the past were from money mainly owned to the king which after the jubilee still left the king the richest person.
      Today debt is owned to each other and mainly to pension funds and other similar ventures, so I don’t see how the rich is going to pay a price for it.

          1. dummy

            cant agree more with you, debt should be dischargeable in bankruptcy and this is not the fault of capitalism, blame the corrupt government, same with MBS, why is Powell still buying 40billion MBS per month when home prices are at all time high and still increasing 10% per month?

            1. Bijou

              @dummy bankruptcy laws can be cruel. You need to be careful what you advocate. If a banking professional makes a bad loan the fault is largely their’s and should be born by them, the supposed expert, not the debtor, unless it can be proven the debtor filed fraudulent papers. “Capitalism” is not entirely to blame, but is a major factor with the profit motive and the insane drive to accumulate money and all the social pathology that involves.

  2. zagonostra

    I don’t know what appellation would best fit the type of economic/political system that China’s has developed. But it seems to me that one aspect that contrast with our own is that the economic system has not been completely captured the political. I think it is quite apparent that in the U.S. those who determine economic policy come from the private sector and bring those values and beliefs into how they approach governance.

    The function of gov’t for Aristotle and Plato was to bring about the “good state” or society. Aristotle had the notion of “telos” in mind in his approach to government, as well as his approach to nature in general. China, from my remote vantage point, still has a long view of what kind of society it wants. The U.S. doesn’t. Rather, it seems to act as if market forces will work out the telos on its own accord. So if there is rapacious interest rates that credit card companies can charge their customers, so be it, if pornography is protected speech, let it pollute the youth. The development of citizens who embody “virtue” is not the concern of the state. We don’t create citizens, but law abiding consumers.

    China and Russia do not have “kings” but it seems they don’t need to, they have an ethos that includes the “good” in a communal and not exclusively individual sense.

    1. steelhead23

      “In modern geopolitics, “democratic” means financialized.”

      The fallacy, you see, is in the question itself. Assume a democracy – people rule. If there were a democracy in the U.S. there would be universal, government provided, health care because over 60% of the people want it. Same with gun control. So, the real question is: What should we call the United States?

      The United States an Oligarchy (to quote President Jimmy Carter). This Oligarchy is composed of corporate, financial, and political powers. The perpetual flow of capital (often termed: dialing for dollars) from corporate and financial benefactors to these political powers (Senators and Representatives) ensures that the goals of finance and corporations, namely, the privatization of everything in the world and wholly unencumbered markets, remain the policy goals of those political powers. All this, under a constitutional cloak of democracy.

      God, wouldn’t it be fun to have an actual conversation with Dr. Hudson.

      1. Yves Smith Post author

        You choose to misconstrue my statement: “in modern geopolitics” preamble makes the statement correct as written.

        Democracies do not scale.

        And I also have to tell you even more people polled in favor of government provided health care with private insurance still available, which is not “universal government provided health care” since doctors presumably could opt out, say by offering concierge services. So the poll results don’t support your contention as to what “the public” wants. The public exhibits what the UK calls cakeism.

        1. Keith Newman

          A related factoid about the universal publicly funded health care system in Canada: the Canadian system allows doctors to practice privately. On the face of it it might seem like “cakeism”. HOWEVER if a doctor so choses s/he is disallowed from receiving payment from the public system for anything at all. So a doctor is either in the public system or out of it, with “out” meaning entirely out.
          This is different from the system in the UK where doctors are able to pick and choose. They are allowed to have some patients covered by the public system and others paid for privately. This is quite undermining of the public system since doctors can offer preferential treatment to private patients.
          In Canada the result of the “entirely out” condition is that very few doctors chose private practice since there are very few patients who are willing to pay the high cost privately. I believe an exception to this is doctors specialising in cosmetic surgery since many people are willing to pay almost anything to improve their looks and the cost, while high, is not overwhelmingly so.

        1. supermario

          RE China<=The economic system has not been completely captured the political <=because the political system is truly representative.. the economy of China is actually controlled by the representatives of the local provinces.
          In most nation states the political system is more like the customer service department in a department store.. Its employees are limited in what they can do for the angry customer.. and the best the customer can do is to get his or her money back. In the USA governed America no matter the promises of the customer service employee nothing he or she does will change the way the Oligarch use the USA to run America.

          1. rangoon78

            As opposed to the Chinese and revolutionary Soviet system: “This is a system organized to secure the power of creditors over debtors; to ensures that access to credit is easy and riskless for the most predatory financial firms, while making borrowing hazardous and often ruinous for students, families, or small-scale farmers; to guarantee that sovereign bond holders get repaid by forcing governments to eliminate welfare programs or cut health budgets.”

  3. Larry

    I thought Yasha Levine’s recent podcast on parenthood that bled into life in the Soviet Union was quite illuminating on different systems of governance and the economy. Yasha and his partner discussed how the USSR had created a shitty version of bourgeois aspirations because of scarcity. He felt that if anything, people were more materialistic because things like cars and furniture were so hard to come by.

    With regards to China, it’s so hard for me to say. They have an authoritarian centralized government that acts as a balance to financial power. Jack Ma’s empire and his very person seems to be under threat. I can’t imagine the same thing happening to Mr. Bezos here in America. But I also follow Michael Pettis on Twitter, and he has insightful analysis of the Chinese political economy. It’s clear that the Chinese elite do not have a handle on controlling housing prices or shifting incomes towards labor. They have created spectacular wealth and advances, but are also creating dangerous financial bubbles and overinvesting in infrastructure. GDP growth for the sake of GDP growth. What to call this? Financial authoritarianism?

    I don’t think American’s care about inequality at all. We admire and even worship the wealthy. Witness the success of Donald Trump as celebrity/politician. What will destroy our country is the amount of precarity injected into our system due to the financial sector taking over too much control over law and order. A system where hard work does not guarantee a roof over your head, adequate food, and some leisure for the vast majority of citizens is one that is doomed to fail. I had some hope that the pandemic might finally shock the elite into doing something about this, but it’s not possible for them to break out of their absolute greed. They’re doing something, but it’s the absolute minimum they can do while also further lining the pockets of a connected elite.

    1. Massinissa

      They’ve basically pushed financing underground, with their shadow banks. Normal banking is bad, loan shark banking that is hard to see at all is even more dangerous. Maybe Ma’s problem is that he didn’t move enough of his economic activity illegally.

      Its easy to sugarcoat one side or the other. China has its own share of problems. Though, Hudson does seem very apt on analyzing this issue

  4. Thuto

    That we are scratching our heads to come up with appropriate, sticky nomenclature for a system that reins in the power and political influence of financial elites and private capital in general is testament to how effective the decades long smear campaign against socialism has been, we dare not use it for fear of being ridiculed or mocked or worse, giving our opponents an easy weapon with which to undermine our political cause, to say nothing of using it to sow doubt among the uninitiated. Socialism has become a scare word, in contrast with democracy which is perpetually ensconced in a virtuous halo even as the iron fist behind its velvet glove is “outed” from time to time. The notion that democracy is “all good all the time” is so deeply ingrained that it can hide its atrocities in plain sight.

    An automatic name generator might throw up a name like “anticracy” once the keywords are defined and that would set it apart from democracy but then run into the problem of the enormous brand cachet enjoyed by democracy such that anything anti-democracy immediately invokes association with autocracy (and all that implies). A very tough query indeed which in my case would require “being with the problem a little longer” as suggested by Einstein.

    1. Carolinian

      Of course the people who started this country were themselves mostly local aristocrats with ambivalent feelings toward true democracy despite that “all men are created equal.” There’s even the theory that they were out to Jubilee themselves from debts to the then dominant British financial empire.

      Perhaps “being with the problem longer” means digging deeper into human behavior and not hoping some sort of social algorithm will solve it for us–be it socialism or capitalism.

      1. Massinissa

        ‘All men are created equal’ sure didn’t help Daniel Shays and his class from avoiding debtors prisons. They only added the Bill of Rights in order to prevent overt civil rebellion, its not something the Founding Fathers did out of the kindness of their hearts.

  5. Vern Lyon

    I gre up Arrow-Debreu Geek, but for the last 30 years my two stars are Michael Hudson, we are the same vintage, 1939,, and Randy Wray.

    Now to the question of what to called, say China’s is “Industrial Capitalism.”

    1. Synoia

      China is obviously an Empire. I don’t understand the confusion. Leader for life = king or Emperor

      It will be interesting if it changes more to promote the current children of the Chinese leader into Hereditary positions. Clearly the Chinese Communist Party is an aristocracy.

      All people are equal, but some are more equal than others.

      All they need now are some fancy clothes.

      1. Fern

        “China is obviously an Empire. I don’t understand the confusion. Leader for life = king or Emperor”

        By this definition, we have to call Germany an “Empire”. After all, Germany has no term limits and Merkle has been head of state for 8 years longer than Xi has been head of state. The United States didn’t have presidential term limits until 1951 and we still don’t have term limits in the Senate or House.

        The idea that Xi was made “president for life” comes from the fact that their constitution was changed to remove term limits. The press turned this into scare headlines like the following from BBC:

        “China’s Xi allowed to remain ‘president for life’ as term limits removed”
        with the text going on to explain: “China has approved the removal of the two-term limit on the presidency, effectively allowing Xi Jinping to remain in power for life” and “China had imposed a two-term limit on its president since the 1990s.”

        We remain oblivious to the double standard.


        1. Martin Davis

          Yes, but you avoid the obvious rejoined: Merkel’s sojourn as head of state would have been brought to a swift end if her party had lost power in an election. With Xi, not so much. The double-standard may need a bit of redefinition.

          1. Fern

            I was specifically addressing the comment: “Leader for life = king or Emperor”. We also hear the mantra that Putin is “president for life”, as if his long tenure were proof of an autocratic system, again ignoring that Janet Merkel has served about as long as Putin, and Russia has popular elections and many political parties. So yes, we have a double standard.

            Long tenure and lack of term limits = emperor only when it comes to our enemies du jour.

        2. Turing Test

          You omit the not insignificant detail that Merkel has faced the German electorate four times and each time received a mandate to govern. If she wished to continue to grovern she would be required to seek another mandate at least every four years, as do leaders in other democratic states.

          Xi has never sought the legitimacy of a popular mandate and never will. Comparing the two is therefore self evidently ridiculous.

          The CCP adopted term limits because in an authoritarian system there are few other means of preventing the leader from amassing too much power. Unlike in a democracy they are not responsible to citizens and cannot be held accountable by them.

          1. Passerby

            As far as I know, Xi Jinping was elected in the 2013 elections and again in the 2018 elections (with the term limits removed), and he will face a vote again in 2023.

            1. Turing Test

              Sure, there was an “election” of sorts, just like the “elections” they used to hold in the former Soviet Union. Following that fine tradition Xi was the only candidate running, as it was a “confirmation vote” by delegates to the People’s Congress, which meets a few days a year to rubber stamp whatever the party leadership puts in front of them.

              For the record the final tally was 2952 for, 1 against, 3 abstentions.

              Seems totally legit.

              And you think this farce is comparable to free and open elections in a country like Germany exactly how?

              1. Fern

                No one has claimed that China has the same system of government that we do. In fact, the point of the article is that our system of government has not protected us from increasing inequality of wealth and from the power of the financial elite. If China’s system of government is more successful in achieving the ends that we value such as efficient crisis handling (i.e., controlling a pandemic), decreasing wealth inequality, increasing the standard of living, and if it has the support of the people, perhaps we should be spending our time thinking about what we can learn from them about how we can improve our own system rather than demonizing them for having a different system.

                The fact that Angela Merkel (please excuse my repeated dyslexia involved her name) was not selected by exactly the same method that Xi was selected is irrelevant to the point I was trying to make.

                1. Turing Test

                  The contention that China is somehow more “successful” than Western countries is not one one most people outside China would endorse. The average Westerner enjoys a much higher standard of living than the average Chinese citizen, which is why no one in the West (or anywhere else, really) is clambering to immigrate to China, while Western countries are inundated with people seeking to settle there.

                  The fact that Angela Merkel (please excuse my repeated dyslexia involved her name) was not selected by exactly the same method that Xi was selected is irrelevant to the point I was trying to make

                  I didn’t say they weren’t exactly the same, I said they were completely different (and pointed out specifically why), then I challenged you to explain the point you were trying to make given that fact.

                  I note that you simply ignored the challenge and begged the question. Some might begin suspect you yourself aren’t sure of your point, beyond the fact that both Germany and China hold something they dignify as “elections”.

                  1. Fern

                    The point that I was making is crystal clear: You are wedded to the assumption that direct elections of the president (which we don’t even have) are the litmus test by which every society should be judged. And I am saying that we should accept that our system is not working all that well and that we should be tolerant of the fact that other systems exist and that we might even be able to learn something from them. We have indirect elections of our presidents; they have even more indirect elections. So what is your point? The fact remains that Merkel and Xi both have no term limits and long tenures. Xi can be voted out at the party congress when his 5-year term is up. The party congress members are appointed, ultimately by locally elected representatives. So what?

                    Surely, you don’t deny that China has handled the covid crisis better than we have? Surely you don’t deny that China has accomplished a monumental achievement by lifting a country of 1.4 billion people out of poverty in only a few decades?

                    Instead of engaging in demonization in preparation for a potential war with China, I think we should accept that they have a different system and stop the labeling and name-calling, as in the “emperor for life” schtick.

                  2. Yves Smith Post author

                    You are out of your mind. China in the 1980s was a backwards peasant society. Their transformation is nothing sort of astonishing and is an accomplishment unmatched in history. Never have so many people experienced such a large increase in their standard of living in such a short period of time. Yes, it is authoritarian. But it never had a tradition of democracy, and peasant societies that leap to modernism tend to go that route. Yes, it has bad pollution. But Bangkok has terrible air too. India in many areas worse, and their water quality is terrible (not so much pollution but terrible sanitation).

                    Go visit Shanghai. No city outside China even approaches it.

                    1. PlutoniumKun

                      It was a mostly peasant society, but it still had nukes, satellites and a large domestic aerospace industry by the early 1970’s.

                      While it can’t match it in scale, I’d argue that the growth and transformation of South Korea between the mid-60’s to the mid 90’s was even more impressive given the state of the ROK in the mid 1950’s. Also of course, under authoritarian rule.

                      The interesting thing about Shanghai is that the Beijing communist party did pretty much everything it could to suppress its growth due to a suspicion about the real loyalties of the local Party officials. It may have been its late arrival that meant it avoided some of the early mistakes of Chinese urbanisation (second, third and fourth tier Chinese cities are truly horrible places to live, even the wealthy ones).

                1. Turing Test

                  I have plenty of experience doing research, which is why I can recognize an obviously polemical source when I see one.

                  Pro tip: articles that make expansive claims but don’t back them up with proper citations aren’t worth wasting your time on.

      2. juno mas

        Why the US continues to spout the Founder’s obfuscation: All men are created equal, is beyond me. The “men” they were talking about were the men in their group, not the proles, negro’s, or Injun’s.

        We may think they were espousing a grand ideal then, but over 200 years later the ideal is yet unfulfilled

        Today the political system we live in has a Senate power that emphasizes geography (state boundaries) over population, and controls whom will be a member of the third (equal?) branch of government. And that Branch gets to parse the meaning of legislation/Constitution (law) using contrived memes (strict construction).

        Power is decidedly not with “the people”.

        1. drumlin woodchuckles

          As long as we continue to spout the Founders’ obfuscation, we may continue to think it means ” all” manses and womanses, and we might keep trying to Make It So.

          The alternative would be to rewrite it to ” NO men are equal” and work to make THAT so, for once and for all.

          Would that be better?

          1. jun mas

            I’ll state my point more clearly: The Founders were self-interested men, writing a guiding document that they themselves didn’t abide by. The ideal of equality for ALL needed enforcement measures, a return of Native American lands (mostly in the eastern US), and likely farm land for freed slaves. But that wasn’t forthcoming. Not from these flawed Founders. The sooner Americans recognize that a wholesale revision of national goals and “ideals” is in order, the better.

  6. PlutoniumKun

    Its an interesting question, and maybe beyond my ability to come up with an answer.

    I’m not really sure States like China (or Europe or the US for that matter), are ‘either/or’ states – I think every state in history is somewhere on a variety of spectrums between elite control, democracy, pure autocracy, corporatism, or some other form.

    China isn’t really all that unique I think in structure – much of what they do evolved from careful study of the success of Japan and South Korea and Taiwan (they’d never admit to the latter of course). South Korea and Japan maintained a very tight control over the financial system in the early days of their rapid growth, although they learned different lessons when that model ran out of steam or they lost control. In terms of financial control, you could argue that 1930’s Japan is a good analogy for the level of central autocratic control over money and banking.

    What is I think really unusual about the Chinese model is their willingness to use a hyper free market/competitive system to allow winners to emerge, and they then attempt to gain full control over the selected winners – this applies right across the spectrum of the economy, from financial markets to widget makers. This is one reason of course why so many Chinese wealthy make sure they have a landing pad outside China, as they know that the price of success may not be what they intended..

    One reason I would hesitate to come to any conclusions about the Chinese system is that we really won’t be able to judge who is really in control until and when it hits the type of credit/financial crisis that seems inevitable as part of the growing pains of all fast growth economies. Very few, for example, correctly anticipated the way the Japanese elites reacted to the 1989 crash. The only thing in my opinion we can be sure about, is that nearly experts will be surprised at the answers. Personally, I’ve no idea, but my suspicion is that it will be revealed that Beijing doesn’t have quite as much control over the financial system as they think they do. The current indecisiveness over allowing foreign capital inflows I think reflects this uncertainty. Beijing can seem an all-encompassing monolith from the outside, but I doubt its any different from any other government from the inside, full of backbiting and brown nose-ers, with the genuinely smart people always struggling to get their ideas heard.

    Obviously, there is a strong element of corporatism in the Chinese model, or if you want to use a slightly less loaded term, social democracy without the democracy bit. I suspect a hanzi ideogram would be a better way to use as a name. Maybe something incorporating the elements ‘power’ ‘money’ and ‘sword’. Its beyond my mandarin to come up with one. Now that I think of it, if someone could do one, it would make a very excellent hipster tattoo.

    I can’t really think of a good name for it right now – the best I can think of is ‘sino-moneta-corporatism’, but that misses out a lot of the elements that make China special. Perhaps ‘autocracorporatism’, as China has a form of corporatism that (unlike the Japanese system), the guy on top really does make the key decisions when needed.

    1. Michael Hudson

      Thanks for your suggestion. The problem I have is to get a more abstract, categorical word — for a government that keeps money and debt relations as a public utility.
      Is it an “autocracy”? I don’t merely want to say “China model,” because it applies to Babylonia and Bronze Age palace economies as well. “Statist economy”?
      The related problem is to show that democracy (along with the oligarchy and aristocracy into which it evolves) WITHOUT control of the monetary and debt-relations sector is going to polarize and become autocratic. But that is the Western civilization model, since Greece and Rome.
      So do we want to call it “Eastern” and “Western” models?
      The Western model is a “financialized economy.” But what do we call China and Babylonia? “Finance-subordinated economy”?
      well, you get the idea …

        1. Even keel

          A teleological economy?

          An economy that looks at the real or inherent purpose of a thing, it’s qualities, rather than reducing everything to money.

          A qualitative economy? Distinguished from a quantitative economy?

          A humanist economy? But it does not need to look at human needs primarily. Would this exclude environmental considerations?

      1. PlutoniumKun

        Thanks yes, sorry, I can see what you are looking for, I was typing a rambling post hoping that I’d come up with a good name for it. I’m sure this falls into the category of ‘there must surely be a word for this in some language’. Probably German.

        The notion of a society that is the mirror image of a ‘financialised economy’ is a fascinating one, I hope someone does come up with a good word for it!

        1. coboarts

          If political and economic activity are assumed subordinate to the state, how about a “temple economy,” leveraging what we learned in “forgive them their debts.”

      2. fjallstrom

        I think it could be interesting to divide the description into different aspects, and look at which are relevant.

        If I start from a 19th century model of European states they are often divided along monarchy/republic, constitutional/absolutist, and to what degree their (often elected) parliament has power. In these terms China would be a constitutional republic with a very limited public participation.

        In more 20th century terms China is a one-party state. Though that heavily implies the ideology-led aspect of the 20th century one-party states that I think is less dominant in todays China (open fro corrections here).

        To unite this and perhaps formulate more relevant aspects I would say that China as a state is a self-selecting bureacracy. It self-selects trough the party, it is constitutional and a republic, but the self-selecting bureacracy I think captures the core of it.

        But this isn’t what you are looking for, it is more the relationship state/economy. Here I would start with seperating Democracy as in itself including financialisation. While it fits today, I think it is unhelpful. One can imagine a liberal elected state (which is what we tend to call a Democracy (Rousseau for example would disagree)) that dominates finance, and one can discuss if that is what we saw in post-war Western Europe with strictly regulated banking and finance, and government take over of large industries. Therefore I say when Democracy devolves into Oligarchy through financialisation, you could formulate it as a Democracy dominated by finance. In a similar way you can talk about a state dominating finance.

        So – maybe – China is a self-selecting bureacracy that dominates finance. This does not fit for Babylonia where it is instead a monarchy that dominates finance. Not super catchy though.

        As an aside: “The three political forms discussed by Aristotle and Plato were democracy, oligarchy and aristocracy. But of course there was another form, which Herodotus discussed: kingship”

        You are the ancient scholar, not me, but is the common version wrong where Aristotle and Plato discussed good/bad versions of government in the pairs Monarchy/Tyranny, Aristocracy/Oligarchy, Polity/Democracy ?

    2. Thuto

      Alibaba has just been hit with a $2.8bn fine after an anti-monopoly probe found they abused their market power, a fine the company immediately “accepted with humility” as they put it. It’s the “immediately accepted” bit that demonstrates who’s in charge, no lobbyists storming the regulators offices with threats of job losses or promises to “fight this and clear our names” that you’d see in e.g. the US. And the kicker is the probe took only 3 months, and while it’s debatable whether any state can be in complete control of its financial sector as you suggest, It’s undeniable that the Chinese government is decisive and has its elites on a very short leash, something almost completely lacking in the West where oligarchs have free rein to plunder.

      1. PlutoniumKun

        The defenestration of Alibaba was fascinating and quite fun to watch from afar. And very gratifying of course to see a company like that taken down a peg or two. Alibaba seems to have foolishly made themselves the proverbial chicken used to scare the monkeys.

        I’d be a little hesitant though to assume that its all about relative power – a lot of Asian countries (not just China) appear to me sometimes like ducks on a pond when it comes to these matters – serene on top, with frantic paddling underneath. I wouldn’t read too much into the apparent humility and serenity of Alibaba management in accepting their role, there was likely a lot of mutual bloodletting behind the scenes, and there may well be more.

        Prof. Hudson no doubt knows far more about this than me, but as a far distant China watcher it seems to me that there are some fundamental power struggles going on right now about the direction of Chinas broader economic policies and the result may well be surprising. As so often, they are experimenting with different approaches, which can make it very difficult to be sure which is a real policy shift, and which is simply an experiment.

        1. Thuto

          I take your point that the swiftness of the probe and its outcome might belie a more frantic, nail biting behind-the-scenes dueling between both parties. That said, my own sense is that Alibaba and others like it (Tencent for instance is said to be next to come under intense regulatory scrutiny) know that open defiance or chest thumping such as you’d see from companies of this importance in the West is an option entirely unavailable to them. When Jack Ma “forgot” this during his infamous speech/rant in the lead up to the scuttled Ant IPO, he was given a swift reminder. The Tencent founder Pony Ma is said to be already making conciliatory overtures to the regulators in anticipation of the probe into his company’s dealings and I would argue that this demonstrates a careful treading by chinese oligarchs when dealing with state power that is in stark contrast to the open defiance that we see in the likes of Elon Musk in the West.

          1. PlutoniumKun

            I agree that it was a clear indicator of who really runs things in China, and as you say it was a very deftly delivered message.

            I think the question though is whether this applies to all finance companies or whether there are others who will learn to be more subtle (or more ruthless) than Alibaba or Tencent. Like a lot of new fast growing companies they seem to have grown in size and stature faster than their structural ability to use their own strength effectively. Compare, say, the aggressive clumsiness of Facebook compared to the quiet effectiveness of Microsoft when it comes to getting their way with government. There may well be Microsoft equivalents in China, although only time will tell.

          2. Synoia

            that is in stark contrast to the open defiance that we see in the likes of Elon Musk in the West.

            I perceive Elon Musk as Arrogant. With Boer Overtones.
            He Reminds me of some I met in S Africa.

      2. Lance

        The party-state does not works like other governments.

        It is impossible to get rich without the help of the party, and the party can take it away whenever it wants, but your statement “the Chinese government is decisive and has its elites on a very short leash” begs the question. What is the difference between the “Chinese government” and “its elites”? It is all part of the system.

        Did the abuse of market even happen and if so, was it worse than other companies? Or is it the ongoing punishment of Jack Ma after his speech in Shanghai, after which his IPO was cancelled?

        The struggles that we don’t see, the “fight this and clear our names” may all happen, but only behind closed doors. The party cannot admit to mistakes and cannot accept public challenges, but that does not mean they are robots or guided by divine intelligence, it only means that it will not admit mistakes and there will be no public challenges.

        1. Thuto

          Your comment to me seems to be full of conjecture. The information released to the public is that Alibaba abused its market position and has been fined for it, you somehow call the veracity of this statement into question by suggesting that the Chinese government may just be putting on a show, which strays into speculative territory without much to back up such a foray.

          As my second comment to PK acknowledges, it is indeed true that the outcome of such a probe would involve a lot of behind-the-scenes dueling, but what we know is that a fine has been levied and accepted by the company. You suggestion is that well, we may not know for sure, it may all be optics, a display of muscle by the Chinese regulator to deter would-be challengers. Again, this is conjecture on your part. I’m also not sure how you make the leap to concluding that having local oligarchs on a short leash, which I contend the Chinese government does, requires divine intelligence of any sort, when my comment only mentioned decisiveness and the willingness to act swiftly. Additionally, In most countries the political and financial elites tend to be the same people, either directly or by proxy so I’m unclear as to how things are different in non-party states?

    3. flora

      The idea of an ‘internal economic suzerainty’, instead of an external territory suzerainty, might make sense. Instead of the emperor being the center of the universe to whom all decisions are deferred, the central party is the center of China’s universe to which all decisions – including economic decisions are deferred. People, groups, and businesses are encouraged to grow and prosper for the wealth of the country and central party. However, any person or group or enterprise that grows strong enough and might challenge the suzerain’s authority is sharply curtailed if necessary. This is an imperfect analogy. ‘Internal suzerainty’ isn’t a real thing.

    4. Yves Smith Post author

      Having worked as the only non-Japanese in the Japanese hierarchy of Sumitomo Bank, the lead of the most cohesive keritsu, I want to scream when you say “Japanese elites”. They don’t exist in the sense you mean. To the extent there is an elite, it’s the graduates of Tokyo University’s School of Law. It’s not class based. The powerful institutions are not lead from the top but from the seasoned cadres of managers in their mid 40s. Their recommendations are passed up in a ritual manner (the higher ups virtually never intervene) for formal approval. The decision-making is called “nemawashi” which means “patting the roots” but the process is much sharper-elbowed than outsiders recognize.

      There are very wealthy individuals who have inherited successful businesses. But their political influence is limited. Japanese don’t respect wealth. They do respect entrepreneurs for creating jobs.

  7. Louis Fyne

    Today’s China was “born” in the European colonial exploitation of old Qing dynasty China, particularly post-1800.

    Don’t blame the Chinese leadership, or its people, one bit for their current trajectory. I’d do the same if I was in their boat.

  8. Hayek's Heelbiter

    People always forget Hunter-Gatherer societies which abide by economic and social structures just as “advanced” societies do, though the underlying premises are quite, quite different (and infinitely more sustainable).
    It would be an interesting thought experiment to try and nudge the three forms of socioeconomic structures mentioned by Hudson towards HG egalitarianism.

    1. Hickory

      Indeed. All the governance systems mentioned involve top-down control. Hunter gatherers did not, and would not tolerate the restrictions imposed by gov’t. Your thought experiment would involve a revolution, but unlike most in history – it would not lead to changing what person/ group controls the state, but ending the state, including its record keeping of land boundaries, money, and so on. Then humans would be free to associate and move and live as they wish, and revert to a state of nature, provided they could prevent other states from taking over. Some groups like the Zapatistas have achieved this, with difficulty.

      1. Synoia

        Hunter gatherers did not, and would not tolerate the restrictions imposed by gov’t.

        Hunter Gatherers most certainly were restricted from the top. Look up Shaka, Dingan, Buthelezi, or the Nigerian Chiefs and consider their control of their people.

        Or Captain Cook’s happy adventures with Pacific Islanders.

  9. Michael Hudson

    Thanks for your suggestion. The problem I have is to get a more abstract, categorical word — for a government that keeps money and debt relations as a public utility.
    Is it an “autocracy”? I don’t merely want to say “China model,” because it applies to Babylonia and Bronze Age palace economies as well. “Statist economy”?
    The related problem is to show that democracy (along with the oligarchy and aristocracy into which it evolves) WITHOUT control of the monetary and debt-relations sector is going to polarize and become autocratic. But that is the Western civilization model, since Greece and Rome.
    So do we want to call it “Eastern” and “Western” models?
    The Western model is a “financialized economy.” But what do we call China and Babylonia? “Finance-subordinated economy”?
    well, you get the idea …
    Also: Polanyi said that money shouldn’t be commodified – or land. So perhaps “non-rentier economies.” Democracy traditional has gone together with creditor and landlord rentiers and monopolists in the West. THAT is why democracies turn into oligarchies and aristocracies.

    1. Susan the other

      But isn’t it all Credit? The best question is What is debt? It’s debt that makes no sense. Because… No mere human can appropriate the elusive wealth of “credit” or “debt”. That’s because all wealth comes from planet earth, from the sun, from the cosmos. To write an encyclopedia on how wealth gets declined into “private tokens of wealth” would take a bigger carbon footprint than bitcoin and make even less sense. It seems like the biggest possible no-brainer is to simply realize the truth of this. And the logical next step for us all would be to make civilization be a system of credit toward a goal of survival. Debt is the biggest delusion in the universe. Except when we must face how we have wasted the natural wealth of the planet. That’s definitely debt – but there’s no survivable way to “write it off”. So to do Planet Credit we need to admit all this and then stop polluting; stop going to war; stop gobbling up the habitats of every other living creature; and etc. And create, with good credit for all, a sustainable, livable world. What goes around comes around – but there has never been a free lunch. No matter how many economists keep thinking there might be one somewhere.

    2. drumlin woodchuckles

      Well . . . what would we call the kind of political-economy we had for a short time after the New Deal?
      Before the financialists outlawed and lifted all the New Deal era limits and controls?

    3. lance ringquist

      how about the word “SANE”

      i call what we have today as free trade economics. without free trade, the world would not be available for rape and plunder completley free of any democratic control.

      keynes said keep finance within borders, and make as much stuff as you can at home.

    4. steelhead23

      I suggest using the french ‘contrôlé faire’ to describe the Chinese financial economy to differentiate it from the laissez faire economies of the West.

  10. Tony Wikrent

    A republic. The official name is The People’s Republic of China after all.

    A republic is a form of government; of organizing politics. Socialism is a form of economy. Capitalism is also a form of economy, not a form of government or politics. There is NOTHING in the USA Constitution or even in The Federalist Papers about capitalism. Find them online and do a text search if you don’t believe me.

    USA is supposed to be a republic, also. So, how did we end up with a capitalist economy now dominated by predatory finance? As many historians have agonizingly recognized, it required liberalism to triumph over civic republicanism in order for capitalism to emerge and become dominant. And, it is important to note that Marx and Engels based themselves on the western liberal tradition, not on civic republicanism. I think this is begins to explain why marxism, communism, and socialism have been so devastatingly ineffective at opposing the institutionalization of neo-liberalism and Austrian libertarian economics since the 1940s debut of the Mont Pelerin project.

    I know a lot of people, including Dr. Hudson, hate Alexander Hamilton, but I think what they hate is the caricature of Hamilton that has been created by his opponents. And who were Hamilton’s opponents in his day? Why, Jefferson and the agrarians, who wanted to preserve the agrarian influence over the economy and politics, but most especially wanted to preserve feudal slavery.

    In fact, Hamilton himself wrote that banking is more of a public utility than anything else.

    Hamilton also devised, for governing the Bank of the United States, a scheme of proportional shareholder representation in which no one “person, copartnership, or body politic” was allowed more than 30 votes, no matter how many shares they owned. Such a system of corporate ownership is entirely at odds with the business management ideas of shareholder value, profit maximization, private equity, etc., etc., that have predominated for around the past half century.

    Republicanism as a philosophy of government recognizes the danger of concentrations of wealth pose to a polity. Plato wanted, as noted in the OP, philosopher kings, which I think most people do not take the time to understand, and simply dismiss as elitist, or utopian, or both. But philosopher kings are what you get when you train and educate someone from an early age to actually exercise power, by sending them to place like Eton or Groton or Exeter, then to Oxford or Cambridge or Harvard. The question is: do you train them to exercise power to enrich themselves and preserve their privilege and position, or do you train them to serve the public interest and promote the General Welfare? What do you think you get when their economics professors instruct them that the sole purpose of a corporation is to increase value for its owners?

    Machiavelli discussed the dangers of concentrations of wealth repeatedly in the Discourses on Livy, especially in his section on how the Roman republic developed the Tribunes as a countervailing power to the oligarchs of the Senate. In, USA, John Adams was most explicit about the dangers posed by the wealthy. As for Hamilton, his task was to find a way not to lock out the power of the rich, but to tame and harness it by aligning their interests with those of the new nation, still weak and surrounded in all sides by colonies of monarchs and oligarchs. Christian Parenti’s new book, Radical Hamilton, discusses the details of how Hamilton did this.

    Ganesh Sitaraman, in his book The Crisis of the Middle-Class Constitution, discusses how republicanism deals with the problem of the rich, and observes how, after allying with the British, a monarchy, to defeat fascism in World Wars 1 and 2, then Soviet communism in the Cold War, Americans completely forgot their cultural antipathy to oligarchies and monarchies. And, of course, who today can describe the difference between a republic and a democracy?

    But, again, for capitalism to triumph, it required that republicanism be displaced by democratic liberalism. Republicanism is a philosophy of government, under which, I believe, the organization of the economy must include elements of both capitalism and socialism. China calls itself a republic. Why not use the word? Will we have to change the pledge of allegiance and drop the phrase “the republic for which it stands”?

    1. William Neil

      Good to see your work again, Tony, complex as usual. Explaining and categorizing China is a tough one, and caution is in order. A one party state, with no formal checks and balances between various governmental structures – so neither a republic nor a democracy. Its handling of the crisis of 2007-2008, as well as its extreme caution in giving a foothold to Western financial institutions would seem to combine pump priming via vast infrastructure as well a MMT type reduction of worries over governmental debt – a freedom to the party which few others in the West enjoy, except perhaps in the extremis cases like WWII…

      Two people who know something about China whom I would like to call as witnesses are Richard Smith, the socialist-environmentalist from NY City and DSA, and James Galbraith down there in Texas, who has formally advised the government there over the years.

      I’ve been on the record early as following the late William Greider’s worries over the potential power of China to upset whatever equilibrium there was in the Western economies (and beyond) by undercutting its manufacturing “rung” – causing the most harm to the non-college degreed working class…This was trouble for sure in my mind, beyond China’s ultimate intent – its sheer scale and success would be impact enough.

      China’s speed in the traditional process of modernization – moving tens of millions from the rural agrarian life to the industrial cities, and now, as David Harvey opines, to capital intensive forms of modern manufacturing to match the West – and the startling fact that it is the only major power to have undergone this process without a major crisis as in the periodic depressions of the American and European 19th century and the Great Depression, make all of us sit up and ponder what is going on.

      As of yet, Hudson is right, no name for it. And torn between awe and worry over what it means for the rest of the world. I tend to worry more about that than the American elites, financial and political, did in rolling out the red carpet for China during the late 1980’s and 1990’s. Greider thought this was one of the few things Trump got right – of course, with no serious game plan to act on it, just the inflammatory style and tightrope over geopolitical upheaval.

      I’ve asked more than once, “Has any other leading economic power ever paved the way for its rival, successor so completely as the Americans during the Clinton years?”

      Harvey says before we did that we allowed the transfer of key technologies to the ring of Asian Tigers deliberately to hem China in, which is the first I’ve heard that take…yet here is China, overpowering them all, forcing them to cut deals in homage. As does Germany….

      1. Alex Cox

        In England the aspirant ruling class move from Eton to Oxford to the Inns of Court to Parliament – in each instance, inhabiting an other-worldly, faux-gothic environment, full of wealthy people.

        There is absolutely no notion of public service at any stage. They are learning how to serve the oligarchy and massively enrich themselves.

        The idea of the Philosopher King is very interesting – not in terms of kings, which we don’t need – but of Philosopher Parliamentarians.

        What if anyone standing for office had to renounce the accumulation of personal wealth? Aspirant MPs or Senators would agree simply to legislate (itself an incredible privilege) and then to retire on a modest pension and tend their allotments.

    2. Darius

      Do you have further readings about republicanism? Your comment is my first exposure to this line of thinking. I have been won over to the idea that liberal reform is futile because organized money can easily undermine it to maintain and increase control. This, as I understand it, is basic Marx. Perhaps republicanism as you describe it offers the tools to cut the power of organized money to the ground.

      Your point that concentration of wealth is the most dangerous threat to society rings true. How do we prevent it except by nationalizing finance and putting production in the control of the workers? Perhaps finance should be nationalized and antitrust laws strictly enforced, as well as strengthened. How can we rely on liberal democracy to do that in the era of mega-donors and corporate control of society?

      1. Tony Wikrent

        This is the first source I’ll list. I started compiling a list a month or so ago, but never completed it. There is a lot of sources, but basically, there is no good original source other than those in the source below. After that, there are articles by academic historians from the 1970s and 1980s mostly, then these ideas were picked up by Constitutional scholars, so there are a bunch from law journals in the late 1980s. I will post a few more below, in a bit, and perhaps some tomorrow.

        Senator Charles Sumner

        The Equal Rights of All: The Great Guaranty and Present Necessity, for the Sake of Security, and to Maintain a Republican Government. Speech in the Senate, on the proposed Amendment of the Constitution fixing the Basis of Representation, February 5 and 6, 1866. With Appendix . .

        [Sumner is the Massachusetts Whig / Radical Republican who was caned senseless on the Senate floor by South Carolina congressman Preston Brooks in 1856, in revenge for Sumner naming Brooks family members in Sumner’s “Crimes Against Kansas” speech. Pages 174 to 190, if I recall, are the best parts. This was a two- or three-day speech, if I recall correctly.]

        Charles Sumner, Works, Volume 10, p 174ff,


        P109 Disenfranchisement inconsistent with republican government (very germane to what (not)Republicans are doing today, in Georgia, and other states)

        P136 Guarantee of republican form of government

      2. Tony Wikrent

        Academic Historians

        Charles Beard’s 1913 book, An Economic Interpretation of the Constitution of the United States (Macmillan, 1913), according to Wikipedia, 

         the Constitution was a counter-revolution, set up by rich bond holders (bonds were “personal property”), in opposition to the farmers and planters (land was “real property”). The Constitution, Beard argued, was designed to reverse the radical democratic tendencies unleashed by the Revolution among the common people, especially farmers and debtors (people who owed money to the rich). 

        Beard’s interpretation remained hegemonic until the 1960s, when three key books were published which focused on what the American revolutionaries and founders said they believed and why they did what they did. 

        The Machiavellian Moment, : Florentine Political Thought and the Atlantic Republican Tradition, J.G.A. Pocock (Princeton University Press, 1975, reprint 2003), was the last, and I found it too difficult to read, so never finished it.

        The Ideological Origins of the American Revolution, by Bernard Bailyn (Harvard University Press, 1967) pp 55-56; is based on over 600 pamphlets, broadsheets, and newspaper commentaries of the Revolutionary era. 

        The Creation of the American Republic 1776-1787, by Gordon S. Wood (University of North Carolina Press, Chapel Hill, NC, is very readable, but also very long. Wood devoted one chapter to explaining republicanism, and it is available online here: 

        “REPUBLICANISM” from Gordon Wood’s Creation of the American Republic.
        This one chapter is probably the best single thing to read.

      3. Tony Wikrent

        I’m going to jump over the other sources from academic historians, including a couple very good historiographical essays that explain how the issue of republicanism was developed and interpreted by academic historians. I’m jumping mostly because I have to shift attention to other matters this evening, and I have this list all ready to go. It is the articles on “the republican revival” in a special issue of the Yale Law Journal.
        Yale Law Journal issue

        In 1988, an entire issue of the Yale Law Review devoted to it:


        • Law’s Republic, by Frank Michelman
        • Beyond the Republican Revival, by Cass R. Sunstein
        • Law’s Republicanism, by Kathryn Abrams
        • The Republican Revival and Racial Politics, by Derrick Bell and Preeta Bansal
        • Further Beyond the Republican Revival: Toward Radical Republicanism, by PaulBrest
        • Modern Republicanism – Or The Flight From Substance, by Richard A. Epstein
        • Look Before You Leap: Some Cautionary Notes on Civic Republicanism, byMichael A. Fitts
        • Making Republicanism Useful, by Linda K. Kerber
        • The Missing Element in the Republican Revival, Jonathan R. Macey
        • As If Republican Interpretation, Jerry Mashaw
        • Reviving Republicanism, H. Jefferson Powell
        • Rainbow Republicanism, Kathleen M. Sullivan

        more tomorrow

      4. Tony Wikrent

        A little note before I leave for the evening. My conclusion thus far is that republicanism, because of its principle of civic virtue (the public interest must not be subordinated to private interests), is very amenable to socialist forms of economic organization.

        And, conservatives and libertarians, and their claims of fidelity to USA founding principles, are full of shit. Among the biggest con jobs ever in history were convincing Americans that Adam Smith and John Locke were intellectual guiding lights for USA’s founders.

        1. eg

          In my experience, conservatives and libertarians have created a cartoon version of Adam Smith for their own purposes, distorting his work out of all recognition.

      5. Anonapet

        How do we prevent it except by nationalizing finance and putting production in the control of the workers? Darius

        Arguably, an ethical finance system would result in more worker control in the first place since those with equity could not then bypass the need to share that equity or at least pay honest interest rates.

      6. Tony Wikrent

        The big flaw in neo-republicanism

        John Rawls, Philip Pettit, and others have promoted a truncated version of republicanism that focuses only on liberty, which they define as “non-domination.” My conclusion is that this cripples republicanism, which I believe also requires an active promotion of doing good. There is nothing I have seen yet devoted to this requirement. It is implicit in almost  everything I’ve read. The obvious origin is the Judeo-Christian injunction to do good works. Benjamin Franklin was very explicit about the need to do good as both a personal and civic principle. Besides the organizations Franklin helped form in Philadelphia, the institutional form this takes is based on Hamilton’s 1791 Report to Congress on the Subject of Manufactures, centered on the promotion of manufactures. Therefore, any decent biography of Franklin and Hamilton will be full of details of republican political economy without be identified as such.There are no books that directly address the issue of the need to do good by having a government that actively encourages the arts, literature, and especially science, but these are useful for understanding this point:

        Boritt, Gabor S., Lincoln and the Economics of the American Dream. Memphis, Memphis University Press, 1978.

        Bourgin, Frank, The Great Challenge: The Myth of Laissez-Faire in the Early Republic. 1989, New York City, George Braziller Inc., 1990. New York City, Harper & Row, 1990.

        Dupree, A. Hunter, Science in the Federal Government: A History of Policies and Activities to 1940,  Cambridge, Harvard University Press, 1957, reprinted by Harper Torch Books, 1964.

        Flamm, Kenneth, Creating the Computer: Government, Industry and High Technology, Washington DC, Brookings Institution Press, 1988.

        Larson, John Lauritz, Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States, Chapel Hill, University of North Carolina Press, 2001.

        Peskin, Lawrence A., Manufacturing Revolution: The Intellectual Origins of Early American Industry Baltimore, MD, Johns Hopkins University Press, 2003.

        Richardson, Heather Cox, How the South Won the Civil War: Oligarchy, Democracy, and the Continuing Fight for the Soul of America, Oxford University Press, 2020.

        Smith, Merritt Roe, editor, Military Enterprise and Technological Change: Perspectives on the American Experience. Cambridge, MIT Press, 1985.

      7. Tony Wikrent

        The political economy of republicanism

        Huston, James L., Securing the Fruits of Labor: The American Concept of Wealth Distribution, 1765-1900, Baton Rouge, Louisiana State University Press, 1998.

        Kasson, John E., Civilizing the Machine, Technology and Republican Values in America, 1776-1900, New York, Grossman, 1976; Penguin 1977.

        McCoy, Drew R., The Elusive Republic: Political Economy in Jeffersonian America. Chapel Hill, University of North Carolina Press, 1980. New York City, W.W. Norton & Co., 1982.

        Also see some of the articles in the 1988 Yale Law Review issue on the republican revival. 

  11. The Rev Kev

    Bit of a head-scratcher this and if I had to come up with a term, I would used ‘Channeled Capitalism’. Sorry, but I will have to explain a bit here. Chinese have a reputation as great business people going way back. It should be noted that when the Chinese government took off the shackles and let their people do capitalism, their nation shot ahead and it is still going strong in spite of problems. They are now literally leaving the west sitting in their own decayed infrastructure. Seeing Hong Kong and Singapore grow rich with far less resources must have given them the impetus to do so. OK, that is the ‘Capitalism’ bit.

    But it is also a ‘Channeled ‘ form of government. What I mean by that is that the government has drawn barriers to show far their people can go and which direction. They have seen how a class of billionaires in the west have taken over their own governments and are cannibalizing their own countries and are not keen to see the same happen in China. The deal appears to be that you can get wealthy if you can do it – but if you think that your wealth will let you take away our power, that will not be permitted. Those disappeared billionaires are those who ignored the message I suspect and Jack Ma’s temporarily going MIA was a message that it does not matter how big you get. Thuto above reminds us how Alibaba just got hit a $2.8bn fine and they are China’s Amazon. So like water, Chinese capitalism has been ‘channeled’ into – mostly – effective channels.

    And as I have said before, the west hates China this as they have showed people living in the west that there are another ways possible and that it is not inevitable to have 1% of a population seize hold of the wealth of a country and deprive the other 99% of even the resources to live. Perhaps western leaders could take a lesson from Cersei from Game of Thrones about how to deal with billionaires as she knew how it works and would inform those billionaires that power is power-

    https://www.youtube.com/watch?v=ab6GyR_5N6c (1:57 mins)

    1. Anonapet

      Perhaps western leaders could take a lesson from Cersei from Game of Thrones about how to deal with billionaires as she knew how it works and would inform those billionaires that power is power- Rev Kev

      There has to be a better way and if the US can’t find it then shame on US and bump the Rapture* Index a few times too.

      *Which won’t be pleasant for Left Behinds.

      1. Synoia

        The deal appears to be that you can get wealthy if you can do it – but if you think that your wealth will let you take away our power, that will not be permitted.

        True, So far. That was also true for the Middle Ages’ Kings of England. I’m willing to postulate that as China’s “Communist” Epoch continues it will be just one more episode of Dynastic rise and fall in China.

  12. Rolf

    I have nothing intelligent to add here, except to thank Michael Hudson, whose books I’ve read, for his post here, and to thank those above for their comments, whose content contain significant insights. Great reading this on a Saturday morning — actually gives me hope in otherwise dark times.

    Stay safe all.

  13. flora

    a small quibble:
    American rhetoric contrasts democracy to “autocracy.”

    I would say American rhetoric contrasts democracy to totalitarianism. Capitalism can be the economic system in either governmental form. See Allied vs Axis powers in WWI, for example.

  14. jefemt

    Color me the poop-tinted bespectacled cynic. Follow the money: Jack Ma? Xi’s family and cronies? I am quite confident that there is a lot of dirt under any system’s fingernails.

    Ask a Uyghur or a far rural peasant, or a Tibetan, or any one of many African nation-states that are experiencing the Belt and Road across their behinds. All ships rise on any tide.
    Do you have a yacht, a boat, a log, or an empty capped plastic bottle in each hand? Personal Watercraft!

    I struggle to observe a system with a care about the least among us and a tightly woven safety net that is elevated above the lowest possible levels. I do sometimes come back to Cuba— where would Cuba be if not for decades-long punishing western embargos? Still their PR machine trots out many impressive achievements.

    Time is running out for the 7 billion hurtling through space on a very haggard abused tired world and its inhabitants, humans included.

    And all I observe in the media is the pining and promotion for the return to normal. I was hoping Covid, essential workers, essential products and services, isolation, living with less, time to ponder and observe–might usher in a new set of priorities and direction. Silly me.

    The fault, dear Brutus, is not in the stars, but in ourselves….

  15. michael hudson

    My point goes beyond just being shrewd business dealers. It has to do with whether money (and land) are privatized or administered by a “higher” authority (royal or public or Party).
    Here’s the basic contextual problem: Polanyi said that money shouldn’t be commodified – or land. So perhaps “non-rentier economies.” Democracy traditional has gone together with creditor and landlord rentiers and monopolists in the West. THAT is why democracies turn into oligarchies and aristocracies.

    1. marcel

      I think it was an article from Paul Krugman, several years back, on why healthcare cannot be market-based, that started my thoughts. There are quite a few ‘natural monopolies’ that don’t fit the market perspective.
      I had healthcare in there, as well as education, but also water, gas, electricity, and internet among others. And I didn’t realize that land and money also belong in there.
      So if we have a society organized in such a way that such natural monopolies cannot be commoditized, i.e. where we can insure that each citizen gets “his part” (even if some citizens get much more) and no citizen can ‘screw over’ his fellow citizen, perhaps we could call this “populists”?
      So China looks like, or tends to, a “populist economy” where a ‘minimum welfare’ of the population is guaranteed.

    2. Rod

      Polanyi said that money shouldn’t be commodified – or land.
      I bolded the word I consider nefarious and pivotal to me.
      and of course we do it to Humans.

      What does it mean to commodify someone?
      (transitive) to treat (something) inappropriately as if it can be acquired or marketed like other commodities.

      Commodify definition and meaning | Collins English Dictionaryhttps://www.collinsdictionary.com › dictionary › comm.

      To the result: as Polanyi scholars Fred Block and Margaret Somers claim, “When these public goods and social necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.”[2]

    3. Kouros

      What do democracies emerge from, vacuum?

      The harshness of the Bolshevik Revolution could be understood in a sense (Lenin & Co had a lot of material to draw from, many revolutions happened before theirs) as creating a blank slate, maybe akin to Rawls Veil of knowledge, in a sense…

  16. Rod

    The important characteristic is that banking and financed are public functions.

    Well I think so also, and see Public as inclusive beneficiaries of all in that Society.

    Because the potential they have to enhance the Society that views them that way instead of enriching those controlling those functions.

    They are tools without a conscience, applied as their controllers, presently, see fit and profitable.
    Presently, a two sided coin only curated and presented to us as one sided only.

    A snappy identifier would be so useful if it were clarifying in distinguishing the Effect of Private facing-v-Public facing Banking and Finacing. Like Thuto above, I like Socialism, but agree ” Socialism has become a scare word” despite it’s root being ‘Social’–which, as a Human, I really do embrace.

  17. laodan

    To counter the contemporary Western model of society, that is driven by financial “rentiers’, Michael finds one possible answer in the Bronze Age Near-East (which is eurocentrism for the TCA = Tri-Continental-Area) where ‘philosopher-kings’ liberated their citizens from the shackle of debt. Left uncontrolled debt had indeed the particularity to enslave the debtors which ‘philosopher-kings’ wanted to avoid at all costs because it allowed rentiers to accumulate ever more gold and silver which gave them too much ammunition in their fight to usurp their power. But to my knowledge this practice was abandoned by the time of the Roman Republic or earlier.

    Trying to characterize the Chinese societal model by relating its performance to the freeing of debt in the bronze-age is audacious to say the least. First our knowledge about China’s antiquity is not as advanced as in the TCA because systematic archeological digging only started after Song Jiang, who was Minister of Science and Technology,at the time, decided to invest in it sometime at the end of the 80ths. Europe started to dig systematically in the TCA by mid 19th century ! But there are other more fundamental reasons, why we should not rush to judgment about characterizing the Chinese polity, that go back further than the bronze age … during the transition from tribal-societies to power-societies that started sometime 12,000 years ago and concluded sometime 5,000 years ago when a radical differentiation occurred in what happened in the TCA and in China.

    In short :

    —- the TCA violently destroyed all traces of animism (abandoning Gebekli Tepe and covering it under a thick layer of dirt is the most convincing proof of this thesis). But societal groups need a worldview to share with their citizens in order to be able to reproduce their institutions over time. That was satisfied by inventing new ideological narratives that contrasted starkly with the pragmatism of animism.

    —- in the territory of present-day China animism was preserved and the first dynastic sovereigns were animist sages who preserved the animist knowledge base which …is preserved until this very day inside what is called the Chinese Traditional Culture (Chinese Traditional Medicine, Chinese Traditional Governance, Chinese Traditional arts, Chinese Traditional Cuisine, and so on and on).
    Contrarily to what PlutoniumKun thinks about Chinese governance its origins go back deep in time and its practice has been encoded generation after generation and these archives have largely been preserved. But what characterizes China’s governance most is its professionalism. Cadres are selected by exams ! And the function of governance has always been considered to be a service to the population with the right to demote those in power if their service is deemed non satisfactory.

    Conclusion :

    — Till today Religions prevails in the TCA while animism prevails in China. Those 2 are irreconcilable and foster radically different thinking and behaviors.

    — Power in the TCA and by extension in the West was all about force and control of the minds by a minority while in China power evolved as a non-written contractual service akin to the service of the traditional tribal (wo)men of knowledge and it was exercised by people from different social origins that had succeeded the state exams. Yes they had exams starting 2000 years ago !
    Those 2 ideas of power are irreconcilable and their impact on peoples’ daily lives has left traces that are measurable in term of quality of life, of dynamism and of innovation.

    — About the role of the state in the economy :
    — in the TCA and in the West that role was limited to extract part of the citizens’ work to pay for the extravagances of the men of power
    — in China the role of the state was to procure stability so that the citizens could maximize the production of their daily lives. The Classic “The Annalects” signal 2 fields in particular : – the protection from outside interference – low taxes and the least interference possible in peoples’ lives. And the Confucian classics recognize the right to the citizens to demote the emperor and his team if he does not satisfy these 2 conditions.

    So if we were in need of a formula to characterize Chinese governance I suggest this idea of a non-written contractual “governance service” to maximize the well-being of peoples’ daily lives. This service naturally extends to the control of corporate interests and more particularly financial corporate interests as Jack Ma has been experiencing over the last few months. Nothing like Ma’s experience has ever been observed under a Western democracy ! So one would have to conclude that the Chinese “Governance service” operates in a qualitatively higher dimension than Western democracy. Their “Governance service” against Covid-19 was exemplar of such a qualitatively higher dimension and it has literally left democracies in the dust.

    1. drumlin woodchuckles

      Given that Marxism and all its descendant isms are intellectual descendants of the TCA West, and that the CCP is ruling China in the name of a Western (German-based actually!) Ideology ( Secular Religion), how much pre-Communist Chinese culture-ethical approaches have risen within the system of Communist Party Rule?

        1. John

          Iaodan says in detail what I would say in bare outline. There is continuity in governance and the purpose of governance in China from its deep past to today. The Party is the ultimate authority as was the imperial establishment that preceded it. It sets policy and adjusts policy to changing circumstances. It’s role is, to over simplify, to channel and balance forces as the emperors of the past were charged with channeling and balancing the flow of the Huang He. Mencius amended Confucius by stating that if the emperor did not serve the interests of the people the Mandate of Heaven would be withdrawn … the could be emperor deposed. I believe this to be true today.

  18. lyman alpha blob

    Aristotle may not have discussed kingship, but his fellow Greek historian Polybius did a couple hundred years later. He saw all governments as cyclical with good forms degenerating to bad ones.

    We should therefore assert that there are six kinds of governments, the three above mentioned which are in everyone’s mouth and the three which are naturally allied to them, I mean monarchy, oligarchy, and mob-rule. Now the first of these to come into being is monarchy, its growth being natural and unaided; and next arises kingship derived from monarchy by the aid of art and by the correction of defects. Monarchy first changes into its vicious allied form, tyranny; and next, the abolishment of both gives birth to aristocracy. Aristocracy by its very nature degenerates into oligarchy; and when the commons inflamed by anger take vengeance on this government for its unjust rule, democracy comes into being; and in due course the licence and lawlessness of this form of government produces mob-rule to complete the series.

    Polybius praised the Roman Republic of his day for being a combination of all three which he considered the best option, but he also knew that even that wouldn’t last, perhaps after boning up on his Heraclitus. And he was right, because less than 100 years after his death the Republic was long gone.

    I don’t know enough about Chinese government to offer an informed opinion on what they should be called, but the rampant financialization of everything everywhere has made it so you can’t swing a cat without whacking an oligarch in the face. China and Russia have managed to keep theirs in check to an extent, or maybe it just seems that way from a distance, but in the US they are running roughshod over everything. Polybius was wise enough 2000 years ago to know that even in a democracy, freedom had limits-

    …that is no true democracy in which the whole crowd of citizens is free to do whatever they wish or purpose, but when, in a community where it is traditional and customary to reverence the gods, to honour our parents, to respect our elders, and to obey the laws, the will of the greater number prevails, this is to be called a democracy.

    By that measure, it’s hard to argue the US is a democracy. With all the upheaval and protest worldwide and no viable alternative to financialized democracy or socialism or whatever you want to call it on the horizon, mob rule and tyranny start to seem likely in the not too distant future.

    Note to Michael Hudson (or anyone else interested in classics): I see you meant to cite Herodotus debate in your essay. You are probably aware of this source already, but the Perseus Digital Library is a great repository of all kinds of classical texts. You can read them in the original Greek and Latin or English translation. They appear to have a few in other languages as well. A classics professor of mine worked on this project back in the late 80s/early 90s and it was he who introduced me to my first hyperlink as he used them in the development of Perseus and encouraged his students to use them in their own projects. I can’t remember exactly what we were hyperlinking to as there was no internet at the time…

    1. drumlin woodchuckles

      Perhaps the CCP is letting the Orthodox Marxist belief in capitalism successionizing itself to Socialism and then Communism guide its policy in so far as it has decided to let the Chinese capitalists run semi-amok as long as they don’t threaten the concept of Great CCP Helmsmanship itself.

      Perhaps the CCPists expect to harvest all the productive forces and all the product of all the productive forces in the fullness of time, in the Final Great Bonfire of the BoorzhWahZee..

  19. ex-PFC Chuck

    How about “Socialarchy,” a compound word that would denote governance for the common good? Comparative terms would be “monarchy,” governance by dynasty, and “oligarchy,” governance by self-selected insiders. The latter two conduct the affairs of state first and foremost for their own benefit.
    Socialarchies could could vary along several axes. The economic axis would be ultra-communist (i.e. only state-owned enterprise) at one end and ultra-entrepreneurial (i.e. libertarian) at the other. Another axis would be, for lack of a more concise term that comes to mind, governmental dispersion. At one end would be the New England town hall where anyone and everyone who shows up gets a vote; let’s call this the ultra-democracy. We can call the other end, where governance authority is vested in a small number of people, the “oligcratic” end. There are probably axes I haven’t thought of.
    In this framework the USSR would have been near the ultra-communist end of the economic axis and the oligcratic end of governmental dispersion. Whereas in October, 1917, it had good socialarchic intentions, by its end much of its managerial class, the nomenklatura, had become closeted entrepreneurs within its state-owned institutions.
    Contemporary China is also oligcratic in terms of governmental dispersion but somewhere in the middle of the economic axis. From this distance it seems to still have genuinely socialarchic intentions and has made great progress achieving them over the past 40 years.

  20. barefoot charley

    I’d build on the genealogy of statehood you’ve introduced so many of us to, and name China’s evolved model ‘palace capitalism.’ Replete with princelings, lofty bureaucrats, intrigues and a clear locus of power.

    It has the advantage of being self-explanatory with a bit of background. Unlike the self-fogging label of ‘free-market capitalism.’

  21. meadows

    If we have a Public Library, a Public School/University, maybe a Public Bank, Public Utility, etc…. why not a Public Economy? Wherein the economic well-being of citizens is primary and considered essential to laws regarding finance. For example, legislation controlling usury, debt jubiless and working wages.

  22. john brewster

    Rentier capitalism is the ultimate in short-term thinking. Kill the golden goose now because tomorrow does not matter. China and Russia today, and many countries after WW2, use state planning (aka dirigisme) to as someone put it, “channel” capitalism.

    So I propose Long-term capitalism versus short-term capitalism.

    Interestingly, even the rentiers now see a need for long-range planning – The Great Reset. But that will be central planning by Wall St. and the Davos crowd, not by the governments that are subservient to them.

    1. john brewster

      Or, Strategic vs Tactical Capitalism.

      Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

      – Sun Tzu

  23. plantliker9001

    I think an important part of Chinese politics is their long historic relationship with a strong meritocratic institution. Large bureaucracies of civil servants coexisting with emperors served to uphold the social hierarchy and hold together the imperial holdings.

    So perhaps what we have today is something like a neo-technocracy or neo-blobism, where the financial institutions work from a centralized frame to build the strength of the blob and also the personal power and enrichment of important civil servants.

    This exists in contrast with some form of neo-feudalism in the west of smaller bureaucracies of corporations pulling the strings of western governments and extracting various rents for their own small kingdoms.

  24. Chris Herbert

    The NH House of Representatives, a solidly Red group of libertarian influenced Republicans, voted to adopt “In God We Trust” and recommended that this motto be displayed in schools. The God of Wealth is Mammon. That “In God We Trust” is on our currency is almost kind of creepy. But we do have a corrupt tax system and a corrupt financial campaign system (where bribery is quite legal) and a One Percent oligarchy. Ergo we do worship money.

  25. The S

    Wouldn’t this be a dictatorship of the proletariat? Decisions are made by the majority, capital is made subservient to what’s best for society. Usury-free democracy? Those who have the gold make no rules?

    Eric Li has a fantastic minute-and-a-half summation, from John Pilger’s “The Coming War on China”


  26. JustAnotherVolunteer

    bureaucratic socialism? With a hat tip to Trotsky and bureaucratic collectivism.

  27. Cat Burglar

    “If Democracy…?”

    Is the question properly put?

    Right now — and you could cite the Gilens and Page study — the US is not a democracy, and you could follow generations of analysts on the far left that it never has been. While the US retains some defensible constitutional limitations on state power, and institutions of popular representation, they are compromised enough to be considered mechanisms of legitimation, but not organs of popular power that confer identity on the political form. So I don’t buy the Autocracy vs. Democracy meme put forward in the New Cold War media.

    Oligarchy still seems to be the best political term for China, the US, and Russia, but an adjective is still needed to name the operations that create and reproduce the small group that rules. (Oligarchy With Chinese Characteristics would be fun, but still begs the question.) Control of banking and credit seem to be how it is done in the US, but control of resources might go through completely different channels in Russia (where the siloviki seem to have veto over the oligarchs) and China (where the Party dominates via direct power).

    The entire world seems to be converging on the kind of political form that the CIA has spent most of it’s life exporting to what were once called Third World Countries: oligarchies with limited representation, varying at times between overt domination and indirect control, but with the same group in the saddle at all times. Merleau-Ponty wrote in Adventures Of The Dialectic that we have to consider that under the cover of the existing politics, something entirely different is being constructed.

    1. eg

      I sometimes call our system Cosmetic Democracy, since its outcomes are clearly consistent with plutocracy.

      1. Lambert Strether

        Hudson is looking for a word for a political economy with “centralized control over money and debt, with the state being the main creditor.” So your suggestion is not on point.

        1. Even keel

          Is it the fact that control is centralized that is key? Or is it the fact that the control is exercised for purpose other than mere money accumulation. Our credit-controllers have no necessary other purpose for their credit than to expand its reach so as to accumulate more money.

          By contrast, the creditors in the palace economy or the Chinese economy have a different, non financial, purpose for their credit. Which is why they can do forgiveness, amnesties, or other anti-creditor tasks.

        2. Tom Pfotzer

          That’s exactly what some commenters are taking exception to. I think Mr. Hudson is asking the wrong question – he’s putting the emphasis where it doesn’t belong.

          In several comments – and in Mr. Hudson’s material – the notion of a noble cultural ethos – the “public service” ethic – is what differentiates effective government from oligarchic or even mob-level theft.

          It matters not who is in control of capital and money. The question is “what do they do with it?”. And not just the “capital” – also the intention, the attention, the effort of the general population. Where is it directed? From where does it emanate?

          China has done a good job of keeping the Rentier class out. Why? Because they don’t add value. They do no public good, and that’s why the Great Opening of China to the West was a Dud. China was hip to the game.

          Let’s not make this more complex than it is. Some societies have the good judgement to cultivate and reward public-spirited behavior. The U.S. has decided that “greed is good” and, in contrast, China’s culture has decided that the Long March toward prosperity for all is the best way run a country.

          The slow train-wreck of Western civilization can be laid directly at the feet of a greedy, short-sighted and small-hearted oligarchic leadership, and a population only too willing to take the easy way out.

          What’s different today? The “easy way” has fetched up against Old Man Winter, and the grasshopper is starting to shiver. Conversely, the Ant is secure in a well-built house.

          1. drumlin woodchuckles

            A lot of the population did not want Free Trade, with China or Mexico or anyone else.
            The people who voted for Clinton did not realize what a liar he was about being an agent of the Free Trade Conspiracy. So a lot of the population here did not want the “easy way out”.

            They (we) were voluntold and volunsold into the Free Trade Conspiracy System. Pray the supporters of Free Trade become as poor as the victims. Pray every Pelosi voter ends up sleeping and dying under bridges.

  28. Hemanth Kumar

    Valid contribution from Mr. Michael Hudson. As to how better to describe today’s China, I’d say it is “state-sponsored capitalism”.

    1. David Kong

      I also find state-sponsored capitalism to describe the Chinese system to be appropriate and attractive. It is appropriate because the roles of the government to issue credit (money) and to control the general direction of economc development are made clear, while free enterprise activities remain in the domain of the governed. It is attractive because the word ‘state’ evokes less negative feelings from Americans than other equally valid terms such as ‘social’, etc. Another candidate is state-financed capitalism.

  29. Grebo

    Terminology is problematic in political-economy. I would like to see something systematic. Draw up a n-dimensional table with axes such as politics, economics, religion, finance, property relations, etc. Each box in the table represents a possible system and will have a unique identifier derived from its coordinates—P1E3R6…—you can then map existing names for systems to coordinates and come up with catchy names for anonymous boxes which will have clearly defined meanings.

    1. Blue Pilgrim

      I really like that kind of multidimensional thinking tables or multiple dimensional graphs). I also like including ambiguity or uncertainty into a model when appropriate, and a description and definition within the model used. Ultimately reality can’t usefully be talked about without knowing or defining what we assume to be ‘real’, with such parameters as consistency, perceptual system and methods, accepted axioms, and relationships to the rest of system — a more or less scientific approach in the epistemology.

      If we talk about ‘democracy’ as rule by the people then we should also explain what we mean by ‘the people’: who and over what time span, what methods are employed for gaining information and making informed decisions, how well informed people are about what the situations actually are, and what the limits should be as to how far decisions can go in impinging personal rights and privileges — and levels of confidence for each of these.

      We can never represent the whole system in all it’s complexity, but we can surely do much better and honestly than what we have now.

  30. debug

    “centralized control over money and debt, with the state being the main creditor”

    Coffer-ocracy maybe? Control over the central moneybox.

    Great thoughts and comments here – the subject is well out of by bailiwick, but I like words. Maybe this helps – or not.

  31. Blue Pilgrim

    You can call them autocratic, genocidal, imperialist, cheating, thieving, enemy — as seems to be the current fad — just don’t call them late for dinner. (grin).

    I call them “China”, and avoid the weird higher level abstractions (See Alfred Korzybski and general semantics, and read up on semiotics) and word/mind twisting spin, propaganda, and over-categorizing so prevalent now. It’s similar to arguing if Russia is Asian or European; Russia is Russia, and virtually a continent, and culture, all by itself. It all reminds me of the story of Abe Lincoln on what to say about if a lamb has five legs if you call the tail a leg (a lamb has four legs regardless of what you call the tail).

    China has said it is socialist with Chinese characteristics, but is moving towards towards more complete socialism, or communism, but I think socialism is fine for right now even though socialism itself is a slippery moving target, if one really needs a word to refer to the vastness and complexity of any large system and culture. Yet, a word is still just a word, not reality, and we should always be wary of how and why words and labels are used, especially in times of increasing controlled media narrative and propaganda. The devil, and the reality, is indeed in the details, and while abstractions can be useful they are also a very dangerous trap and weapon. Democratic is rule by the people, tyranny or oligarchy is rule by the few — as we now see in the ‘democratic’ US. It can be a time consuming nuisance to get into the weeds and details of reality, but it also the only way to ‘get real’ and not fall under the spells of a con man, an over-intellectualized academic, or one’s own illusions. This is a basic principle of Zen, or Korzybinsky: the map is not the territory. For all the complexity and contradictions, Russia is Russia, reality is reality, China is China.

  32. Robert Hahl

    What distinguishes China at the moment is “real” economic growth. Is there a single word for that?

    In some places and times there was a limit to how much a debtor could ever be asked to pay, such as twice the original debt. Nothing more due to late penalties, restructuring, etc. that sounds like a good idea that we could use.

  33. Steven

    Or when monetary (Super) imperialism comes home to bite. At least the old-timers had something to limit their wealth addiction. There is only so much ‘silver’ a wealth-addicted oligarch could acquire and hold. Not so with modern forms of wealth – essentially ‘debt that can’t be repaid and won’t be’. Maybe right up to the 1971 demise of Bretton Woods money (widely confused with wealth rather than the debt almost all of it really is) was really ‘worth’ only how much more money it could earn.

    As Hudson has observed, the goal of finance, as opposed to industrial capitalists, is the creation of new money – as debt. It doesn’t matter whether you back that new money with gold or financial engineering. In fact, it is much easier these days to create money on keyboards than it is to create real wealth the world wants, needs, and can afford.

    I’m guessing industrial capitalism was probably doomed anyhow, even without an ascendant military-industrial complex. It just became too difficult to make money making things after a once rich in natural resources continent was stripped to support continued money-making through such practices as planned obsolescence, military Keynesianism, and of course sustaining ‘the American lifestyle’.

    Can’t wait for the updated version of ‘Super Imperialism’! In case you haven’t already figured it out, the victims are no longer just foreign nationals.

  34. Noone from Nowheresville

    How do the global rules set vs. the national / local rules set of the US compare with the Chinese global rules set vs. national / local rules set?

    Are the Chinese creating a new system at either the global or local levels? Or are they creating derivative works of the US systems?

    I also think that the CARES Act will end up being a historical marker of sorts where the name of the US system changes because the global rules and national / local rules have changed. The impacts / outcomes just haven’t become apparent yet.

    One thing I would add is that these systems are ultimately about how to control resources whether they be humans, food or whatever.

    1. Noone from Nowheresville

      So what do the Chinese elites want / need to control and what are they willing to grant in return at the global level vs. the national / local level? How does that filter down through the national, regional and local elites?

  35. Gulag

    Branko Milanovic, in his relatively new book, “Capitalism Alone,” calls China’s system simply, Political Capitalism, which he argues has 3 key features: (1) a highly efficient and technocratically savy bureaucracy that is in charge and has as its main goal and duty to realize economic growth,
    (2) an absence of the rule of law and (3) an autonomous State.

    Milanovic argues out that Deng Xiaoping is the founding father of this modern political capitalism which combines private sector dynamism, efficient rule of bureaucracy and a one-party political system. Milanovic sees Deng as the Chief Architect of the transition from state socialism to capitalism but someone who was also not hesitant to destroy any idea he deemed as dangerous such as an tendency towards bourgeoise liberalization.

    In other words, China is seen as a system where capitalist interests are never allowed to reign supreme and the state retains significant autonomy to follow national interest politics and if needed rein in the private sector. Milanovic argues that the duel ability of the state to be guided by national interest and to control the private sector is the key feature of modern political capitalism.

    Milanovic also argues that the most important question for its future is whether Chinese capitalists will come to control the state.

    1. Kouros

      Francis Fukuyama talks at length of the absence of the enshrined power of law in the Chinese culture (which in the west is imbued with religion as well as the quasi egalitarianism of earlier societies, that needed a common denominator and continuity, i.e. as the Germanic Thing was or even the Law in Roman Republic): see Origins of the political power.

      However, while at prima facie the assertion that China lacks the rule of law, and from a Westerner or one raised in a westernized culture appears to be derogatory and a flaw, I do wonder if that it is so. Even the Romans recognized that laws are changeable and they serve specific political purposes.

      The insistence nowadays of the west as ensemble of law abiding polities flies in the face of reality…

      The Chinese recognize that people will obey laws only so much. And when it comes to law abiding, the Chinese abided to the lockdown measures and weathered the pandemic, so far, while the west is in shambles… For the Chinese was paramount to actually enforce the temporary laws brought by the pandemic, while the citizens of the western law abiding polities took a different course.

      Something to ponder about…

  36. Gordon

    By far the best handle on this I’ve found is the central thesis of “Why Nations Fail: the origins of power, prosperity and poverty” by Acemoglu & Robinson. They contrast two types of governance.

    They argue that prosperous nations are invariably ‘INCLUSIVE’, that is to say that their institutions create virtuous circles of innovation, economic expansion and more widely held wealth.

    In contrast, countries they class as ‘EXTRACTIVE’ have institutions that channel wealth to a favoured small group and consequently disfavour anything that might rock the boat – widespread education or innovation for example. Banana republics are the archetypal examples.

    Finance and banking are certainly top extractive institutions when they escape effective control, but many other sectors can also play this game. For example, one of Reagan’s first acts as President was to direct the Commerce Department to stop enforcing the Robinson-Patman Act paving the way for the consolidation of retailing to previously unimaginable levels so leading in turn to increased pressure on smaller manufacturers and hence more concentrated wealth via several channels.

    Here in the UK we haven’t had a real opposition for 40 years. From this side of the pond the US looks to have the added complication of an electoral system that is wide open to abuse – responding more to dollars than votes, allowing obscene gerrymandering and making it virtually impossible to start a new party for instance. Chris Hedges once made the point that, in his opinion, Nixon was the last democratic President because he was the last one to be scared of the voters.

    1. Gordon

      China is what I have come to think of as a ‘frontier’ context. ‘Frontiers’ may be literal (as in the American west) or technical (as with the rise of the Internet). Either way, they represent virgin territory, beyond the reach of established oligarchs and their instinct for freezing out actual or potential rivals. That is partly why we have seen explosive growth in Tech and also in China.

      Of course, it helps that China has run a very shrewd strategy for the last few decades. Anyone would think they’ve been reading Sun Tzu!

      But China is maturing as an industrial power, and my guess is that an underlying extractive instinct will be revealed as it evolves from the ‘frontier’ stage of rapid development. Its Social Credit system seems designed to deliver just that.

    2. Gulag

      But a big problem with the conceptual framework of Acemoglu and Robinson is that it fails to explain the existence of communism. where often political power and economic power are only weakly related.

      Using their framework you would expect that the high concentration of political power found in communist countries must also result in a high concentration of economic power. Thus the existence of communism, which at one point included a third of the world’s population for a significant part of the 20th century, is almost completely absent from their framework and cannot be explained by it.

      1. vlade

        The claim that political and economic power in communist states were only “weakly related” is false.

        Communist states (the ones that were in existence) concentrated power – including the hard power. While personal ownership still technically existed, in practical terms the benefits were really gatekept by the party, and one can argue that thus the economic power was entirely concetrated in the party. It didn’t make sense for a top official to own anything when he could have just said and have its benefits. In fact, it was counter productive, as accumulation of private wealth would be a) bad PR b) allow an individual to have power outside of the party.

        In fact, you can see it now with CCP, where CCP can take apart Alibaba (or whoever else they deem to overstep) at will. The formal ownership matters little, it’s the gatekeeping of the real benefits that matters. And that is concentrated in the party.

    3. drumlin woodchuckles

      Really? Reagan really directed the Commerce Department to do that? He directed the Commerce Department to take care that the Laws be strictly flouted and obstructed?

      I wonder why no one thought to call that out as an Impeachable Offense. Maybe such impolite things just weren’t done in those days.

      1. juno mas

        Well, price discrimination by producers goes on even today. So it may be true. Sherman Antitrust Act didn’t impede Microsoft from monopolizing personal computer operating system software; or Google the internet platform.

  37. Gulag

    Branko Milanovic, in he relatively new book “Capitalism Alone,” calls China’s present system simply political capitalism. He argues that it has 3 important dimensions: (1) a highly efficient and savvy bureaucracy which is in charge, (2) the absence of a binding rule of law, and (3) an autonomous state.

    This system, according to Milanovic, combines private-sector dynamism, efficient rule of bureaucracy and a one-party political system. Its key dynamic is never allowing capitalists’ interests to reign supreme with the state retaining significant autonomy to follow nation interest and, if needed, to contain private interests.

    Taken this present structure of power an important question for the future becomes whether Chinese capitalists will come to control the state and if they do so will they use representative democracy as their tool.

  38. Dave in Austin

    It isn’t only “What should we call China?”; it is also “What should we call East Asia?”.

    For 250 years the U.S. was the wave of the future.  We became the world’s largest economy in the 1870s and have been the wave of the present since 1917.  Now another place, East Asia, is the wave of the future. 

    Each part of that region has modernized followed a different economic and political path. The only patterns I see are mixed private-public economic development, the relative security of private property, universal free education, the use of democratic forms to reassure the public and give a sense of legitimacy to the state, and a strong race-based nationalism felt by the nations’ now-literate inhabitants. On the latter look up a now almost entirely forgotten book “The Uses of Literacy” by Richard Hoggart; (Pelican Books, Ltd., 1957 and later)

    The Greek city states, Carthage, Rome, the Netherlands, Britain and the U.S. all followed the same pattern. So the issue of how economics, politics and public opinion merge to form a rising state’s pattern can be judged, to some degree, historically. But the apparent common characteristics of success now largely disagree with the modern, liberal view of what America’s civic religion should be. An almost Marxist dialectic ensues.

    Maybe we should take the long view and say that the seven centuries of chaos created by the Mongol invasions of the middle east, the great plains of southern Russia, most of India and all of China is finally drawing to a close and the formerly great, damaged civilizations are using the tools of modernism and industrialization to return to their former position.  Mackinder may have been right;  the heartland might eventually prevail over the rimland.  And we drew tickets to ride the train into that storm.

    1. Yves Smith Post author

      Thailand and Vietnam and South Korean and Taiwan would all disagree with being lumped together as if they were all of a muchness. These countries have ancient cultures and proud histories. Only people with no sense of the past like Americans would make such a presumptuous statement.

  39. Scott1

    According to ADVChina, Laowho86 there is now less food security in Communist China than has been generally believed. Other observers have long reported food insecurity in the East of Russia and the East of Communist China.
    During the Stalinist and Maoist Dictatorships of the 20th Century unnecessary famines came to pass.
    Trump’s Trade War with China led to land being taken out of agricultural production when soybean sales to Communists fell. More land would have been taken from production had farmers not received relief checks. How much corporate consolidation has occurred is unknown to me. The entirety of GOP policy has been privatization meant to make the nation unrecognizable as the democracy intended.
    Michael Hudson says that the Jubilee is necessary, and it is too bad Occupy did not use the phrase “Write Down” and “Write Off”. At any rate I am convinced Mr. Hudson, PHD Hudson is correct.
    To return to my point and say what I think most important to keep in mind I want to say we have seen Communist Dictatorships lead to famine and the superiority of free press, free speech democracies is clearly that you are less likely to be starved to death.

    1. drumlin woodchuckles

      Perhaps student loan victims could start a new movement called Occupy The Debt. They could camp out around the White House and Capitol and etc. ( and like places in every state) and silently dare Biden to give them the ” Obama Treatment”.

  40. Pookah Harvey

    David Harvey’s explanation of the Chinese economy might offer a suggestion.

    This is the Chinese model in motion. It is very fast, it is very quick, it is backed by government and has the advantage of massive scale. It has mixed in within it strong government interventions, but it’s also highly decentralized so that an entrepreneurial culture has become absolutely central to what you might call the “gladiator capitalism” which is emerging in the Chinese context.

    The Chinese use financialization to contain the creative-destruction of the “free market” in an arena where it can be safely observed by the populace while separated from it. Emperor Vespasian gave the Coloseum to the Roman people making it a public utility. Colosseum Capitalism? American version, Grid-Iron Capitalism?

    1. Acacia

      David Harvey also described memorably described China as “Neoliberalism ‘with Chinese Characteristics’.”

  41. Robert Hahl

    Around 2008 I was in the audience when Paul Krugman was speaking and I got to ask a question, which was: In the early-80’s the Kennedy family fortune was said to be $400 million. Today $400 million is a good year on Wall Street for one man (it was always a man then). My question is, where is it all coming from?

    He umd…and thought about it…and eventually said “Well, it’s not funny money.” Meaning it was not literally counterfeit money. But that was all he could come up with.

    The trouble is it might as well be counterfeit money. As George Carlin said, “It’s a big club, and you ain’t in it.” You are not in the big club of virtual counterfeiters. And that is a problem for everyone who is not, since they can buy politicians but we can’t.

    The word you are looking for might should convey there is some limit on the private uses of money.

    1. KiWeTO

      Limits & Constraints on the private accumulations of wealth (therefore creating societal influence) perhaps?

  42. Jeremy Grimm

    My suggestion of a word or phrase to capture the meaning you intend is something of a copout. I cannot think of a single word that captures the meaning I think you are looking for. In English the problem of creating a new word is variously handled by crafting slang, stealing and reshaping a word from another language that has a word for the concept, or building some construct of roots stolen from Latin or Greek. ‘Engineered’ or ‘designed’ or ‘technocracy’ are the words that best fit my impressions of the Chinese government and economy, but they don’t really fit and they all either carry some unhappy baggage or fail to capture the full meaning I believe you intend.

    Of the ideas I’ve read in the comments so far I very much prefer PlutoniumKun’s suggestion made at the tail of his comment, April 10, 2021 at 8:22 am: construct “a hanzi ideogram”. It would indeed “make a very excellent hipster tattoo”. The kind of ideogram you are looking for would be a work like a well-crafted trademark or a sigil (stealing the word from Gibson’s “Peripheral”). I suspect a Chinese scholar of Chinese poetry might know of a rare ideogram or combination of ideograms perhaps alluding to an era or poem with suitable connotations. This source ideogram or amalgam of ideograms would probably benefit from further refinement by a skilled Chinese calligrapher. An English phrase for the ideogram should be derived from a translation of the ideogram into English supplemented by a pinyin translation of the Chinese pronunciation for the ideogram. When the English phrase grows clumsy I believe the pinyin word will replace it as a new word in English. Perhaps this might occur a little bit like the origins of the word ‘sofa’.

    If you collect the refinements you have made in the comments here, elaborating the meaning you want to convey, they can be used to inform your Chinese poet and calligrapher and as the basis for a definition of the word when you introduce it.

    1. John Anthony La Pietra

      Catching up after a rough week leavened by my NC-enabled discovery of BOFH, and I find an occasion to chime in anyway! My experience is in Japanese, not Chinese, but I have a whimsical thought in response to Jrremy Grimm’s idea — a bit light-hearted, but I sell it to you for what I paid for it . . . or even less.

      Many others here probably know the term zaibatsu for vertically-integrated economic conglomerates. In kanji (what Japan calls hanzi), the word is written 財閥. The first character is pronounced a bit differently in several languages, but it generally means the same thing: wealth.

      Perhaps fewer are aware of the more modern pairing of Os and Xs in Japan, almost “Family Feud”-style, to indicate yes versus no, right vs wrong, accepted vs rejected, etc. In Japanese, the term for the O is maru — and the term for the X is . . . batsu.

      So my off-track idea is to combine the 財 with a big X to come up/out with another kind of zai-batsu.

  43. urblintz

    I don’t have an answer as to what we might call China. I do have a problem with defining “democracy” given its results. Looks to me like “democracy” might be overrated.

  44. ambrit

    I’m coming in late to this ‘party.’
    I hearken back to the old expression used by the former Chinese ruling classes to describe the derived nature of the authority of the central government: The Mandate of Heaven. The Mandate was not a blank cheque for the rulers to run roughshod over the people. The Mandate decreed that the Gods had anointed the Ruler to care for the people under him or her.
    See: https://www.ancient.eu/Mandate_of_Heaven/#:~:text=The%20Mandate%20of%20Heaven%20(Tianming,on%20its%20behalf%20on%20earth.
    So, my suggestion for a term with which to accurately describe the present day Chinese system of governance is “Mandatory.”

  45. Glen

    China – state controlled capitalism (Adam Smith’s a “well regulated market”).

    US – private controlled capitalism (Milton’s Friedman’s “free markets”).

    I would say that Reaganism transformed America into a country willing to destroy itself to maximize quarterly profits. China seems to take a longer term view.

    Maybe we can call China’s version of capitalism “Greedisn’tgood.”

  46. juliania

    I would go at it a bit differently, bearing in mind that the philosopher-king scenario is actually for Plato ideal personhood writ large (which is the only way I have of explaining how the Republic dialogue ends up). I would suggest the Chinese system be called a meritocracy, since financial matters are being put rightfully in their place in a system which works for the betterment of society (thanks in large part I am sure, to their government’s ability to listen to such as Professor Hudson in formulating how economics plays its part in satisfying that goal.) That is, in China the government is based on having the best educated minds in power, ‘best education’ being so close to the Platonic or Aristotelian ideal that it would be hard to distinguish them from the same, were we in our ‘democracy’ to also have such persons in our government. In other words, we too could be called a meritocracy, were we freely able to elect (and un-elect) those who merited the task of leadership even with the system we have. Which wasn’t the Greek ‘demos’ leadership per se, but a hybridization of sorts, a workable compromise in the country when it was designed.

    The Chinese people see that they have good leadership, and they mightn’t care what we call it as long as we recognize that it is the case.

  47. Michael Hudson

    These comments are all very helpful. I can see that a single word won’t do it. Even if there were such a word, I would have to spend a chapter explaining it. So that’s what I’ll do in the end of “The Collapse of Antiquity” when it’s out later this summer, and I’ll work it into my China lectures too.
    The long dynamic of civilization is that when it started, in the Bronze Age, societies could not afford to leave creditors with rights to enserf the population and monopolize its lands. The entire Near East retained resilience by restoring the status quo ante.
    Greece and Rome stopped these Clean Slates, and subsequent Western civilization has not been able to prevent the rentier sector from polarizing economies between a narrow creditor and landlord class (with monopolists) lording it over the rest of society.
    So today a point has been reached when we are back in the Ancient Problem: wipe out the debts and redistribute wealth, or shrink and shrivel.
    That is the challenge now facing Western civilization.
    Will China be the first to close the long circle, in re-subduing money and debt management to the state? The question is indeed whether the finance sector will achieve its age-old ambition to break “free” from government regulation to destroy the liberty of an increasingly indebted population and economy.

    1. zagonostra

      Couldn’t you make the argument that the finance sector has already achieved its “age-old ambition” in the U.S., at least to a large extent.

      Legislators are responsive to those who can exert focused leverage. Without leadership that can coalesce numerical power into political power that represents the “increasingly indebted population” I don’t see how a life free from economic precarity is possible for the majority.

      I wish I had a better understanding of the relationship between the economic and the political in Greece and Rome, and especially during the “Holy Roman Empire” when Europe was united under Christendom, before the Reformation. R.H. Tawney in “Religion and the Rise of Capitalism makes a good case for Christianity acting as a moderating force to raw economic and political power of what we today would consider the “oligarchy”

      Look forward to some leisure to read more of you works…

    2. JBird4049

      >>>So today a point has been reached when we are back in the Ancient Problem: wipe out the debts and redistribute wealth, or shrink and shrivel.

      Many people don’t understand why the shriveling occurred as well as just how closely we are following their path. It is also not just the concentration of wealth or of enserfment as in the modern college debters. It also has to do with what is socially acceptable.

      One of the reasons, it is thought, that the Greco-Roman world never had an industrial world is because of the low status workers had due to slavery. All the parts needed for the revolution to occur were there: stable society, rule of law, technical/mechanical knowledge, large economy, but it just never happened. Any civilization that could produce the Antikythera mechanism, which almost certainly required a large infrastructure of many skilled workers/mechanics likely from multiple cities, of which we know almost nothing about. We only get the small hints from bits like the mechanism. The Byzantines and, IIRC (and don’t know much about China) the Chinese also had much of the same knowledge even, if not quite at the same level. That is two civilizations that had, or have, lasted over two thousand years and yet the steam engine, whose principles were know to the Greeks, remained a toy to open doors at temples to impress the rubes or effectively a party trick to impress the wealthy party goers and theater guests. No trains.

      Actually getting into manual or physical work for money, instead of as a hobby, was considered low class. Slaves did much of the work and it was the wealthy who got the prestige as well as the power at least in the West. IIRC, the Chinese have also been big on stability and used their from top down, centralized government to stop any big changes as in an industrial revolution. So more toys.

      Just look at the United States now, and the British Empire in the past, where getting rich from financial air castles is more important than doing anything productive. Well, you could learn to code, but actually making physical objects and maybe selling them at a fair price is for suckers in our current society. Even if a person really has the next world changing widget, who is going to invest in him? It is the stock market, payday loans, and other money makers where the money is. It is not in investing in factories. Inventing stuff and then making them, like making a decent pair of shoes, is something that the Deplorables do.

      Some of the reasons that the Roman Republic ended in a civil war is because of concentration of wealth into every fewer families, the destruction of the workers and small farmers due to the importation of a vast number of slaves, and the illegal taking of land meant for the average citizen. The Western Roman Empire melted away because society had become one of a few wealthy elites and then everyone else; much of the old knowledge lost, or if it still existed, it was in the Eastern Roman Empire, and the wealthy were not incentivize to actually invest in anything productive beyond hoarding more stuff. So they did not.

    3. DW Bartoo

      A single word won’t do it.

      “It” is not merely “political economy”, although the separation of those words has allowed oligarchy its major foothold to justify rapacious extraction within “Western” culture (in the “homelands”. as well as) through military conquest (the so-called “age” of “exploration”) of other “homelands”.

      Indeed, the U$ exists only because our forebears, especially those of us whose ancestors arrived on these shores well before it became a status quo of landed gentry who tired of being kinged.

      The social myth called it a “revolution” and a republic (which Franklin, in disgust, warned us about keeping).

      Frankly, at issue is the future of the human species.

      George F. Kennan, formulating U$ foreign policy in 1948, argued that, as six percent of the world’s human population, if “we” wanted fifty percent of the world’s resources, then we should have to take them, without regard of the human cost.

      Kinder hearts have prevailed and now “we” postulate it as “humane intervention.”

      As the U$ is the greatest purveyor of violence and terror, the major threat to that future, at the moment, it might be wise to consider that to change our “political economy” will require that “we” reassess our relations to each other, society being only the reflection of how people within a “group” treat other members of that group, and the rest of the world, including old Mother Nature.

      If we venture the notion that, whether “we” like it or not, the Earth, from a grounded human perspective, cannot take much more of acquisitive “ambition” to amass huge piles of money and absolute control over everyone and everything.

      Thus, again, whether “we” like it or not, we must ponder how to encourage a culutural shift from dominance to shared, equitable, sane, humane, and sustainable collective behavior.

      We must dare step away from the childish belief that if Jesus were a nation, then he would be us.

      In other words, an evolution of consciousness must occur, silly things like conscience, like actual principle must be considered as more than just hagiographic nonsense.

      It is a measure of depravity when war-making and preparing to do so becomes the primary “engine” of wealth creation,
      and when “money is all that matters”.

      It ain’t just the political economy, it’s the entire cultural bag of deepest do do.

      Bringing to mind the Dodo and all those silly dinosaurs who could not adapt to a changing world.

      Ah, but had the Dodo and the dinosaur nuclear weapons, they could well have had an impact upon our present world.

      When pathology rules, vapulation is required and will continue until morale improves.

      The foundations of our existence are crumbling into dust and a bit of spacklr and paint, and a few new slogans, will not slow our descent.

      Bold imagination is required, and Michael’s stellar efforts at education are very much (and long since) appreciated.

      More, please.

    4. Kouros

      Leaving aside the attributes of the feudal system, we still have some anchoring points in our culture. Just think at your translation of the Creed and how Jesus kicked the moneylenders out of the Temple… The Church as well as Islam have a long and strong anti-financial stance…

      Isecon, Christecon, Ethiecon, Justiecon…

  48. korual

    If capitalism is a mixed economy with finance in the non-governmental sector, then is socialism a mixed economy with FIRE in the governmental sector? In contrast, communism is not a mixed economy, but a totalitarian state where all markets are controlled by the state. On the other extreme, a state dominated by the private sector would be fascist or libertarian. We just need to realise that socialism fundamentally requires FIRE in the public sector and hence we could call China socialist.

    The French, Maoist philosopher, Alain Badiou insists that Western states be called “parliamentary democracies”. The implication is that democracy is a good thing where the common good of the people is then usurped by the parliamentary oligarchy. China is non-parliamentary.

    So the political economic term suggested is “non-parliamentary socialism”.

  49. truly

    I know this will be of little help to you Michael, but we might just choose to call China “successful” or “effective”.
    As for now they seem to be successful and effective at accomplishing things that are very beneficial to a very large number of their citizens without causing excessive harm to others, and without laying any (obvious) future trap for themselves.

  50. stefan

    Currently, China is an autocracy. Xi is an autocrat. The Party is an autocratic clique.

    In many ways, the whole thing resembles the workings of imperial China throughout history; certainly the central problem remains the same: the unification of China.

    The “Chinese characteristic” is that Xi’s albeit Communist dynasty must still maintain the “mandate of heaven” reflecting the relative acquiescence of the people.

    The Confucian underpinning of governance in East Asia is incompletely recognized/understood in the West.

  51. Tom Collins' Moscow Mule

    1. “. . . . expropriate their lands by debt foreclosure, take their property and demand a rising share of their income as debt service.”

    Or, simply use the brute force of the state to expropriate, “In fact, the collective ownership structure, combined with regulations that require rural land be primarily used for agriculture, mean that when cities expand into rural areas, the government must expropriate villager-owned land in order to legally develop it. In addition to corruption, this has resulted in a historically unprecedented transfer of wealth from peasants to local governments and land developers.”


    2. “The result of financial patronage is debt dependency – and in modern economies, debt deflation.”

    Is China going to somehow escape “debt dependency” and its consequences? Maybe not, because some of the consequences are already making an appearance. Apparently.

    “Total Chinese debt across all sectors (household, government, financial and non-financial corporate) rose to 318 percent of GDP in the first quarter of 2020, the Institute of International Finance reports.”
    “Household debt increased to 57.7 percent of China’s GDP in the first quarter of 2020.”

    “Most licensed non-bank consumer finance firms in China lost money in the first half,” the manager said, adding that many smaller firms will “need capital injections to keep afloat or they will face liquidity pressure when they write off huge amounts of soured debt.”



    Sounds like an authoritarian ‘remix’ version of the same old song and dance to me, because “Her style is new but the face is the same, as it was so long ago.” As a real time experiment, it should prove to be highly entertaining, as most nationalistic [political/economic] games are. Little people, as they are largely inconsequential, will likely be crushed. That narrative seems to be globally universal. And because little people are both not generally considered ‘newsworthy’ and powerless, the business of the corporate state and its ruling managerial class can proceed unencumbered.


  52. Bdg

    Democracy has nothing to do with capitalism or vice versa. The financialization of our society is underpinned by private corporations creating private created money backed by a central bank that Jefferson stated was unconstitutional.

    So, what does any of what private capital has devoured and created in lieu of democracy have to do with democracy?

  53. laodan

    The history of civilizations is a history of institutional reproduction of power societies over the long haul of many generations. Arnold Toynbee’s studies of the Tri-Continental-Area’s civilizations show us that many were born but few lasted the length of a few generations. The stabilization of power, at the end of the societal transition from the tribal to the power-model of society, has indeed been a very difficult process in the TCA that was finally solved by the collaboration of the men of knowledge with the men of power. The management of debt, by Early kingdoms and empires (technologically the bronze age), is rooted in the same difficulty to ensure institutional reproduction.

    In light of this it has been observed that, over the very long haul, societal evolution derived from the form taken by knowledge formation :

    1. During the Last Ice Age the world population adhered to animism. Life was egalitarian. There were no power institutions. The only tribal institution was of a contractual nature and related to a community service in the form of knowledge formation. In a modern political sense decisions were always taken at the unanimity. Such a type of organization was made possible by the small nature of tribal societies that allowed their members to know and trust each other (Robin Dunbar : small group theory).

    2. The transition to power-societies, that engaged civilizational paths, produced radically different outcomes in East-Asia and in the TCA. In the TCA animism was violently liquidated and new ideological narratives had to be invented which hindered institutional reproduction. Once the men of knowledge collaborated, under the authority of the men of power, their narratives were adopted as state narratives which facilitated institutional reproduction over the long haul of multiple generations.

    3. In East-Asia tribal animism slipped smoothly into power societies launching a civilizational realm. The men of knowledge gradually had taken charge of governance, which is normally the domain of the men of power, and this explains why, all along the path of the Chinese civilization, the men of power were equally men of knowledge.

    4. In the West with Gelasius’ “two sword doctrine” power was detached from Knowledge. During Early-Modernity the emergence of nation-states gradually reversed Gelasius’ doing and in Late-Modernity the servants of big capital turned Postmodernism and critical theory into Neo-liberal instruments that relegated Knowledge in the garbage bin of history (Oh woke irony).

    This is a short summary of what happened to Knowledge and why in their Late-Modernity Western societies are solely at the mercy of the men of power : big capital holders and their servants (politicians, intellectuals, scientists, and other technical specialists). This stands in stark contrast to China where society is still largely run along the lines of Traditional Chinese Culture whose highest esteem goes to knowledge.
    What I suggest here is that a Western conceptual model has zero chance at comprehending what goes on in China. And applying Western concepts to its societal reality is thus bound to be rejected out of hand.


    The West integrated the axioms of TCA civilizations and Christianity as its founding worldview which are characterized by “societal evolutionary rupture” : — rupture from animism –rupture from institutions — rupture in governance (knowledge versus power) — science, tech, and capital are grounded in rupturing with the past, and so on and on…

    China is China and history in China is characterized by “societal evolutionary continuity” which means that its present integration of Western economic tools is strategized so as to return its nation into the fold of its cultural continuum (axioms of civilization and Traditional Chinese culture). Ten twenty years down the road, fifty at the most, the Chinese will have separated themselves from Western conceptual models and their universities will churn out new models rooted in their cultural continuum. The restructuring of “Aunt Financial” as a financial entity controlled by the Central bank is an illustration of how Chinese governance answers Jack Ma’s ‘rentier’ ambition of letting “Aunt technologies” capture society through debt. In light of this brazen act of governance the fine of Alibaba should be seen as being nothing else than a smokescreen.

  54. vlade

    We do not have democracy – if, by democracy, we mean what Greeks around 500BC understood by it. What we have is what they would call oligarchy. I repeatedly wrote that they would laugh at the idea that unrestricted voting could be democracy (because they knew well that the money will find the way to subvert the unrestricted votes).

    “It is administered by the many instead of the few; that is why it is called a democracy.”

    1. Martin Davis

      But that for me raises the perennial old arguments over division of labour (standing in for hierarchy of whatever sort, and thus domination) and centralisation/decentralisation (how small a society to be capable of self-governing and answerable to all its citizens). Our modern societies, of whatever sort, have a sophisticated division of labour, and a great deal of intermediation between rulers (whether elected or not) and ruled. Size/population is not absolutely determinative, as other factors intervene (ethnic/cultural divisions for example), but it surely counts for a lot. Without a simpler form of society, and I’d argue both smaller in extent and population as a precondition, democracy in the classical sense is unattainable. Iceland would be nice a compromise, but how on earth could that be generalised.

      1. vlade

        That is about the hierarchy. I’d suggest having a look at the Swiss, and how they operate (and seem to be pretty happy with it). They don’t do sortition anymore, but have other mechanisms that act as countervailing forces. But IMO the most important of those is still the same as in Athens – political involvement of the people.

        Ultimately, either people can spend at least some time paying attention to their political affairs, or not. If they do not, they should not be surprised if the agenda and direction is set by those that do, for whatever reason. Politics doesn’t do free-lunches either (it may look like that for some now, but it took decades of work subverting what was there and actively getting people looking the other way).

  55. Sound of the Suburbs

    The corruption and downfall of civilisations and empires.
    “The Fate Of Empires and Search For Survival” Sir John Glubb
    The pivot point where the decline begins.
    “But, beneath the surface, greed for money is gradually replacing duty and public service. Indeed the change might be summarised as being from service to selfishness.”

    That sounds like the ideology we call “neoliberalism”.
    It’s the same mistake we always make.
    Those with money want that money to give them control, and this requires a fundamental corruption in the way people look at things.
    Money must become the most important thing that everyone strives for, and real wealth must be seen to lie in money.
    Today, we should know this isn’t true.

    Weimar Germany and Zimbabwe were never short of money.
    Weimar Germany and Zimbabwe had created far too much money compared to the goods and services available within the economy causing hyper-inflation.
    States can just create money, and the last thing you want is too much of the damn stuff in your economy.
    They had made so much money it lost nearly all its value, and they needed wheelbarrows of the stuff to buy anything.
    Money has no intrinsic value; it comes from what it can buy.
    Central bankers actually look at the money supply, and expect it to rise in line with the new goods and services in the economy, as it grows. More goods and services in the economy require more money in the economy.

    Paul Ryan was a typically confused neoliberal and Alan Greenspan had to put him straight.
    Paul Ryan was worried about how the Government would pay for pensions.
    Alan Greenspan told Paul Ryan the Government can create all the money it wants, there is no need to save for pensions.
    What matters is whether the goods and services are there for them to buy with that money.
    That’s where the real wealth in the economy lies.

    It took them a long time to disentangle the hopelessly confused thinking of neoclassical economics in the 1930s.
    This is the second time around and it has already been done.

    The real wealth creation in the economy is measured by GDP.
    The transfer of existing assets, like stocks and real estate, doesn’t create real wealth and therefore does not add to GDP.
    Real wealth creation involves real work, producing new goods and services in the economy.

    We have fallen into the old trap that we always seem to fall into.
    We have confused making money with creating wealth.
    As money concentrates in fewer and fewer hands it kills the economy and real wealth creation, which doesn’t lie in money.

    1. Sound of the Suburbs

      The financial illusion.
      States can create money and so can private banks.
      We have prevented states creating money, and the money creation is being done by private banks.
      Money comes out of nothing.
      Real wealth doesn’t lie here.

      The economic growth model used during globalisation never had a long term future.
      Neoclassical economics is the economics of the Roaring Twenties, the Wall Street Crash and the Great Depression.
      The good bit comes first, then the financial crisis and then the impoverished future.

      We would need to know how banks really work to see what’s going on.
      Bank loans are like borrowing your own money from the future, and the interest is the charge you pay for this service.
      You spend the money today and pay it back in the future.
      You can pull future spending power into today with bank credit and have jam today, but penury tomorrow.

      Today policymakers think banks are financial intermediaries and can’t see the problem.
      Ben Bernanke is famous for his study of the Great Depression and here it is discussed in the Wall Street Journal.
      “Theoretically, neither deflation nor inflation ought to affect long-run growth or employment. After a while, people and businesses get used to changing prices. If prices fall, eventually so will wages, and the impact on profits, employment and purchasing power will be neutral. Borrowers suffer during deflation because their debts are fixed in value, but creditors benefit because the dollars they get back will buy more. For the economy as a whole, deflation ought to be a wash.”
      What has Ben Bernanke got wrong?
      Policymakers can convince themselves “debt doesn’t matter”, as it doesn’t appear to if banks are financial intermediaries, but they aren’t.

      Banks – What is the idea?
      The idea is that banks lend into business and industry to increase the productive capacity of the economy.
      Business and industry don’t have to wait until they have the money to expand. They can borrow the money and use it to expand today, and then pay that money back in the future.
      The economy can then grow more rapidly than it would without banks.
      Debt grows with GDP and there are no problems.
      The banks create money and use it to create real wealth.

      What have we been doing wrong?
      Using bank credit to fund the transfer of existing assets.
      We hold the false belief we are creating wealth by inflating asset prices and can’t see the problem.
      This does bring future spending power into today, but doesn’t make the economy grow so it can handle the debt contained within it.
      This is the jam today, penury tomorrow economic model of the Roaring Twenties.

      At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
      No one realises the problems that are building up in the economy as they use an economics that doesn’t look at debt, neoclassical economics.
      Claims on future spending power are building up in the economy.
      Debt grows faster than GDP until you get a financial crisis.
      1929 – US
      1991 – Japan
      2008 – US, UK and Euro-zone
      The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.
      The Chinese were lucky; it was very late in the day.

      As you head towards the financial crisis, the economy booms due to the money creation of bank loans, as it did in the 1920s.
      The financial crisis appears to come out of a clear blue sky when you use an economics that doesn’t consider debt, like neoclassical economics, as it did in 1929.

      Japan could study the Great Depression to avoid this fate.
      How did Japan avoid a Great Depression?
      They saved the banks
      How did Japan kill growth and inflation for the next thirty years?
      They left the debt in place and the repayments on that debt killed growth and inflation.

      Japan left all the claims on future spending power in place and spent the next thirty years paying back the debt they had run up in the 1980s.
      The West left all the claims on future spending power in place after 2008 and Western economies haven’t been the same since.

      China was the last real engine of global growth, and they have made the same mistake as everyone else.
      China did see the financial crisis coming, but the debt fuelled growth model they have been using since 2008 has reached the end of the line.
      This is why the global economy was slowing down before the coronavirus.

      The economic growth model of globalisation never had a long term future.
      It’s finished, everywhere.

      1. Tony Wikrent

        “…the intrinsic wealth of a nation is to be measured, not by the abundance of the precious metals, contained in it, but by the quantity of the productions of its labor and industry….” — Alexander Hamilton, Second Report on the Public Credit, December 1790

        “To cherish and stimulate the activity of the human mind, by multiplying the objects of enterprise, is not among the least considerable of the expedients by which the wealth of a nation may be promoted.” — Hamilton, Report on Manufactures, December 1791

  56. PlutoniumKun

    I was trying to think of a word that might operate as an opposite to a financialized economy, and all I could come up with is a nomocentric (from the ancient greek for ‘money), as in, ‘a nomocentric government is one founded on the principle of complete centralised control over money supply’.

    I suppose a more direct opposite to ‘financialized’ would be ‘financio-phobic’ government.

    1. michael hudson

      The problem is that “homocentric” means literally “law-centric.” Nomos = law. (Coinage was a LEGAL creation, not just a metallic commodity.)
      I see it’s necessary to up the ante and contrast Western civilization with the Near and Far East, and see it as a 2500-year detour from the path of civilization.
      But will it ddestroy the road back?

      1. DW Bartoo

        Perhaps, Michael, it will take a genuine lesson in the consequences
        of “excess”, a “learning” in which the U$ has never really been “schooled”?

        In its short history of ready technological domination, the U$, as guarantor of the “Western” traditions of ruthless empire, neither its people, as a whole, nor those who would rule, have ever really tasted utter humiliation, have never grasped that war really is hell on Earth, with economic sanctions a very close second.

        Comeuppance has eluded a young, mindless, ruthless empire, although it’s earliest beginning are tied to genocide and slavery.

        Karma is a bitch.

        And greed really is NOT good.

        As to “civilization”, it might be a good thing.

        We do not know.

        Our version of “civil society” is akin to our pretense that we’ve “democracy”.

        ALL our “systems”, information, education, legal (“justice”), and so on, were/are designed and intended to ensure that “nothing will change.”

        Why, that might even be sufficient, as a campaign “promise”, to “win” an election in THE exceptional and indispensable nation.

        Sophistication might amount to realizing that limits actually do exist.

        It might even lead to the accumulation of actual wisdom.

        Which mostly requires imagination and courage.

        We seem in the midst of an official shortage of both.

        However, if one’s paycheck, social status, and financial comfort depend upon not understanding …

      2. PlutoniumKun

        Plenty of people think the Battle of Marathon was a bit of a disaster for Europe! Some Persian culture could have done a lot of good as the seedbed for future European developments.

        Sorry I can’t be more helpful – its a terrific insight, and it deserves a good label.

  57. farmboy

    Today on the farm capital rules. Pre WW2 it was labor and had been for centuries, some innovations made for efficiencies albeit with terrible externalities, i.e. the bottom plow. My family have been farmers over 100 generations, most of us could say the same. What was once a question of survival is now more of economics, supply and demand, logistics. The movement of goods and services is reflected in the portability of money, you can carry it in you pocket or as electrons in servers in china. Self imposed restraints on human activity are waning as effective when climate change puts a lid on everything. We will be and are being forced to account for all externalities of all actions past and future while imposing those costs on the present. It’s as if Deus Ex-Machina (aliens fell sorry for us) is running things now. Maybe we (all) are pre-Disaster Capitalism while the Bulletin of Atomic Scientist Doomsday Clock ticks loud. Dystopia Capitalism will come after as all externalities come due. Revelation Capitalism next is the last act with a new dawn to come. Dawn Capitalism, I guess capital formation of one kind or another is with us eternally.

  58. ramen

    late stage communism evolved into a kind of early stage capitalism with an autocratic government (without the pretense of ‘democracy’) that still has some notion amongst its ruling elite of ethics and the welfare of the nation.

    I expect it is only a matter of time, though, (how much?) before billionaires will worm their way into control

    1. tegnost

      in some way it’s still extraction based, and they have more to extract than we do so they’re farther away from our situation in which past productivity is being harvested here while future productivity is being sown there. The CCC thinks they can keep a lid on it as apparently along with a large number of farmers they also will execute people for bureaucratic crimes so that maybe opens some eyes to morality in the workplace but in a way they’ve sold out to the same demons so like you’ve said, just a matter of time

  59. Keith McClary

    In case of “Jubilee”, what happens to my retirement fund, safely invested in fixed-income securities?

  60. foolisholdman

    “As so often, they are experimenting with different approaches, which can make it very difficult to be sure which is a real policy shift, and which is simply an experiment.”

    The point is that before they make “a real policy shift” they do a small-scale experiment. They don’t assume that they know all the answers. They were burnt by e.g. the policy of the wholesale elimination of small birds and the “Great Leap Forward” where they made an (ill advised) policy shift, without trying it out on a small scale first, to find out how it worked in practice.

    I (and the CPC) would argue that it is wrong to call the Chinese state “Undemocratic”. There are obvious difficulties in deciding what the demos wants, (in any state) as is vividly shown by the state of democracy in the USA in particular, and the rest of the West in general; but the way of getting into the CPC, is partly controlled by the people you have worked with and partly by the CPC and if enough people complain about your behaviour as a member, you can find yourself in trouble and/or thrown out. As someone remarked: “In the US we have two parties and the ordinary person has almost zero control over policy, while the Chinese have one party which listens (by means of frequent polls) to what people want and frequently changes policies to accommodate their wishes.” Which system is the more “democratic”? It does not seem obvious to me, that the US system is the more “democratic”.

  61. foolisholdman

    It is perhaps a bit off-topic, but since Michael Hudson is advising the Chinese government (I believe) perhaps he can answer the question that I have seen answered both ways: Do the Rothschilds have any place in the Chinese State banking system?

  62. Stanley Dundee

    Hello Prof. Hudson and many thanks for all your great work over the years.

    What terminology should we use for today’s world to describe what makes China (and Soviet Russia a century ago) distinct from the Western democracies?

    Perhaps the notion you are seeking could rely on what the MMT folks call sovereignty, which, for MMT, is the power to create money. With money being a claim on the resources of society, what’s really at stake is the ultimate command of those resources, and who will be subject to whom. What the Chinese seem to have is political sovereignty, in which the financial leaders are beholden to political masters (Hello, Jack Ma). What we seem to have in the west is financial sovereignty, in which political leaders are beholden to financiers and other rentiers. Personally, I think we’d all be best off with democratic sovereignty, in which the power to create money is widely dispersed but variously subject to local, regional, and national democratic control.

  63. NotThePilot

    Hi, long time reader, but I guess this is the first time I’ve decided to comment.

    First the disclaimer: I’m not a Sinologist, just someone that took a couple language classes in school & independently studied bits of the history & philosophy.

    I’d say though, if you’re looking for a term to sum up the tighter leash China keeps its financiers on (and a lot of other aspects of its system), there may already be a perfectly good one, which the Chinese have used for millennia: Legalism (fajia)

    It’s definitely closer to what Westerners would call autocracy than democracy or oligarchy, but IIUC, there’s almost none of the implication that it’s a category of government with essential qualities. The emphasis instead is all on implementation: bureaucratic & Realpolitik methods for the sovereign to maintain order (and the more positive aspect of social harmony) under unified control.

    One of the core principles is that the sovereign should try to avoid asserting any preference for actual policies (because once you do, every half-competent & ambitious person in the government will outwardly conform & hide their true intentions, in order to better position themselves). However, the authority to assign offices, rewards, and punishments must never be delegated.

    I imagine any Chinese official acting with Legalist principles in mind (and even the Wikipedia article on Xi Jinping flat-out says he’s a fan of Han Fei), would see money & credit issuance falling under that. There’s definitely an open association with Legalism and state control over strategic industries too, at least going back to the Discourses on Salt & Iron.

    It’s an interesting topic, even more so considering how little anyone among US or European pols and hangers-on seems to discuss it (are they even aware of it?) I’ll just say that regardless of how you feel about the Chinese government, if you want to get an idea of how badly our new cold-warriors may be misunderstanding it, google the phrase “wai ru nei fa.” Then recognize that the CCP’s supposed Marxism & socialism, which at least the US government wants to fight like a rival ideology, may be just one form of “ru”, and ultimately a shadow.

  64. Synoia

    I perceive our horizons are focused on the short term. In the long term there are rises and falls of Governance (Civilizations).

    There is a class system, Aristocracy, Skilled Trades, and Peasants. Twas always thus, and is extant today.

    Technology has changed some things, but the Governance and Class mechanisms look the same as always.

    That appears to be Human Nature.

    Try using the existing words to describe the US, One’s from the 17th, 18th and 18tu Centuries in Europe.

  65. PeePee

    Except the marketplace allocates capital better than the State. That is China’s problem. Many state owned companies are drowning in debt. Despite the control, this was an inefficient distribution of capital. China’s economy has done well by embracing liberalization of its economy, rather than state control

    In my home State, and many others, there has been a foreclosure moratorium. The debtors aren’t racing to take away people’s properties these days. And there has to be an element of personal responsibility. I live within my means, and a neighbor is a debt slave. Maintaining a high standard of living, compared to one’s compensation, leads to this.

    Perhaps we should not complain. Just tinker with the system a bit. Higher capital gains taxes. Higher taxes on the upper levels of income. Continue on. Glad not to be China, right?

    1. Yves Smith Post author

      Your comment about “marketplace allocating capital better than the State” is not borne out by facts, at least as far as the US versus China. We had a dot-com era which led to lots of capital being allocated to companies that never made a dime, more important, never never never would make a dime, and promptly went bust when the bubble collapse cut off their funding. Your great marketplace mechanisms gave us the Financial Crisis, which took massive non-market interventions to prevent the global financial system from collapsing. As I explained in a 2005 article (http://auroraadvisors.com/articles/Shrinking.pdf), companies even then had been dis-investing to produce better short-term earnings to please investors. The main use of public company borrowings for the last five years has been to buy back stock, rather than invest in the business of the business. And don’t get me started on Uber…..

      1. Tony Wikrent

        “marketplace allocating capital better than the State”

        I think it depends on the market, and what needs to be allocated. I think it would be absurd to have the state direct allocation in, say, home furnishings or lawn care equipment. But even in these cases, the market must be regulated for consumer safety, environmental impact, monopolization, price gouging, rent extraction by management and/or “investors,” etc.

        I think it is pretty clear by now that we need to socialize medical care. And we need to undo privatization of education, infrastructure, and a few others.

        Moreover, as we move toward tens of millions of jobs being eliminated by robots, automation, and AI, we are going to need a guaranteed basic income, and some degree of socialization of more and more sectors such as housing and transportation.

        Interestingly, some of the Constitutional scholars such as Frank Michelman and Edwin Chemerinsky have written about republicanism and developed a concept of “provisioning” citizens so that they are not economically dependent on employers, enough so that “civic virtue” can be revived and brought into play. See, for example, We the People: A Progressive Reading of the Constitution for the Twenty-First Century
        Book by Erwin Chemerinsky

  66. Sam

    Why not simply, “Social Capitalism”? We desperately need to repair the social fabric in America. Until every citizen is adequately housed, fed, schooled, employed, health-cared and retired, then there will be limits on the amount of individual private wealth. Let’s say, one billion in assets. After the above criteria have been met, then the limits could be negotiated upwards. Of course, “adequately” could be argued continuously, but we are pretty good at that already. I would take that deal. If it’s not enough for some folks, well then, they can cry me a river.

    1. David Kong

      Any term containing the word ‘social’ evokes negative feelings from Americans. While these negative feelings are sometimes justified by facts, they also interfere with objectivity and pragmatism to the detriment of the economy. What about ‘state-sponsored capitalism’ as suggested by Hemanth Kumar above, or ‘state-financed capitalism’.

      1. SAM

        I would bet the phrase “state sponsored” evokes a more negative feeling from Americans than does “social”. Hell, we like “social” events. We like to be “social”. We want our children to be “sociable”. “Social” media isn’t exactly unpopular. I would bet many folks understand that we need to repair the “social” fabric. Now “socialism” is reasonably unpopular, and I would agree that term should be avoided, “State sponsored” sounds to me more like something that comes from the old Soviet Union. So I guess we’ll have to agree to disagree.

  67. drumlin woodchuckles

    Maybe we need to invent a whole new word for whatever it is that China is. A totally cromulent word which embiggens the language.

    Something like Capitalommunism ( Capitalommunist) or Communapitalism ( Communapitalist).

  68. robertH

    “The three political forms discussed by Aristotle and Plato were democracy, oligarchy and aristocracy. But of course there was another form, which Herodotus discussed: kingship”
    “My point ,,, has to do with whether money (and land) are privatized or administered by a “higher” authority (royal or public or Party)”


    Yes indeed. I note that Hudson adds “land” to what is in contention..

    Some commenters have alluded to mankind’s primal state – hunter-gatherer – in apposition to modern man’s subjugation to the monetary imperative. In that primal state all life alike was primal; herbivores grazed or foraged, carnivores preyed on herbivores, and omnivores – including among others bears and homo (neandertalis and sapiens) combined the two. None of them owned any “private property”. The phase-change when it came was confined to our own species; it’s normally called “the agricultural revolution” aka the inception of “farming” (necessitating a sedentary mode of existence).

    That contained the germ of private land ownership. And – as its corollary – of all other forms of private property; but it was ownership of land which was the crucial distinction between the H-G state and all other subsequent socio-economic developments. Ownership of all of a kingdom’s land was vested – by divine sanction – in the palace. Its highest servants were the temple’s attendant priestly caste who alone were able to practise the mysteries whereby the favour of the gods could be obtained (and most crucially – so it was believed – the harvest be assured),

    I think that insufficient attention is being given in this (fascinating) discussion to the fourth of the forms noted by Hudson – kingship. I suggest that it is in fact to kingship that the governance of today’s China is most closely akin – i e that it is simply the uninterrupted perpetuation of however many thousand years one cares to count as constituting China’s history. In China, an emperor (and his particular dynasty) needed to be perceived as having obtained “the mandate of heaven” in order to lay claim to legitimacy – until such time as the reigning dynasty was overthrown (by violence) and the usurper was somehow considered to have acquired the mandate of heaven in his turn. (That “somehow” is the crucial – but inscrutable – bit). The way in which recent Chinese nominally-communist rulers have “emerged” seems to me to emulate that process in all its most essential respects, complete with its own complement of mandarins the party cadres.

    Whether or not Xi will be (as was Deng) emperor for life, or his eventual successor will be one of his own descendants or someone who “emerges” as Xi did from the higher echelons of the party, remain to be seen. Either way doesn’t seem to me to detract from the analogy I’m seeking to draw.

    Another analogy I would draw (different in most other respects but alike in this one) would be with “La Serenissima” – Venice under the rule of its Doges.

    Both of these examples (and no doubt there are others) are “kingships” – incontrovertibly so I suggest. Kingship was never invariably or of necessity dynastic; quite often it has been – at least to some degree – elective (or self-selective!). Monarchs can of course as individuals turn out to be “philosopher-kings” (or queens) thus satisfying Plato’s criterion of legitimacy. But there can never be any guarantee whatsoever in advance that that will be the case in any given instance (quite the contrary)…

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