Michael Hudson on Renegade Inc.: China’s Fortune Cookie Crumbles

Yves here. Michael Hudson continues his critique of George Soros’ demand that China open itself even more to Western investors. Hudson explains that the hoped-for outcome is financialization and rent-extraction by foreign interests. Hudson contends the Chinese understand the difference between industrial and financial-led growth and intend to keep the latter in check.

However, despite these plans, the central party has been loath to come down heavily on the Chinese love of speculation and real estate investment. The Evergrande collapse is the result of a real estate bubble starting to unwind. The authorities reportedly want to reduce the role of real estate development in growth, but whether they can succeed without causing a serious recession is an open question.

Please note that Hudson graciously sent us this transcript before this pre-recorded show is set to go live. It should be up by the scheduled launch time. I will add the customary link to the show at Renegade Inc.

Ross Welcome to Renegade Inc. With China’s increasing wealth, Western investors want some of the action. One of those investors is a bullish gentleman called George Soros. However, the Chinese are acutely aware that with Western investment comes inequality. So as Beijing begins to rethink how to do proper economic growth, we ask, will China learn from Western mistakes?

Ross Michael Hudson, always great to have you back on Renegade Inc.

Michael Hudson It’s good to be back here. Thanks for having me.

Ross Michael, we join you at a time where a lot of people think the unipolar world could have maintained its supremacy. Turns out it hasn’t. Multipolar world is here to stay. You of late have been quite vocal about George Soros, no less. Mr. Soros has been casting aspersions about various things, but one of them is talking about the Chinese economy and why Black Rock, amongst others, should be allowed to invest there, because ultimately it’s going to undo American interests. Can you unpack that for us because it seems very complicated?

Michael Hudson Well, George Soros’ dream is that China would do what Yeltsin did to Russia – that it would privatise the economy, cally carve it up and let US investors buy control of the most profitable heights. In that way, the foreign investors would be able to sort of get the profits of Chinese industry, Chinese labour, and it would become the darling stock market of the world, just like Russia’s stock market was the leading booming stock market of 1994-96. China would be run to benefit US investment bankers. Soros is furious that China is not following the neoliberal policy that the United States is following. It’s following a socialist policy wanting to keep its economic surplus at home to benefit its own citizens, not American financial investors. For Soros, this is a clash of civilisations. His proposed strategy is to stifle the Chinese economy by putting sanctions against it, to stop investing in it so as to force it to do to itself what Yeltsin did to Russia.

Ross Let’s hear it in his words. He says: ‘The BlackRock initiative imperils the national security interests of the US and other democracies because the money invested in China will help prop up President Xi’s regime, which is repressive at home and aggressive abroad. Congress should pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China. The effort ought to enjoy bipartisan support’. He’s not mincing his words, is he?

Michael Hudson He thinks that China actually needs American dollars to build its factories and invest. He thinks that somehow China’s balance of payments is going to fall apart without the US market, without US investors telling President Xi what to do. The Chinese government won’t have a clue as to what to invest in and how to let the ‘free market’, meaning George Soros and BlackRock and other companies, operate. So he’s living in a dream world where other people need us. It’s like a guy who doesn’t realise his girlfriend doesn’t need him anymore.

Ross There seems to me to be a distinction here that the Chinese are acutely aware of, and it’s between the classical economists and the neoclassical economists. The classical economists have understood the idea of unearned wealth, unearned income. The neoclassical economists actively chase unearned wealth, unearned income, because that is central to their playbook. Can you just expand on those two ideas? And is it the case that that’s why you talk about a clash of civilisations?

Michael Hudson Well, you put your finger on it, Ross. People think that China’s advantage is its abundant, low priced labour force, or the government building infrastructure. But what’s guiding this is an understanding of the kind of economics that goes back even beyond Marx, to Adam Smith, and John Stuart Mill and the other classical economists. They realise that there’s a difference between earning income and creating wealth by employing labour to produce goods, to sell at a profit and then reinvest these profits and more capital formation, in contrast to simply buying a rent-yielding property, buying land and letting it rise in price without the landlord doing anything, buying a monopoly and just raising the price – charging monopoly prices like the US pharmaceutical companies are doing. China understands the difference between earned income and unearned income, between productive investment and unproductive investment.

In the United States, if they do recognise this difference, they realise that via unearned income you can make wealth by parasitically much quicker than you can actually create real wealth. It’s cheaper to be a parasite than a host. And so most of the financial strategy of Wall Street involves how to get something for nothing. How can we get a free lunch? Well, to do that as a major policy, we have to begin by telling people what Milton Friedman said: There is no such thing as a free lunch. But the whole of Wall Street is looking for a free lunch. They’re looking to grab Chinese assets on the cheap, like Soros has grabbed post-Soviet assets. They’re looking for monopoly rights. They’re looking for lending money and letting China do the work, to pay the interest to the Americans that are going to be providing it with money that the Federal Reserve ends up creating on its computers, or that George Soros already has saved largely by how he got the free lunch from the Bank of England betting against that and driving Sterling down.

Ross Some people call it the free world. Others call it a democracy. Others, for America, call it an advanced oligarchy. Do you think that the Chinese have looked at America and the wider West, understood that privatising all that rent has ultimately led to societal decline?

Michael Hudson They’re beginning to look at it that way. Most Chinese Marxists focused on Volume 1 of Capital, which is about employers hiring workers and putting them to work and making a profit off the mark-up. Only in the last couple of years have Volumes 2 and Volume 3 of Capitalmoved into central discussion in China. And it’s Volumes 2 and 3 that talk about economic rent. And so China has come to realise tha the United States is not an industrial economy. We’re not going to understand what’s happening in the United States, in England or Europe by looking only at what Marx wrote in Volume 1 of Capital, because they’re not making money industrially anymore. They’re making money by being a rentiereconomy, by landlordism, by monopolies and by bank credit, which Marx discussed in Volume 2 and 3.

So they’re now broadening the discussion. For the first time, you’re having, especially in the last month, China asking, “Do we want to let Chinese investors make money, financially, by buying housing, becoming absentee landlords and hoping that there is going to be a housing price inflation like you have in the United States? Or, do we want to keep housing low priced and not to bid it up by credit creation and finance?” They’re now realising that to keep China’s cost of living low, you have to keep the price of housing low. That means that you don’t want housing to become a commodity, an investment vehicle for absentee owners and landlords to make money. You want housing to be for Chinese people to live in. That means low-priced housing, not debt-leveraged housing as they’re seeing in the United States.

Ross I know somebody who works on the life boat on the Thames and they get a view each night that no one else would ever get. And they go up and down the Thames and they see all these high rises, which are oversupply of property, real estate. And there isn’t one light on in any of them. The reason, foreign investors, predominately the Chinese, have come bought them, clingfilmed the whole place, locked the door and then they chip off back to China – sit and wait, basically allow that land value to go up and cash out 10 years later. You can see what that does to local communities, schools, shops, infrastructure, services and all the rest of it – this absenteeism. Do you think that those foreign investors, the leadership in Beijing, has seen this model around the world and thought, yep, fine, we can do it over there, and yet we need to repatriate some money because of some of the liquidity issues that we’ve got over here. But we’re not having that as a central business model or a central economic model to our economies? Do you think that that light has gone on?

Michael Hudson Well, they’ve been discussing this regarding Hong Kong for the last 10 years. Hong Kong is the typical example of multi, multi-billionaires in real estate. They think that a socialist economy is not one that gets rich by creating absentee landlords. There’s been a large outflow of Chinese investment to the West. You have it in New York City on the west side, all very dark apartments with no lights on at night because they’re absentee-owned. Thorstein Veblen in 1923 wrote a book, Absentee Ownership, saying that housing should really be for living, not a speculative vehicle. But in America, real estate is all about civic development. It’s about how to increase real estate prices and create a bubble for speculators to find someone to flip the property to. I’m not sure it’s going to happen much longer and in London now that Brexit has occurred. But I think that what China is trying to do is asking how to create a domestic economy where Chinese people make money productively. They can not only afford a house of their own, but if they invest, they can invest in making China richer, not in buying income-yielding, rent-yielding, assets in America, England or Europe.

Ross Do you think that the pictures that we’ve recently seen on social media of the huge tower blocks that haven’t been finished, residential, that haven’t been finished for eight years and now they’ve just put semtex under them and raised the whole thing to the ground? Do you think that’s a real world example of the scar tissue, if you like, that private debt creates and in another sense, a Minsky moment? Blowing all these things up means that you get rid of all of that oversupply, which means that that inventory isn’t in the market and isn’t their to be flipped and speculated on.

Michael Hudson These are buildings where they wanted to pre-plan for what they thought was going to be a rural exodus, but the rural exodus didn’t occur into these cities. Right now, China is focusing, I think for the first time in quite a few years, much more on rural development. China is primarily a still a rural economy, a village economy. Most people don’t realise that. When you think of China, you think of Shanghai and Shenzhen and Beijing and even Wuhan. But the fact is that much of China’s rural and there can’t really be a rural exodus to the cities because you have a kind of passport plan in China. In order to live in Beijing, you have to have a permit to live in Beijing so the city won’t become even more overcrowded than it is now. They’re having to re-focus development much more on the rural areas that have not kept pace with the heavy industrial factory areas that have occurred. So they wanted to do a lot of building, not only to employ labour and to do construction, but to think just in case they needed this housing for the rural exodus, they needed it in place. Now they realise, OK, we’re not following that particular central planning idea. Central planning really is very hard. It’s very hard to build whole small cities in advance with nobody there. It’s much easier to wait until they’re actually economic forces leading you to develop. So in that sense, China’s becoming more market oriented in its planning. But at the same time, it shapes the market, increasingly, to create domestic prosperity and earning opportunities, not unearned rent-extracting opportunities, but productive earning opportunities. This is an ongoing process of re-evaluating, restructuring, fixing up and improving the economy.

Ross Michael Hudson, welcome back. Great to have you for the second half.

Michael Hudson Thanks.

Ross Michael, we said right at the top of this programme that there is, let’s say, a tug of war between the unipolar and the multipolar. China have looked at the West and they must conclude now, the Russians also, must conclude, that the Western economic model is fatally flawed. In many ways, what you’ve got in America is an advanced oligarchy. Across Europe, you’ve got a zombie banking system. And basically the model for the last certainly 30, 40 years has been to extract as much rent as possible and pass it off as an economic miracle. To avoid all that, this fork in the road has crystallised. What do you think will be the decisions coming out of Beijing when they look at the economy in a more holistic way and they realise that they want to better the lot of the average Chinese citizen?

Michael Hudson Well, as I pointed out, their concept of the economy realises the distinction between earned income and unearned income, between rent and profits. It wants to make profits, not economic rents. And it also sees that the United States is trying to prevent it from going along this socialist road, and that’s really the new Cold War. You mentioned unipolar versus multipolar. It’s actually not so much that China, Russia and the Shanghai Cooperation Organisation, along with Kazakhstan and Iran and now the other groups are pulling away. It’s the United States that’s trying to force them to follow the US neoliberal model by imposing sanctions and special penalties and military threats, not to mention ISIS terrorism. The United States is driving Europe, Asia and now Africa as well, into a unified, consolidated unit outside of itself. It’s very self-destructive. It thinks like George Soros, that if we stop investing in Asia and other countries, that will force them to knuckle under to the US. But what it’s doing is it’s driving them altogether into the Belt and Road Initiative.

What China’s doing is creating a precondition for a profitable industrial economy over a large area to benefit from. It’s participants are going to need transportation. You’re going to need ports. You’re going to need roads. You’re going to need pipelines and is focusing on the interconnections, on the infrastructure.

America doesn’t build infrastructure these days unless it’s monopolised. This is the political fight going on in the United States now. President Biden has a infrastructure plan that he’s scaled down from six and a half trillion to three and a half trillion. And essentially the bulk of the Democratic and Republican Party said if we can’t privatise infrastructure and make it a rent-extracting monopoly, we’re not going to do it, and we’re going to block the government from doing it. So in the United States, they’re going to have high priced infrastructure, high-priced health care and high-priced education while China is going to have low-priced transportation, low-cost infrastructure, free education, public health care. And you’re going to have a very high-cost United States unable to compete with the rest of the world. All it can do is make military threats or financial threats. If it tries to impose sanctions as it’s imposed on Russia, China and other countries, these are going to serve as protective tariffs for foreign countries.

When President Trump put sanctions on agricultural exports to Russia, it was a windfall for Russia. They developed their own agriculture and Russia is now the largest grain exporter in the world. Senator McCain characterised Russia as a gas station of atom bombs, but it’s a gas station with the largest farm sector in the world, and is developing an industrial integration with China and the rest of Asia. It’s a Eurasian world island as Mackinder called it a century ago, and it is becoming the economic focus of the world, leaving the United States as the high cost economy with no visible means of support, because we’re not doing our own industry anymore. We’re not competing with China. We’re letting China do all of the industry, and all of a sudden we’re dependent on it. This does not bode good for prosperity in the United States or Europe and other areas that are satellites of the US economy.

Ross  What is the probability of the West going, hang on, we have taken a detour here, we need to do something differently?

Michael Hudson I’d say maybe between one and two percent. In order to understand that you’re taking a wrong detour, you have to understand what the right path is, and why China’s doing it right. They can’t acknowledge that, because that’s called socialism. And when everyone points out that instead of having health care absorbing 18 percent of the American GDP, you could provide public health care and lower the cost of living in the United States. That’s a precondition for making labour more competitive. Well, the employers are going to argue that if you make health care public, then you’re going to lose the ability to lock-in labour to its employers. Right now in the United States, especially during the pandemic, if you work for an employer for a living, you’re afraid of being fired because you lose your health insurance and that is a threat of bankruptcy. If you complain about your job, you might be fired. That’s a danger. So having private health care paid for by the employers locks labour into dependency. They’re afraid to ask for higher wages. They’re afraid to ask for pensions. Privatized employer-based health care has become part of the class war here, and it is succeeding in impoverishing labour. Same thing with privatized education costs financed on credit at fairly high interest rates, without any bankruptcy recourse to wipe them out..

President Biden promised that he was going to wipe out student debt. If you have students paying 40 to 50 thousand dollars a year to have a college education and a college diploma is a precondition for getting a job like a union card used to be, then you’re going to have that added to the cost of living. When you have all of these privatised – education, health care, not to mention housing and other factors – when you have all these rent-extracting exploitative sectors you cannot be a competitive economy. You can only get money by conquering and exploiting other countries, by owning their own rent-extracting sectors and monopoly-profit sectors.

But there’s no one to conquer anymore. America couldn’t even conquer Afghanistan. Every economy for the last 5,000 years has two parts. There’s the real economy of producing and consuming and paying taxes and government services. And then there’s the debt and financial overhead. All economies operate on credit. The problem is that credit cost money, and creditor claims accumulate at compound interest. if you look at the compound interest for anybody’s savings – take the wealth of the One Percent and all the trillions of dollars they have – if you leave your money to accumulate compound interest, it grows exponentially. But economies don’t grow exponentially. They grow in an S-curve, and sometimes there’s an interruption. Sometimes there’s a disease like Covid. Sometimes there’s bad weather and a environmental disaster or there’s a war. And once there’s an interruption, what do you do with the fact that the finance sector grows faster?

Well, this goes way back to Babylonia. It occurred in Greece and Rome. Ultimately the tendency is for the financial sector to take over and to use the financial returns to take over real estate. And so there’s a symbiosis between real estate and finance. That’s occurred in every economy for the last 2,000 years since Greece and Rome. It certainly characterises where most money and most wealth is made today. In the universities, you take a course and they say, well, you accumulate wealth by saving up the wages and saving up the profits you made. But that’s not how the wealthy classes got money. That’s not how the One Percent have made money. They have made money either by taking property from the public domain by privatisation, or it’s made today by the central banks, lowering interest rates, flooding the market with credit, enough credit to push up real estate prices 20 percent in the United States in the last year. Housing prices have gone way up to unaffordable levels, pushing up education prices – and education is priced at whatever a bank or the government will lend you to pay with a student loan. It’s all financialization. It turns out that what people thought was industrial capitalism has turned out to be finance capitalism instead. So what China is doing is saying that it’s not going to let our industrial capitalism evolve into finance capitalism. It’s going to evolve into socialism, because they’re a socialist government.

Ross Just say the Chinese, the penny’s dropped and they’ve understood how badly wrong the West got it. What does the Chinese economy, and as importantly, society look like 10, 20 years from today?

Michael Hudson It’ll be a more balanced, less polarised economy. It will still let people make fortunes, but not gigantic fortunes large enough for an independent oligarchy to develop, to become a rival to government and try to replace government. In the West, you’ve had a financial oligarchy evolve and take over planning from elected government. So we don’t have democracy now. It means a free market where you leave everything to Wall Street as your central planner. So China is going to leave its planning spontaneously to individuals to innovate, to develop, where America is becoming, and England, are centrally planned economies planned by Wall Street, not to create prosperity, but to create rent-extracting opportunities for Wall Street stocks and bonds and absentee real estate. So you’re going to have a rentiereconomy – let’s call it neofeudalism – while the rest of the world goes forward into what industrial capitalism was meant to be a century ago before it was sidetracked in the West. Much of Eurasia and the Shanghai Cooperation Organisation will evolve into socialism, as most expected would happen in the West a century ago.

Ross You talk about Super Decadence. Is the irony lost on you that one of your politicians recently attended a 35,000 dollar gala event dressed in an expensive dress with the words ‘tax the rich’ embroidered all over the back of it?

Michael Hudson That perception of inequality has become so popular that you can almost make fun of it. There’s something called neurolinguistic programming, that says that if you have a problem, a headache or something, if you can imagine your headache or your problem being very far away and then expanding and expanding and finally, poof, it all dissolves and goes away. They think that they can say “Tax the rich” and just make it into a phrase that’s so popular, it doesn’t really mean tax the rich any more. It means that you accept inequality, but realize that it’s just become part of the system – and wouldn’t it be nice if there were a parallel universe in which we could indeed tax the rich. But of course, that’s just a nice fantasy.

Ross Michael, always entertaining. Always a pleasure. Thank you so much for your time.

Michael Hudson It’s wonderful to be here, Ross. Thanks for having me on your show.


Right after this interview, China did on its own just what George Soros was asking U.S. money managers to do: Stop lending money to China. So China itself made an about-face and turned down the BlackRock’s plans to buy a large Chinese real estate company, and it did not pay foreign holders of its Evergrande bonds on September 23.

Diplomatically, China had expected Wall Street firms to lobby to stop America’s anti-China policy. And indeed, many Wall Street executives did point out to the U.S. government that China offered many opportunities for America to make money, and urged not to treat it as an enemy. But the military-industrial complex (MIC) has its own agenda, along with the neocon and neoliberal advocates of unique U.S. unilateralism. I think that ever since China’s officials met in Alaska with Mr. Blinken earlier this year, they see the handwriting on the wall, as have Russia and other SCO members. The’ve accepted that the world economy is fracturing between the U.S.-centered “free world” (central planning by Wall Street and unilateral diplomacy from Washington) and the multilateralizing rest of the world.

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  1. James Simpson

    A fascinating and informative interview as always with Mr Hudson. I write this while living in a tiny flat in England on Universal Credit, £325 a month of which is given to my rentier landlord who does no maintenance and whom I’ve not even seen for about two years. Yet he, quite possibly, regards benefit claimants as scroungers. I’m unable to work, why? Because I’ve an unspent criminal record which utterly deters every potential employer. Irony abounds.

    1. John Rose

      In the US also a criminal record is a barrier to employment. Combined with racist policing, makes for effective maintenance of racial polarization.

  2. JE

    As someone with some assets, skills and mobility albeit with school aged kids, how can I use this foreknowledge? It has been clear to me from years of thought and reading on NC that the opportunities I had growing up in the US will not be available to my kids who will be entering the rentier-serfdom economy of the US. But where to go? What country will take US refugees and the right path, for their people, rather than following the neo-liberal-death-cargo-cult into the ground? Finland? Iceland? China? Is it better to fight in place to improve the US? It seems like a lost cause most days. :/

    1. John Rose

      My wife and I learned this fifty years ago from neo-communists in Detroit. We decided to not have children. It was a good choice for us enabling us to exist outside wage slavery.
      Your situation tempts me to praise Osama bin Laden.

    2. drumlin woodchuckles

      The US is a big place, land-area-wise; and there may be some out-of-the-way part of it where you could live and teach your children about how to collapse in place and survive in place.

      Or there may be some other country you can go. I have heard some European countries look with some favor upon people descended from those countries. I can’t remember which ones those might be.

      If you could convince the Russian authorities that you mean Russia no harm, they might let you in there. There is a lot of space, and the PutinGov is trying very hard to put Russia on some kind of Stolypin path to a stable future, in the teeth of antiRussianitic opposition.

    3. ObjectiveFunction

      Taiwan, mate. Safe, clean, great schools, pretty easy for expats to find work with the right skills, especially in tech or biochem. The invasion risk is overstated.

      Related to the OP, Anne Stevenson-Yang’s piece in Forbes (the ‘People’ magazine of business, I know), mentioned in today’s Links, in turn cites a very interesting HBR piece “Mafia-Like Systems in Chinese Business“.

      Saving our resident ‘whataboutists’ the trouble: much of the below sounds a lot like business as usual in the West as well, at least where regulators or government buyers are concerned. With more lawyers and lobbyists in our mafias, of course, in place of spouses’ cousins. To the point where I edited the quoted text to remove the ‘mafia-likes’ and just say ‘business systems:

      China’s largest non-state business systems are more akin to mafia systems, or organized crime, than they are to other conceptualizations of firms. They extort resources such as state assets, land, credit, or prestige, but threat is rarely one of violence, but exposure, incrimination and, by extension, the coercive power of the party-state.

      Secrecy and obfuscation “hide and disperse” (yinbi + fensan 隐蔽+分散 underlie the organization and sprawling connections among firms and are tied to shareholders and political patrons whose identities are obscured by design. Hidden related party transactions facilitate both “tunneling” (transferring assets and profits out of firms) and inflating balance
      sheets of firms to borrow.

      Business systems tend to disperse their financial dealings widely among financial institutions. Since the early 2000s, financial regulation has been divided into different peak agencies with jurisdiction over three separate sectors (insurance, securities, and banking). Business systems have exploited the lack of oversight to pursue licenses in different sectors and elaborately leverage financial positions to exploit investors (stock market investors and private equity investors) and savers (through access to banks). Shadow firms gain obscured control of financial firms, which are then used to finance more self-dealing and expansion.

      Anbang, for example, funded its aggressive domestic and international expansion efforts by selling investment products to Chinese savers. The products offered higher returns than low domestic bank deposit rates but questionable risk coverage, and Anbang regularly exceeded quotas and skirted regulations thanks to its high-level political connections. Anbang had financial relationships with hundreds of investment companies, taking large or small positions in firms which, in turn, would then reinvest in Anbang’s own firms through several layers of partnership

      “Stealth privatization”—taking control of state assets, accessing preferential state loans, and then privatizing these assets without public notice but with informal political support—is widespread. Family members buy small stakes through holding companies, allowing the central owner control rights.
      Steering contracts toward friendly firms for clandestine kickbacks, and inflating the prices of subcontracts to pocket money.

      All parties have incentives to inflate deal prices 一起吃肉, literally “eating meat together”—loan officers and introducers, who get a cut, and borrowers, who enjoy access to cheap credit because of their political connections.

      Because of the symbiotic relationship between local non-state business and local officials and the strength of the party-state’s monopoly on the use of force, violence does not figure prominently.

      Those within the financial system with ties to mafia-like firms were, whether they desired to be or not, participants in the mafia-like system. Even if they benefitted little personally from illicit activities, they had few incentives to report or sanction them, and instead sought ways to maximize their own benefits while watching others plunder.

      The state eventually assumes the financial burden of unwinding mafia systems. The CCP has long proven itself intolerant of financial risk and instability, and such an intolerance combined with political protection has led mafia-like systems to assume risk with impunity.

      In 2016-2017, as the Xi administration trained its sights on financial risks, alarmed by levels of corporate debt, the focus was not just on the firms who had borrowed incredible sums at low rates from domestic financial institutions, but also on the regulators and lenders who made it possible. In April 2017, Premier Li Keqiang 李克强 urged a “crack down” on the banking, insurance, and securities sectors, urging “relentless punishment” for internal supervisors and managers who “collude with major players” to commit fraud and self-dealing (e.g. lending to shareholders).

      So how’s that working out for them?

      1. ObjectiveFunction

        … And there it is, right on cue, in the WaterCooler link on Kyrstyn Sinema:

        Despite announcing his departure from TPG in 2006, Price listed TPG as his employer on a 2020 Federal Election Commission filing with the title of “partner emeritus.”

        A spokesperson for Price told The Intercept, “Bill Price no longer has any affiliation with TPG and has not for a decade.” When shown a copy of the FEC filing, the same spokesperson did not respond for further comment.

        They are all Caligula’s horses?

    4. Thistlebreath

      I can only point to Louis L’Amour and Vivienne Westwood. Start with what you have, look around and find where those skills are in demand. Viv had humble beginnings. She worked in a factory when UK rationing was still in force. Louis was more or less abandoned by his family. Westwood has given a lot of interviews but here’s the elevator version: find within your skills something that you love, do it until you do it so well that others seek you out. Never stop striving to improve what you do. When you are the person who others must find to fulfill their desire, that, and only that, will be your security.

      Michael Phillips’ 1974 book from Shambala Press pretty much says the same thing–rigorously find your joy and skill blend. The money will follow. Book’s name is “The Seven Rules of Money.” He helped develop Mastercard, for his bona fides. He wanted to be an artist but when a family friend told him he had some talent but could he envision doing it 8-12 hours every day, he chose another path.

      Hope this helps.

  3. Hayek's Heelbiter

    Always a treat to see Michael Hudson listed under Recent Items.

    And it truly warmed my hear hear him declare that neoliberalism is actually “neofeudalism.”


  4. RabidGandhi

    I see, so “China [who? the geographic location or the 1,300 million inhabitants?] understands the difference between earned income and unearned income”, something that the US doesn’t understand.

    So, take heart victims of the Washington Consensus: it was all a misunderstanding! The brutal neoliberalism, the massive upwards transfer of wealth, the financialisation and deindustrialisation… these were all due not to power politics playing out (as acutely illustrated in this weekend’s post on Denmark’s McD’s battle), but rather due to a misunderstanding because Beijing understands Adam Smith’s thesis while Washington just can’t seem to grok it.

    Naturally, saying that Chinese economic and industrial policies are the result of a complex power dynamic both within the CCP and between the CCP and the various other interest groups in China is not only harder to fit into a short interview like this, but throws a spanner in the narrative works whereby China is defined not on its own terms but rather as a foil to the neoliberal west. Thus for example, even though the CCP is legit afraid of labour unrest and sets policies accordingly, here it’s just a matter of they’re actually having read Smith and Stuart Mill; they have a keener understanding.

    On the other hand, were I cynical I might say that oligarchs, both Chinese and United Statesian alike, want the same thing: to pillage their respective economies. The question is not how much they understand, but how many effective stops are put on their pillaging.

    1. drsteve0

      Undoubtedly both parties to the new Cold War understand the differences perfectly well. What I gleaned from that passage (filtered thru my own bias) was Chinese elites understand that a rentier economy will not best serve the advancement of their nation or its people. Western elites don’t give a d@mn one way or the other, they just want theirs and they want it now and will do as little constructive work as possible to achieve that end.

    2. lyman alpha blob

      For sure there are money grubbers and pillagers in China, so to your point not everyone in China necessarily wants to understand the difference between earned and unearned income. But Xi and his inner circle do seem to understand this and from several thousands miles away at least seem to be taking steps in the right direction to benefit the majority of Chinese people rather than just a select few oligarchs. One or two even disappear under mysterious circumstances from time to time, pour encourager les autres. Can you even imagine a Soros or Bezos being taken on a little vacation to an undisclosed location?

      The tradeoff here seems to be in the lack of freedom – not just for the occasional megabillionaire who takes a little government sponsored sojourn to get their minds right, but for everyone else as well. How much of that repression is genuine and how much is anti-Chinese Western propaganda can be hard to tell, but it is happening. There has been news of bans on effeminate men in popular culture, limits to online gaming, etc to name just a few. I’ve read some Chinese scifi in translation and it seems to indicate a lot of nasty online surveillance going on, but whether it’s worse than what the tech giants are doing in the US is hard to tell.

      I found the twitter thread from yesterday’s links encouraging and if accurate, it ties in rather well with Michael Hudson’s argument. The key was this:

      Throughout the preceding decades, Deng Xiaoping and many other leaders did not necessarily oppose democracy and liberalization in the abstract.

      What Deng opposed was the idea that political reform could come before economic reform. For Deng, economic reform had to start first and privately expressed his belief that Gorbachev was “an idiot” for failing to recognize this.

      …Xi’s restructuring of the previous political structure is straight out of Deng Xiaoping’s playbook.

      In the US we have a system in need of huge reforms to avert collapse, yet today the energy goes into identity politics (arguably not even a real political reform, like say restructuring the Senate would be) and we wring our hands over things like whether it’s OK or not for a former man to run for governor as a woman in a BS election to begin with, only to find out actual people don’t really care because most people don’t have enough money to fix the brakes on their car if they give out (and we have overall a terrible, crumbling public transportation system). Meanwhile we refuse to even discuss an economic reform like providing a national healthcare system, even though we’re in the middle of a worldwide pandemic.

      China seems to be trying very hard to avoid having a completely decadent elite rubbing it in the faces of the rest of the populace with a ‘let them eat cake’ attitude, and making sure the vast majority is on a sound economic footing first before worrying too much about the rest. I do grant that if I were living in the middle of the Chinese system, I might have a much less sanguine outlook.

      1. Susan the other

        I always think of Deng and Yoda in the same thought. Deng was reiterating Marx saying that the normal course of politics was first capitalist to generate the means, and then socialist. To do it the other way around achieves neoliberalism which is a perpetual mess – so much so that if neoliberalism were to survive it would be forced to print money constantly, not to keep anarchy at bay but to keep people spending money to keep neoliberalism alive. Absurd. But that’s probably the plan. At least for now. The biggest problem with it is not broad societal subsidization of finance capitalism, but unsustainable overconsumption. Neoliberalism must expand – it cannot hold steady. If neoliberalism ever holds steady it will quickly devolve into de facto socialism. Kind of zombi socialism. So it is dead no matter which end you are looking at because monopolies (the inevitable goal of neoliberal economics) are the most destabilizing social organizations – because they are huge extractors, and they have to keep growing like Little Shop of Horrors. We will have to nationalize them for that reason alone. At some point. My crystal ball says we will jump start our dead neoliberal economy with huge infra spending, much of which will be pilfered but nobody will do anything about it, and then we will be forced to nationalize our behemoth industries like the Medical Industrials, the various utilities, lotsa stuff. Then we will still have small capitalism for a while and that will probably choose to become more and more socialist instead of repeat the mistakes of neoliberal extravagance and inequality. I just wish it could happen faster. And I’m also hoping we are self-aware enough not to do a bunch of our usual military black ops to sabotage the socialist world. We’re not fooling anyone anymore.

      2. drumlin woodchuckles

        I will venture the guess that tech surveillance in China is made very obvious, overt and visible on purpose to get the Chinese to behave themselves from a ChinaGov viewpoint.

        Whereas tech surveillance in America is very covert, sneaky, hidden, disguised, denied, etc. in order to stealth-manipulate people and stealth re-wire their brains at the interneuronal-connection level so as to control and direct their activities, thoughts and feelings without them even suspecting.

        Something like virtual Delgado implants.

  5. Michael Hudson

    I could only say so much in a single interview. For those of you who would like to read a detailed description of China’s real estate philosophy, especially with regard to its rural setting — and that is where the key really lies — there is a free download of a book by my colleague Wen Tie-in:

    Wen Tiejun’s Ten Crises: The Political Economy of China’s Development (1949-2020), is available for free downloads at Global U and Palgrave Macmillan websites: https://our-global-u.org/oguorg/en/wen-tiejun-ten-crises/
    and https://www.palgrave.com/gp/book/9789811604546

    1. Tom Pfotzer

      Thanks for making the effort, Dr. Hudson. I certainly appreciate it. I am curious to see how China does its rural development, and I’ll read Wen Tiejun’s book. Thanks for the pointer.

      China has a great chance to do something really different. The locus of econ devel seems like it will tend east, toward central Asia. The technology of manufacturing and the need to redesign how humans live with the land might make for some very interesting experimentation, and China has all the tools necessary to make it work.

      Here in the U.S., we also have that same sort of opportunity. After a long drought, I’m starting to see some activity around the question “how can we re-design a local economy, using the household and village as the focal point?”.

      We have a generation of young people that either can’t or don’t want to engage in the economy-as-it-is, and we have a huge number of forgotten / decimated / abandoned fly-over towns wondering if they have any chance at a future.

      I am very interested in rural econ development, just because land is such a useful tool as a platform for production and for human-natural world integration. And I see the forgotten fly-over towns as desperate enough to “try anything” – including something really different. And they have low-cost, underutilized land, infrastructure, and buildings.

      China might find that “next economy” first, but if that 1-2% chance of the U.S. “getting it” is going to happen, I think it’ll happen bottom-up, with the economically alienated young folks leading the way, and using a bit of land near a small town as the canvas for experimentation and evolution.

  6. Eustachedesaintpierre

    Great stuff & maybe the Chinese remember the East India Company’s effect on the East, in particular the Opium wars which I suppose were not all that different from the smash & grab operating today. Perhaps Soros realises that the West needs China to continue it’s great game for the few that profit from it, else it is going nowhere good perhaps even for the likes of himself.

    “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” – Confucious.

    1. drumlin woodchuckles

      A West based on degrowth down to a sustainable steady-state level would not need to play the Soros game. And it would still be ” the West”.

      Medieval Europe was The West in its day. And it was steady state.

  7. The Rev Kev

    Always a pleasure to read Michael Hudson’s work as they are always packed so full of detail. I doubt that China is really worried by George Soros. Chinese written civilization alone is some 3,500 years of continuous history. And Soros, at age 91, will not even be a blip in Chinese history when he falls off his perch in the next few years. But attitudes to China have changed over the years.

    Before the great crash, there was a saying I read that went how Asians sweat while westerners think. Yeah, it was that racist. It did not help at the time that some Asians, in order to further their chances of success, had corrective surgery to make their eyes more Caucasian like. How the mighty have fallen. I do not think it too far from the truth that if you want to find a more classic form of capitalism, that you have to go to China now. That is why I reckon that the CCP actually stands for the Chinese Capitalist Party.

    What we have in the west is, well I don’t know how to classify it really. It seems determined to destroy itself and impoverish people so that a tiny fraction of 1% of the population can have even more wealth, even though they have no hope of ever spending what they have. And in trying to have everything, they have sown the seeds of their own destruction. After all, where is the vitality to to be found in a rentier economy? It can’t compete and the talents of its own people are hobbled by financial and class interests, its infrastructure falls apart and you have an oligarchy that refuses to save itself unless profitable. This is not the 21st century that I ordered!

    1. drumlin woodchuckles

      Perhaps a word for what we suffer under could be ” sadisticapitalism” run by “sadisticapitalists” who thrive on the visible suffering of millions below them on the pyramid.

      If anyone thinks ” sadisticapitalist” and “sadisticapitalism” are good words, feel free to take them for a ride and see how far they go.

      Or maybe sado-capitalism and sado-capitalist.

  8. ChrisRUEcon

    That postscript is *Chef’s Kiss*, and dovetails nicely with what was said in this tweet Lambert posted yesterday:

    “The broad sentiment within China is that the United States is captured by entrenched interests and cannot restructure its system to escape these traps.”

    Yes, trapped indeed. Which set of plutocrat interests will triumph in this sickening battle? #MIC vs #TheRest


    1. JEHR

      or #Crickets.

      I notice that the two professors who wrote about Chinese Crises are women. Ah, if only we had more women in power!!

      1. drumlin woodchuckles

        Clinton would agree with you. So would Kamala Harris. So would Nancy Pelosi.

        So long as you mean women like Clinton, Harris and Pelosi.

  9. Gulag

    Is it the case that prior to 1978, China found itself largely dis-functional because of total governmental control of the economy?

    Did China spend the next 30 years or so throwing off this legacy of excessive direct government control while instituting a type of market socialism?

    (Things like the Farm economic policy lifting restraints on farmers, then the grant of land to farmers giving them the freedom to decide where or when to farm or not farm, as well as the liberalization of rural non-agricultural economy (township and village enterprises) along with parallel steps in the urban economy like allowing small scale businesses and restaurants, and later, privatization of urban housing and then small scale industry and finally changes in large-scale state industrial structures)

    Would it be safe to say then, that the market-type reforms listed directly above were primarily responsible for the dramatic economic growth between 1978 and 2010, in which the Chinese economy grew faster for longer than in any other economy in human history.

    Would it also be safe to argue that it is still too early to judge whether post 2010 industrial policy with firmer CCP control will be a success (despite Xi’s understanding that the political leadership must act immediately to pop their massive real-estate bubble, or else risk losing political legitimacy?

  10. Whatdoiknow

    Great insights but I fear they will prove worthless as China collapses within itself in not the too distant future .
    It’s the destiny of all planned economies.
    I wonder how much rentier capitalism would be preponderant today if the Fed hadn’t pursued a continuous creeping inflation theory over the years and we truly had price stability, that is zero inflation?

    1. MonkeyBusiness

      China has collapsed many times. Storms come and go, the big fish eat the little fish, and China keeps on paddling. The goal of China is China.

      The United States will collapse too and will break up for sure. A thousand years from now there will still be a China, the United States? Not so much.

      1. Fritzi

        I’d 100 percent agree of there wasn’t this whole climate catastrophy and collapse of ecosystems and so on Thing going on.

        That one is unprecedented in human History and No one has an answer to it.

        But I still think, if complete extinction of species can be avoided, then China is of course still vastly, incomparably more likely to still be around as a recognizeable, coherent and working entity than America, even after a huge dieoff that kills 90 percent of humanity.

    2. drumlin woodchuckles

      If we didn’t have the Fed policy you describe, and had rentier capitalism protected by its captive government, we would probably be a modern day version of the bureaucratic slave states of antiquity, or at best the very worst of old Feudal Europe.

      If the Chinaconomy collapses, it won’t be from planning. It will be from falling into the crater opened under it by a general geo-physical ecosystem collapse. Kill the ecology and the economy will die.

      Perhaps the ChinaGov just wants China to be the “last man standing”. If China can emerge from the coming ecosystem collapses as the last Belarus in a world of South Sudans, then China wins. I suppose we could debate what China will have won.

    3. Mikel

      Countries more often than get help from other countries with nudges and/or a push to the edge: war, sanctions, invasion…but always so many “innocent” bystanders.

  11. Tom Collins' Moscow Mule

    I am willing to consider that the differences of a top down vs, a bottom up style capitalist economy are largely superficial and the conundrum that the Evergrande failure and what it reveals will be resolved in a way that does not materially affect the economic status quo in any dramatic fashion, because the current economic game and its rules remains the same, globally, that is inviolable. For example, without central bank intervention there would be no stability and no speculative ‘confidence’, as speculative markets are unable to function without ongoing intervention.

    “There have been few signs of official intervention. The People’s Bank of China’s 270 billion yuan ($42-billion) cash injection this week is the largest weekly sum since January and has helped put a floor under stocks.”


    And, “The government is “still going to provide a guarantee” for much of Evergrande’s activities, said Zhu Ning, deputy dean of the Shanghai Advanced Institute of Finance, “but the investors are going to have to sweat.”

    Even as, the power of an authoritarian police state to control internal dissent . . . .

    “The authorities have other ways to quell public unease about Evergrande. For months, local governments have been issuing directives urging Communist Party officials and companies to look out for budding protests related to China’s troubled property developers. Some notices warn officials to monitor aggrieved home buyers, unpaid contractors and even laid-off real estate salespeople.”

    “The conundrum for China’s leaders is how to impose financial discipline without fuelling social unrest, since an Evergrande collapse could crush a property market which accounts for 40 per cent of Chinese household wealth.”

    . . . . only extends so far, because,

    “An abrupt default by Evergrande on a wide range of debts “would be a useful catalyst for market discipline, but could also sour both domestic and foreign investor sentiment,” said Eswar Prasad, an economics professor at Cornell University who is a former head of the China division at the International Monetary Fund.”


    Caught between a speculative Blackrock and a hard place, as it were.

    1. drumlin woodchuckles

      If the ChinaGov could unwind Evergrande and then unwind any other domino a falling Evergrande may knock over, and in such a way as to guarantee every Chinese return of money up to some decent austerity level, while vaporising and disintegrating every single foreign investment in those Chinese real estate/development/etc. companies right down to the last brass farthing; then the ChinaGov will have done the societies of the world a real service.

    2. Tom Pfotzer

      “current economic game and its rules remains the same, globally, that is inviolable”


      “the differences of a top down vs, a bottom up style capitalist economy are largely superficial”

      are two statements which need clarification and possibly rebuttal.

      The current game remain the same globally? No; the rules are quite different now in China, and are becoming more different by day.

      Rentiers are being blocked, marginalized, and outsted in China. They are being promoted and enabled here in the West. That’s a mighty big difference. Please rebut that statement.

      Top-down .vs. bottom up style capitalist economy are largely superficial… at the moment, I’d agree with that statement here in the West. But bottom-up has agency – has capabilities and freedom of action which top-down doesn’t. Bottom-up doesn’t need permission; top-down does.

      That “freedom of action” isn’t being effectively used yet, but it’s there. A household has a great deal of decision-making power (what to buy, what to pay attention to, what to build, what to know, who to interact with) that hasn’t been effectively curtailed yet, and will be difficult to fully stifle.

      I caution observers: don’t lose sight of, forfeit by denigration, or dismiss the control you have.

      1. Tom Collins' Moscow Mule

        Can 50 cents still buy a cup of coffee? . . . .

        “China’s drive for “common prosperity”, as President Xi Jinping aims to ease inequality in the world’s second-largest economy, does not mean “killing the rich to help the poor”, an official from the ruling Communist Party said on Thursday. China must also “guard against falling into the trap of welfarism”, Han Wenxiu, an official at the central financial and economic affairs commission, told a briefing in Beijing.”


        . . . . “because the current economic game and its rules remains the same, globally, that is inviolable” . . . . appears to be the case historically . . . . according to “the golden rule”.

        At least according to the rumor mill.

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