Michael Hudson v. George Soros on China’s Rejection of “Market” Capitalism

Earlier this week, the Financial Times posted a comment by famed investor George Soros, Investors in Xi’s China face a rude awakening. This article would have been very useful if it had stuck to its headline warning, which is more or less along the lines that Xi has made very clear that he’s not going to allow investors, above all foreign investors, to exercise more influence in Chinese business and society.

However, Soros then goes on in a vein that the article subhead accurately summarizes: “The leader’s crackdown on private enterprise shows he does not understand the market economy.” Oh, contraire, China’s success has been built on learning from the mistakes of other Asian countries that developed quickly but then fell prey to financialization, particularly Japan, and had difficulties making the transition from being export and investment led to consumption led.

In particularly, Soros is cheesed off at Xi restricting foreign investment, particularly in stocks. First, China is a capital exporter. It doesn’t need foreign funds. Second, despite the Anglopshere idealization of public stock markets, China doesn’t need one either, although getting rid of the one it has now would be messy and very disruptive.

As Amar Bhide pointed out in a landmark Harvard Business Review article, Efficient Markets, Deficient Governance, anonymous, freely traded shares inherently lead to poor governance. Public companies cannot share critical business information that investors need to make informed decisions. Transient shareholders also lack the motivation and means to improve the performance of the companies they’ve invested in. Bhide has pointed out in other venues that while all other types of investments, such as derivatives and venture capital, existed in pre-modern times, arms length share trading did not because stock is a legally vague and weak promise.

And despite the idealization of share ownership, it’s almost entirely divorced from the funding of business. The most important source for new investment is retained earnings. Second is borrowing. Share sales are a distant third. The overwhelming majority of stock trading is shuffling paper among investors.

The most charitable interpretation of Soros’ position is that he suffers from a China version of the saying attributed to Charles Wilson, “What’s good for GM is good for America,” which here becomes, “What’s good for people like me of course is good for China.” Except as Michael Hudson explains, it isn’t.

Below are sections of the Soros article, with Hudson’s remarks in bold italics:

Xi Jinping, China’s leader, has collided with economic reality. His crackdown on private enterprise [what the classical economists called rent-seeking and unearned income] has been a significant drag on the economy [meaning the economy’s polarization concentrating wealth and income in the hands of the richest One Percent]. The most vulnerable sector is real estate, particularly housing. China has enjoyed an extended property boom over the past two decades, but that is now coming to an end. Evergrande, the largest real estate company, is over-indebted and in danger of default. This could cause a crash. [That’s just what is needed.]

….One of the reasons why middle-class families are unwilling to have more than one child is that they want to make sure that their children will have a bright future. [This is true of every advanced nation today. It is most extreme in the neoliberalized countries, e.g., the Baltics and Ukraine – Soros’s poster countries.]

We have skipped over Xi’s crackdown on the private tutoring industry…as if tutoring is essential to providing for security and an adequate standard of living for the next generation. How about strong public education, including remedial and advanced tracks, and vocational/technical training for those not bound to universities?

Back to Soros and Hudson:

Xi does not understand how markets operate [meaning that he rejects rapacious rent-seeking, exploitative free-for-all, and shapes markets to serve overall prosperity for China’s 99 Percent]. As a consequence, the sell-off was allowed to go too far [by which he means, too far to maintain the dominance of the One Percent; it seeks to reverse economic polarization, not intensify it]. It began to hurt China’s objectives in the world [meaning America’s neoliberal objectives for how it had hoped to make money for itself off China].

Recognising this, Chinese financial authorities have gone out of their way to reassure foreign investors and markets have responded with a powerful rally. But that is a deception. Xi regards all Chinese companies as instruments of a one-party state…

Pension fund managers allocate their assets in ways that are closely aligned with the benchmarks against which their performance is measured. [The tragedy of financializing pensions is that fund managers are rated on making money financially – in ways that hurt the industrial economy by promoting financial engineering instead of industrial engineering.]

Almost all of them claim that they factor environmental, social and corporate governance (ESG) standards into their investment decisions. [At least, that’s what their public relations advisors advertise. Exxon claims to be cleaning up the environment by expanding offshore oil drilling in Guyana, etc. As for “social standards,” the neoliberal mantra is trickle-down economics: by making our stock prices rise, by stock buybacks and higher dividend payouts, we are helping wage-earners earn a pension, even though we are offshoring and de-industrializing the economy, de-unionizing it and “freeing” the economy from consumer and workplace protection laws.]

….The US Congress should pass a bipartisan bill explicitly requiring that asset managers invest only in companies where actual governance structures are both transparent and aligned with stakeholders. [Wow. Such a bill would block Americans from investing in many American companies whose behavior is not at all aligned with stakeholders. What proportion: 50%? 75%? More?] This rule should obviously apply to the performance benchmarks selected by pensions and other retirement portfolios.

If Congress were to enact these measures, it would give the Securities and Exchange Commission the tools it needs to protect American investors, including those who are unaware of owning Chinese stocks and Chinese shell companies. That would also serve the interests of the US and the wider international community of democracies. [So Mr. Soros wants to block the US from investing in China. That is President Xi’s objective also: China doesn’t need U.S. dollars, and is in fact de-dollarizing.]

There are a lot of reasons to criticize Xi and the Chinese regimes, but combatting foreign influence and a bit late in the game pushing back against high levels of inequality are not among them.

And Soros presents himself as having superior insight into China, and then acts as if an American strike on Chinese public companies would dent them. Good luck with that.

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  1. Ian Perkins

    I hear many variants of “Where did the West go wrong” nowadays, on many topics, and by no means only from left or alternative sources.
    I don’t get the impression the same is true of China.

  2. ambrit

    President Xi seems to understand the principle of “China for the Chinese.” The unspoken corollary of this is; “America for the Americans.” In this regard, Trump was merely badly expressing the true needs and wishes of the American people. The stage is now set for the rise in American politics of a “Smart Trump.”
    The West had better be very careful in how it deals with China. Much of it’s industry is now there. Once China makes some sort of transition to a domestic consumption economy, the West will no longer have any leverage over Chinese affairs. Then, watch out!

    1. Louis Fyne

      The West already has zero leverage. The West can’t even get the PRC to comply with a simple thing as a document request re. the early days of Covid.

      And if you go by that Klauswitz saying: “war is another means of politics”….the West again has no leverage of China as there is zero chance that the West can compel China to act in a manner of the west’s choosing by using force.

      Any conventional war with China, the US will lose as fighting China in East Asia is the absolutely worst place the West can fight logistically (see 1950-3, 1954-73). And that was before the modernization of the Chinese military AND zero fears in the PRC of seeing the West splitting Russia away from friendly relations from China.

      Though a Martian would never think that when you listen to the chickenhawk pundits/think tankers yap on TV or the intertubes.

      Pundits dream that the US Navy swoops in, cleanly kicks butt in the South China Seas/Taiwan Straits, PRC says ‘aww shucks’ and the Americans go home to spike the football.

      Never going to happen.

      1. Yves Smith Post author

        While I agree that the US has little leverage v. China, anything about the origins of Covid in China (assuming a Chinese origin, which the Chinese government rejects) is NOT a “simple thing:” The Chinese were out way before our lab leak theory with a US military origin narrative. They have made a huge push to establish that PR. Any “investigation” thus comes off as Western blame-shifting.

        And if the shoe were on the other foot, there is absolutely no way the US would allow China or the UN or the WHO to poke around our countryside and go into nationally funded labs. So our depiction of the US position as reasonable is anything but since we would not behave in a reciprocal manner.

        1. blep

          It’s also kind of irrelevant. The fact is that if they were mishandling covid in a ham-fisted way as the US claims, people would be dying in droves. I think 2 died in China this year. So it’s very clearly a way of the US escaping its own responsibility for mass death with an external enemy. This isn’t Vietnam trying to work cooperatively to figure out “what happened,” it’s starting with a conclusion and filling in the rest.

        2. Pate

          So Yves (or others) might you comment on what non- military leverage if any the US has against China including the possible roll of dollar supremacy (for example as the ticket of exchange for most international trade)? IIRC you have said China as an exporter has no interest in currency supremacy. Is China’s Silk Road and sidling up to Russia somehow related to the desire for an alternative basket of trade currencies to escape the west’s control of financial flows or its power to engage in financial war through sanctions etc? Thank you!

            1. Kemerd

              Indeed, and I understand the policy and why. But I also very much like to hear your opinion on this. Hudson published some vague ideas about this, but I have not seen a comprehensive account of how this could be done by any financially literate author.

              1. Pate

                Grimes (speaking to Hombre):
                “Mister, you have got a lot of hard bark on you comin’ down here like this”.
                Yves, Apologies for my unintentional violation. Kemerd thanks for your effort (hard bark and all).

      2. schmoe

        Considering the US’s success in largely shutting Huawei out of the European, Australian,,and (probably) Brazilian markets, any comments that the West has zero leverage is very premature. Also China will not openly defy US sanctions on Iran.

        That said, if China can master semiconductor lithography and stabilize Afghanistan, the “West” is rapidly loosing its pressure points, short of parking the US Navy off China’s coast and blockading oil imports. I have always thought that Steve Bannon envisioned a replay of the Battle of Midway against China and then the US rules the world for all eternity.

    2. Edward

      Wall Street may not care about America that much, but it depends on the U.S. economy for its wealth. If the U.S. economy becomes uncompetitive and stops supporting them, where will they go? Perhaps they wish to move on to successful economies like the one in China, but that country seems to be barring this.

    3. Temporarily Sane

      Candidate Trump (with a little help from his campaign advisor Steve Bannon) intuitively understood the anger and the needs of Americans who’ve been shafted by decades of neoliberalism and he made good use of this knowledge during his 2016 election events. His rhetoric about bringing back manufacturing jobs and ending the forever wars helped win him the election.

      But president Trump failed to deliver on any of the key promises he made to ordinary Americans. But he did deliver tax cuts to his wealthy corporate benefactors, stuff his cabinet with crony capitalists, military men and neocon war hawks, do a massive arms deal with the Saudis, give the Israelis Palestine on a platter and bring the country to the brink of war with Iran. And he chickened out on his very popular decision to end the Afghanistan war (which Joe Biden now gets credit for).

      As for “bringing back” the jobs…well, he did put some sanctions on China that American companies and consumers largely pay for.

      So it’s quite amazing that Trump is still as popular as he is. He’s a sociopathic self-promoter who knows how to tell people what they want to hear. But his timing was impeccable and he showed up with his (bogus) anti-establishment cred and his “take back America” message right when hatred for the grifting, neoliberal Democratic Party was peaking and he successfully channeled the anger and disillusionment of Americans into an election victory.

      It’s well known that human beings are not quite the pure “rational actors” of Economics 101 lore and, when making decisions emotions often trump (heh) reason. Hatred for the Democrats and their policies is so strong that many Americans still support Trump despite his glaring failure as a president and a politician.

      That the Dem/Rep duopoly is irreparably broken is apparently still too radical a notion for American voters to accept. When one party is unpopular, a candidate from the other party who acts sympathetic to popular anger will get the benefit of the doubt even when he/she very obviously doesn’t deserve it. This was true for Obama, who is still wildly popular among Democrat true believers, and the same is true of Trump whose popularity has become almost almost cult-like.

      Democrats’ tone deafness, insufferably self-righteous scolding and endless panicking over “fascists” is tiring…but so is the cartoonish “Biden/Obama are the devil” schtick (hello Jimmy Dore!) and the implicit support for losers like Trump and other odious “Republican adjacent” BSers that’s so popular among ex-Democrats.

      Yes, the Democratic Party is rotten to the core but it’s pretty depressing that this translates into faux credibility for the other half of the duopoly which is just as rotten, only in slightly different ways.

      If you want M4A, a livable wage and new deal type stuff it makes no logical sense to get behind Trump and the “new” right. But I suppose it’s easier to do that and hold out for a POTUS savior then it is to deal with the fallout of accepting that America isn’t what you (and I) were taught it is. For people who really believed in the myth, that’s losing your religion type scary.

      1. drumlin woodchuckles

        The Democrats and the Mainstream Republican remain economic traitors for Free Trade against America. Given that, Trump retains some default popularity among still desperate people who know they have no other place to go. Certainly not to their Free Trade Treason enemies in the Democratic and Mainstream Republican parties.

        ( I am talking about the ex-Democrats in the “Brexit States” who voted for Trump. I am not talking about the MAGA Foxanons who worship the very toilet Trump relieves himself in).

        1. lance ringquist


          The High Cost of the China-WTO DealAdministration’s own analysis suggests spiraling deficits, job losses
          Report By Robert E. Scott February 1, 2000
          Issue Brief #137
          The High Cost of the China-WTO Deal
          Administration’s own analysis suggests spiraling deficits, job losses
          by Robert E. Scott

      1. drumlin woodchuckles

        How much could a ‘smart Trump’ get done before he ended up ” dead as a Kennedy”?

        A President Gabbard would be uniquely threatening to the establishment in that regard. She would know enough about security to be able to work with the Secret Service to establish a genuinely defensible perimeter around herself. Any assassination would have to be fairly obviously an assassination to get through all the security she would be able to create around herself.

        Then she would try pursuing policies which would make the “Deep PaperClip Nazi State” so upset that it would risk showing itself in order to get her killed. She would know this. She might well have “parallel channels” to many very skilled defense-offense operators who would stand ready to “reach out and touch” all those who would most profit from her removal. She could die happy in the knowledge of that, at least. She would die knowing that she would be very very avenged.

        For that reason among others, the establishment really really really doesn’t want the ‘smart Trump’ to be Tulsi Gabbard.

    4. lance ringquist

      where to begin? soros is another kool aid drinker like nafta billy clinton. this was all predicted. communist china no longer needs our bananas, oops, i mean dollars.

      you could see a change in them right after musk went to nafta billys free trade utopia. it was almost like XI said we have siphoned about all that is worth getting, time to shove the idiots down the drain.

      people have to say it loud and clear every day in public. nafta billy clintons policies were complete failures, complete economic nonsense, and his free trade policies were the worst policy blunders in american history.

      the dim wits hillary clinton and empty suit hollowman obama figured out something was going wrong with their pivot to asia,

      they were stunned the chinese were not going to be serfs for them.

      Deng must have been astounded, yes comrade lenin was correct as he stared in shock at the smirking nafta billy clinton,

      “The Capitalists will sell us the rope with which we will hang them.”

    5. lance ringquist


      The point of all this is simple. It’s not a moral or psychological failing to see Manchin, Biden and the rest as irredeemably opposed to all that non-billionaire people in the U.S. actually need. It’s simply realistic.

      If your neighbor tried to get rich by causing your death, you’d certainly call her evil. The same with these people. Just because the deaths they will cause are global and the riches they will see are scaled in the billions and trillions, that doesn’t make them different from your hypothetical murderous neighbor.

      If insiders’ “optimism” leads to one set of tactics, a more realistic appreciation of the enemy — yes, mainstream Democrats are your enemy in this — suggests an additional and different set of tactics that should also be applied. Tactics that start, for example, with “We’re naming who you are until your deeds prove us wrong.”

    6. Generalfeldmarschall von Hindenburg

      China spent a long time being beat up by outsiders after spending nearly a millenia as the regional Big Dog. They are more concerned about long terms meta stability and security than most. All the same, their rapid hyper industrialization has caused tremendous ecological damage which may undo their careful planning.

  3. topcat

    If the Chinese are really smart, which they are, then they will smoothly take over Asia and form an alliance with Russia hence becomming self sufficient in food and energy at this point they can cut the west adriift and implement the old British strategy of Splendid Isolation.

    1. drumlin woodchuckles

      That would be a merciful outcome. The cut-adrift west could then adopt autarky for its own self. They could have Their autarky Over There, and We could have Our autarky Over Here.

      But that is not what the CommuNazi ChinaGov PartyState wants in the long run. In the long run, the Chinagov wants to reduce America to part of its captive hinterland within the One Ball One Chain Prosperity Sphere.

      1. lance ringquist

        the problem with nafta billy clinton, his advisors and financial backers was that they were blinded by their merit(in real life, their own greed and stupidity), they thought that they would get a nation of 1.3 billion people, as their new pre civil war south, which was a free trade bonanza for parasites(it was only when tariffs which is democratic control and a tax on the rich was applied that that slave driven wealth was dented

        https://www.history.com/news/slavery-profitable-southern-economy )

        but china had a different thought on this, and it was well known to boot.

        i do not blame china, lincoln understood this well,

        “The globe is divided into different communities, each seeking to appropriate to itself all the advantages it can, without reference to the prosperity of others.”

        “Throughout the campaign Lincoln and his fellow Whigs concentrated on the tariff issues while Democrats focused on expansionism in Texas and Oregon. The tariff of 1842 – the chief accomplishment of the Whig-dominated Twenty-Seventh Congress – had been designed to restore prosperity, encourage foreign investment, improve the balance of trade, and enhance government revenues. Because most of these goals had been achieved,”

        so if arrogant morons with no sense of history approached me with the entire 200 years of accumulated wealth of their nation and handed it to me on a silver platter with no real enforceable strings attached, i would do as lincoln said they will do.

  4. BeliTsari

    Trying to invest in renewable, regenerative, efficient, “smart,” or resilient products & services (all booming, right through Trump’s supposed trade war & anti-envioromental tirades). It wasn’t all that much of a surprise, that we’re now involved in a reactionary, bogus protectionist, virtue-signalling scam, against Chinese suppliers of PV, LEDs, generators & motors, ALL sorts of storage, smart grid microprocessors & circuitry as well as US/ Chinese partnerships’ PHEV & EV busses, AI agricultural and capital equipment & mass transit… since late January, for some odd reason (NOT effecting Korean, Taiwan or Malaysian inports?) I’d tried to invest in Huawei, but I’m not an employee. Guess, if Biden’s cabinet slows AGW mitigation, it’s a win-win?

  5. Michael Hudson

    Soros is obviously upset that President Xi is not Boris Yeltsin, and that China is not following the kleptocracy dependency that warped Russia’s economy. Soros thought the ending of the Cold War would simply let him buy up the most lucrative rent-yielding assets, as he has aimed to do in the Baltics and Ukraine. China said “no,” so it is not deemed to be a “market economy,” Soros-style. It has not made its social organization marketable, and has avoided the financial dependency that makes “markets” a vehicle for U.S. control via sanctions and foreign buyouts.

  6. Tom Pfotzer

    Western rent-seekers are being rapidly shut out of Asia.

    The West’s strategy was to move the West’s production to China, install the West’s rent-seeking apparatus, and enjoy another New American Century of elite rent-seeking.

    China has out-maneuvered them. China’s strategy is to build and maintain a viable, creative, competent and coherent middle-class culture, and use the state as mechanism to achieve that goal.

    Most of the opportunities for sustained organic growth based on middle-class income, new wealth creation – particularly that based on new technology development – are centered on Asia. It’s possible that most of the untapped mineral resources also reside in central Asia and Russia, as well.

    Afghanistan was the western gateway to those future rents, and it’s been closed down. China itself is the eastern gateway, and it’s been resoundingly shut down.

    China and Russia and Iran know the West’s moves, and they have (China) or are rapidly evolving (Russia and Iran) the knowledge and discipline to avoid the traps. These nations are communicating those traps to the other Asian nations. That’s why they are declared to be the “enemy”.

    As Yves points out, China doesn’t need Western capital and has clearly communicated that fact via recent moves to restrict U.S. access to IPOs based in China. No Western rent-seeking taps (extraction points) allowed.

    The rent-seekers are in a bad way. They’ve cannibalized the West, and have few new pools of wealth to feed off.

    So, they have to make some hard choices, which include (at least) these options:

    a. Further cannibalize the Western economies, gradually weakening them until they collapse economically and socially, or

    b. Exploit non-Asian wealth pools, e.g. Africa, central and south America, or

    c. Rebuild the West.

    Option “C” requires a strong, creative middle class, and consequently a major cultural make-over. It would require a re-direction of wealth creation _away from_ the facilities owned by the 1% and _into_ facilities owned by the 99%. Otherwise no aggregate demand.

    Option “C” would therefor require equipping the 99% to play a durable, economically viable role in the economy as it now is. Not some “future” economy, but the “here-and-now” economy.

    The economy moved, and the 1% didn’t. Ergo “stimulus” and transfer payments, each evidence of rapidly deteriorating buying power of the middle class. As goes buying power, so goes competitive vitality.

    The loss of Afghanistan is a signal event; it’s not the trend, it’s a milestone on the trend-line.

    As I scan the Internet, I am not seeing evidence of coherent, reality-based re-assessment of the West’s economic strategy*. I see competing factions fighting over a rapidly-diminishing pie.

    * Michael Hudson is a notable exception

    1. larry

      Tom, one wonders whether China could have successfully rejected the US’s rent-seeking incursion attempts had it been a democracy comprised of competing interests instead of a dictatorship. In this particular case, the score might be considered to be: China-1, US-0.

      1. Tom Pfotzer

        Larry: probably not. The rent-seekers have long known how to compromise a democracy. Buy the gov’t, control the media, control the money-flows. They’ve got it iced. What’s changed is that the rest of the world knows the moves.

        At some point, our society is going to have to conduct a referendum on the value of “freedom”, and if it truly is valuable, how we use it. I’m not sure we’re real good at using the “Freedom” tool right now.

        Have you read The Great Rupture by Viktor Shvets yet?

        SufferinSuccotash: A good sub-cat. I’d generalize it to “plunder the commons”, as that extends into the culture and social space. They are extracting rent from from people’s identity, who they associate with, what they want to learn (searches), what they’re afraid of….it’s just gruesome to behold.

        1. Susan the other

          What’s kinda strange is that old Georgie Soros doesn’t seem to be repentant about any of this. He seems to think he’s right when it is blatantly obvious that he isn’t right and never was. It’s weird, because Hayek was such an eloquent writer and speaker he convinced millions of people that neoliberal economics was TINA. When in fact it was a complete disaster. We are looking at it today. So Soros’ previous bond vigilantism is now (with finance having to be bailed out because it killed off whole economies) stakeholder vigilantism. But stakeholderism has already managed to be disastrous as well. How can stakeholderism ever survive without the whole “strong dollar” idiocy preventing the social spending and allowing pure profiteering? It can’t.

    2. SufferinSuccotash

      Just wondering if there’s a sub-category of (a.) which is called “cannibalizing the public sector.” This has already happened to a certain extent, but once the rentiers get a firm lock on the income streams from tax revenues then they’re fixed for life.

    3. Michael von Plato

      RE: “The rent-seekers are in a bad way. They’ve cannibalized the West, and have few new pools of wealth to feed off.”
      Largely true, but there are a few very tasty pools left, namely the privatization of previously public goods: schools, hospitals, highways, parking meters, water reservoirs and attendant infrastructure etc. The return is often modest, but the benefit to the investors are: government guaranteed returns.
      This is indeed a perverse kind of capitalism, a capitalism largely if not entirely dependent on public money.

      1. SufferinSuccotash

        The East India Company provides a partial precedent. In 1765 the Mogul Emperor granted the company the authority (diwan) to collect revenue in Bengal, Bihar and Orissa. From that point on the Company’s effective control of most of the Indian subcontinent was pretty much a foregone conclusion.

        1. witters

          Well, that was after the Battle of Plassey – the greatest neoliberal success story of all time – full privatisation of the Bengali state.

    4. Fritzi

      The West’s (or the US’s) last real hope is climate catastrophy and ecological collapse will destroy China a little bit faster than it will destroy America.

      But I think even there they will be disappointed.

      Ultimately I don’t think any modern “civilisation” is getting out of this alive.

      But the Chinese at least know how to organise people.

      Making them probably capable of staving off total collapse longer, quite possible even better at keeping remnant populations alive afterwards.

  7. Rolf

    Tom, great comment. Agree strongly that nothing (good) will happen absent a decisive reversal in policy. Can you expand on “C”, i.e. what facilities do the 99% now own (or could own) that would serve this purpose? What do you see as precursors for reversal — assuming “A” is averted? And how to accomplish this amid accelerating environmental, social, and political stressors and constraints?

    1. Tom Pfotzer


      I think A) and B) are givens. The dominate-extraction mind-set is so deeply entrenched and the players are so very experienced at the game and so very well-resourced that I don’t see top-down adaptation as likely. Not for years to come.

      What means does the 99% have to get back in the game? Let’s define the “game”: to perform an economically viable, competitively defensible function that’s valuable enough to provide a decent std of living. Main needs met, some of the wants, too.

      Here’s a few baseline assumptions:

      a. Automation continues to factor labor out of the production equation. Every year, there are fewer pools of protected wealth that the middle class can harvest.

      b. The 99% is not capable of much creativity or self-discipline. Mind-set, collaboration skills and tools almost totally absent from the scene. Alibaba would not have made it in the U.S.. Think about that for a minute. We are mostly dependent, change-averse, selfish and short-sighted. Not the stuff of a creative renaissance. There are exceptions, but we’re talking generalities at the moment.

      c. Biosphere degradation and climate change are starting to really bite.

      d. Corollary of c) is that a very good bit of our installed economic physical plant is obsolete right now. It’s well-known @ 1%: they are exiting those holdings. Stock buy-backs, hollowing out, no further investment in R & D…they know it. We don’t know it yet (need some bag-holders to buy that stock, right?) but they do. Industries: ag, energy, transport, manufacturing, education, health-care, finance, materials (smelting, cement, plastics) … all need big make-overs to function next 30 years.

      e. Young people totally boxed-in, and they are figuring that fact out.

      That’s the back-drop: exogenous enviro events on the upswing, middle class factored out, industrial infrastructure obsolete, nobody really in a position (ready-willing-able) to re-imagine and then implement next economy, rage on the upswing again.

      You asked the question “what do the 99% have”. Here’s what they have:

      a. Their household. Got an asset that is terribly underutilized, can function as production center with some mods at HH and village scale. HHs have volition; no volition at any scale beyond county politics.

      b. Their labor. The regular economy doesn’t want it anymore. It’s an available resource. It’s not terribly creative, or skilled, or disciplined. That can change, but only after the pain threshold is met. We aren’t at that threshold yet, so no change happening.

      c. A nation full of underutilized, derelict assets at the local level. Think “fly-over small town”. Land’s cheap, buildings cheap, desperate for new blood. Feeding into that is…

      d. A crushing need to redistribute productive capacity. Where’s CO2 emanating from? Transport and elec gen. Where’s pollution from? Waste streams. Where are they? At the point of consumption, e.g. “local”. Got to move the production to proximity with consumption. That _implies_ that the local player has a leg-up (proximity), and it sure looks to me as though the barriers to entry for local production (machine tools, access to tech, access to heavy materials like steel, distribution outlets) are falling a lot, and fast. Think about CAD/CAM, 3D printing, robotics, recycle of materials, mini-mills (steel and aluminum, fed from waste-streams), just to name a very few examples. These things are present or incipient now, just not effectively deployed. They can be deployed.

      The re-distribution of capacity, and the fundamental re-design of that capacity is very likely to happen. So, who builds it? Who owns it? Who buys it from it? These questions are very much up in the air right now, here in the U.S.

      So, the 99% has 2 major trend-lines aimed right at them (no value for labor, enviro melt-down) , but they’re currently immobilized. The 1% is also immobilized, but for different, and maybe more durable reasons. Who will snap out of it first?

      China’s in a different place. Their population is gung-ho creativity and peer-to-peer commerce. State is committed to providing the tools and capital to get things done. They have actual plans and they follow them. They are probably going to adapt faster than we do.

      1. Rolf

        Tom, thanks for the detailed reply. A great deal to think about here.

        d. A crushing need to redistribute productive capacity. Where’s CO2 emanating from? Transport and elec gen. Where’s pollution from? Waste streams. Where are they? At the point of consumption, e.g. “local”. Got to move the production to proximity with consumption. That _implies_ that the local player has a leg-up (proximity), and it sure looks to me as though the barriers to entry for local production (machine tools, access to tech, access to heavy materials like steel, distribution outlets) are falling a lot, and fast. Think about CAD/CAM, 3D printing, robotics, recycle of materials, mini-mills (steel and aluminum, fed from waste-streams), just to name a very few examples. These things are present or incipient now, just not effectively deployed. They can be deployed.

        The re-distribution of capacity, and the fundamental re-design of that capacity is very likely to happen. So, who builds it? Who owns it? Who buys it from it? These questions are very much up in the air right now, here in the U.S.

        Great point, strong agreement.

        So, the 99% has 2 major trend-lines aimed right at them (no value for labor, enviro melt-down) , but they’re currently immobilized. The 1% is also immobilized, but for different, and maybe more durable reasons. Who will snap out of it first?

        China’s in a different place. Their population is gung-ho creativity and peer-to-peer commerce. State is committed to providing the tools and capital to get things done. They have actual plans and they follow them. They are probably going to adapt faster than we do.

        Yes. Brings to mind the distinctions in the summary chapters of Branko Milanović’s, Capitalism, Alone.

        I’m very grateful to Yves and others at NC for maintaining this forum — it’s one of the most intelligent corners of the internet.

        1. Tom Pfotzer


          Yes, there is a lot to think about there, and maybe I said a little too much too soon. There’s a pacing aspect to this that I, ah, am not that great at.

          Never heard of Branko Miolanovic. Here’s a quick blurb on the book you mentioned:

          Milanovic argues that capitalism has triumphed because it works. It delivers prosperity and gratifies human desires for autonomy. But it comes with a moral price, pushing us to treat material success as the ultimate goal. And it offers no guarantee of stability. In the West, liberal capitalism creaks under the strains of inequality and capitalist excess. That model now fights for hearts and minds with political capitalism, exemplified by China, which many claim is more efficient, but which is more vulnerable to corruption and, when growth is slow, social unrest. As for the economic problems of the Global South, Milanovic offers a creative, if controversial, plan for large-scale migration. Looking to the future, he dismisses prophets who proclaim some single outcome to be inevitable, whether worldwide prosperity or robot-driven mass unemployment. Capitalism is a risky system. But it is a human system. Our choices, and how clearly we see them, will determine how it serves us.


          I have great bouts of self-talk on the subject of “will we commence the vigorous struggle toward a survivable place soon enough??”

          Choices are key. To make choices, we need good situational analysis, and to know what our interests are. Easy to say, not so easy to do.

          And, like you, that’s why I post here, and read here. Thx again to NC et. al.

          1. Rolf

            Also — just bought a copy of Shvets’ The Great Rupture, many thanks for mentioning this book above. So much to read!

          2. drumlin woodchuckles

            There is nothing wrong with too much too soon as long as you then circle back to the relevant beginning and lay out everything in sequence in phased staged granular detail.

      2. Mikel

        Of all his theories, Adam Curtis has one of the most pointed critiques of the cult of self-expression.
        I think of this when you speak of young people boxed in (letter “e”). And really a box that is not limited to youth.

        Currently, the most over-hyped way of making a living is people having to put themselves on a platform plantation and “be themselves” or “express themselves” for donations or subscriptions.
        A lot of it it is repetitive noise, occasional displays of actual talent, and/or rehashed socio-political-economic theorizing.

        1. Tom Pfotzer


          If – and I say “if” – I’ve committed the indignities of “rehash[ing] socio-political-economic theorizing”, please be sure to call BS and get me steered in a better direction.

          ==== disclaimers and apologies aside….

          One of the things I hope to see evolving on the Internet is a place to test out and apply ideas in a real-enough, yet small-scale-enough environment such that we can actually see what works, and we don’t have to theorize as much.

          One of our problems is that the problem-space is so large, the variables so many, the chances to test so few…it’s in the way.

          Do you know why the Wright brothers succeeded, where so many other, better-resourced players didn’t?

          They built a wind-tunnel. Nobody had done that before. When they got to Kitty Hawk, they _knew_ the wings would work. Steering? Propulsion? Not so sure. But they knew the wings would provide enough lift.

          We need an econ lab. Online. Many people commenting real-time on how it’s working, what to do differently.

          1. drumlin woodchuckles

            @Tom Pfotzer,

            By “econ lab”, do you mean a semi-dedicated comment-site where people can describe what they are doing/ have done and other commenters can discuss it?

            If that is what you mean, I have a semi-suggestion.

            Every Sunday, Ian Welsh runs a post called “”Weekly Wrap Up” by Tony Wikrent of Populist Economics ( I think it is called). Many of Wikrent’s assembled articles are from Naked Capitalism though some are from other places.

            I will offer the following suggestion . . . . that you take a look at Ian Welsh’s ” Weekly Wrap-Up by Tony Wikrent” and see if its comment-thread offers a hopeful place to have the “econ lab” you speak of. If you think it does, then you could say so here, and invite people to do some econ-labbing at the end of each Sunday’s Wikrent thread after the legacy commenters have clearly said all they are going to say.

            Here is the link to the Week-End Wrap so you can see what you think.

    1. JEHR

      A very interesting video about China which has much to teach the world; i.e., how to take an existing economic system (a collectivity) and integrate it into a new form (an adaptive market system).

  8. chuck roast

    Soros should be embarrassed by this bit of naval gazing. Unfortunately, like the rest of his class he is incapable of self reflection. Not once does he even allude to Xi’s social intent which might have a small kernel of beneficence for the general population. Soros…a man with a true heart of gold. Homo economicus…the explicit endorser of Neoliberal rule #1, and parenthesis please (Neoliberal rule #2 is entirely implied). FT leaves this piece outside its usual pay wall so the great unwashed can be blessed by Soros’ awe inspiring Trinitarianism. These people simply cannot be shamed.

  9. Synoia

    Is China studying the US as an example of what not to do? And then implementing a considered plan? As a corollary, the US appears to rely largely on a random walk, lead by “The Market.”

    Leading to an old saying: Those who fail to plan, plan to fail.

    1. Societal Illusions

      can it be truly random? If random can’t readily be gamed and there’s sufficient evidence of gaming that’s been going on. cui bono?

      1. Synoia

        True, good point: Perhaps “apparent random walk” or “Gamed random walk, where “gamed” means “insider trading.”

    2. Mikel

      “Is China studying the US as an example of what not to do?”

      Speaking of studying the US…what about studying IN the US?

      Grabbing my popcorn to watch what their final verdict will be on “elite education” in the US…..

    3. Ian Perkins

      Is China studying the US as an example of what not to do?

      Maybe that was a rhetorical question, but I think there’s no doubt about it.

  10. The Rev Kev

    I’m trying to imagine a meeting between Xi jinping and Joe Biden when they can finally confront each other with their demands. Something like what happened in Alaska but this time not so polite. So here is how I think that it would go.

    Joe Biden: ‘In order to have all sanction relief, the United States makes the following demands on China. You are to free up your financial controls so that US corporations can buy a controlling stake or even buy up Chinese corporations with hot money. The human rights of your billionaires is to be respected and they are no longer to be imprisoned. Safety and environmental protection laws for China will be watered down for firms doing business in China and no technological information is to be shared with their Chinese counterparts. The Chinese stock market will, under American supervision, will be expanded and oversight is to be weakened in order for this institute to grow. Chinese investment is to be scaled back if it conflicts with western technology and no subsidies are to be given to this sector at all. The Chinese military is to be substantially reduced as a wasted investment and the nuclear program also to be wound back. When all these measures have been taken, then and only then will sanctions be slowly scaled back to an acceptable level.’

    Xi jinping; ‘Ah yes. We have our own demands on America. The Glass–Steagall legislation is to be immediately made law again and put into full effect. The big banks in the US are to be broken up so that in any town or city, the banks will be simply utilities like the electricity and telephone. It will be made illegal for any institution to own more than 0.5% of any publicly-listed corporation. The big 6 media companies are to be broken up right down to the community level in order to foster free speech more. Your minimum wage must be raised to $25 an hour so that your people have money to be spent or invested and universal healthcare introduced to break the effects of big healthcare on your economy. Homeland Security is to be broken up and your Bill of Rights be restored across the nation. All student loans will be cancelled both present and future so that students can concentrate on their careers and not their debts. When the United States has done this the Chinese Republic will be assured that America will be a stable country going forward and one that we can trade with. Mr President? Mr. President? Joe? Hello? Quick – somebody call 911. I think that he just had a stroke.’

    1. juliania

      Ah, maybe he’ll do a Yeltsin after all! Personable CIA protegee – anyone?? Where’s Valerie Plame these days?

      1. Sierra7

        “Where’s Valerie Plame these days?”
        Hunkered down with April Glaspee (Who??) collaborating on a book: “How the American Empire Has Lied to It’s Own People and the World for Decades.”

        Remember the old saying: “The Inscrutable Oriental”
        George Soros is living a dream that he helped create (somewhat of a nightmare for our commons) and believes wholeheartedly that what’s good for the USA is good for the rest of the world.
        Recent events should tell us that the Soros’s of the world and their iron hardened neoliberal ideas are now past tense.
        Welcome to the new world.

    2. lyman alpha blob

      There is a fairly recent video of a Chinese official discussing Trump and Biden which has been posted at NC before but I can’t seem to find right now. He says that Trump was more difficult for China due to his unpredictability, but that Biden would be no problem. He jokes with the audience and implies that the Hunter Biden “investments” in China had a purpose and that Joe has done and will continue to do what China wants.

      Wish I could put my finger on it because my description isn’t doing it justice. Anybody else remember the one I’m thinking of?

  11. Sound of the Suburbs

    It was very unfortunate that Henry Simons and Irving Fisher both died in the late 1940s.
    Today could have been very different.

  12. Michael von Plato

    RE: “The rent-seekers are in a bad way. They’ve cannibalized the West, and have few new pools of wealth to feed off.”
    Largely true, but there are a few very tasty pools left, namely the privatization of previously public goods: schools, hospitals, highways, parking meters, water reservoirs and attendant infrastructure etc. The return is often modest, but the benefit to the investors are: government guaranteed returns.
    This is indeed a perverse kind of capitalism, a capitalism largely if not entirely dependent on public money.

    1. begobs

      This is indeed a perverse kind of capitalism, a capitalism largely if not entirely dependent on public money.

      A potted history of state subsidy: The reign of Elizabeth I ended in a controversy over the granting of the sweet wines monopoly, at about the same time as the establishment of the East India Company. The latter outlived the Royal African Company, only to be superceded by the Victorian empire, which guaranteed its shareholders and creditors for decades after the official death – and all out of the proceeds of taxation in India. Certain investors in the South Sea Bubble never lost out, because the state granted them their shares in the first place. The Royal African Company had its successors in the slave trade, whose beneficiaries were spectacularly compensated by the state upon abolition in 1833, and which reassembled in the scramble for Africa under the protection of Royal Navy gunboats. Meanwhile, the Opium War … and so on.

      1. eg

        Yeah, those who think that capitalism has ever operated without state complicity simply haven’t been paying attention.

  13. lyman alpha blob

    David Graeber in his book Debt: The First 5,000 Years talked about how in China, emperors may come and go but the bureaucracy has remained intact for thousands of years and tends to take the long view of what’s best for China, in sharp contract to the West which is mostly concerned, especially in modern times, with how to goose the next quarter’s earnings report.

    Sure looks like Xi is keeping with Chinese tradition and judging by the rapidly crumbling West these days, it would not be surprising to see China become the “City on the Hill” in the majority of the world’s eyes. At least until climate change takes everything down…

  14. flora

    A great read and a very timely post. Michael Hudson’s straightforward deconstruction of Soros’ argument is bracing. Thanks.

  15. HH

    American plutocrats should get their act together. At the behest of US defense contractors, The Congressional appropriations committees are busy funding a future war with China which would wreck the fortunes of Apple, Walmart, and much of the rest of the US economy. Since “defense” represents less that 5% of US GDP, it is astonishing that the rest of the plutocracy is oblivious to this mischief.

  16. amused_in_sf

    There are interesting parallels with the rhetoric around the TPP:

    In that case, if you favored letting countries regulate their *internal* markets with rules that applied to both domestic and foreign companies, you were accused of being against “free trade”.

    Here, if you think countries should be able to regulate their real estate or financial markets, or have controls on international capital flows, you are against “private enterprise” or “markets”.

  17. Antagonist Muscles

    I regard Michael Hudson’s analysis with the highest regard, and his analysis of China subordinating financial interests to the interests of Chinese society at large is a stark contrast to neoliberalism’s tentacles in the US. While I do not dispute the wisdom of Chinese authorities defanging the ultra-wealthy Chinese from the top down (see here and here), I do have difficulty squaring from the bottom up Chinese society and culture with neoliberalism.

    My comments here reflect my own observations of ordinary people in China, certainly not powerful CCP politicians or wealthy business people. Although I make some bold, possibly offensive, claims here, I don’t intend to hurt anybody.

    Worship of money – The Chinese do not figuratively worship money in the religious sense, but the reverence given to money is pervasive. I have little knowledge of Chinese tradition or religion, but I have observed that peculiar ceremonial practice of burning fake paper money. I doubt this is a symbolic act acknowledging the triviality of money with respect to spirituality or afterlife. Please comment about this ceremony. Nevertheless, the ordinary Chinese man can and will demote moral and social obligations in favor of money. Does the ordinary Chinese man who swindles his fellow countryman (or even better, a tourist) consider the propriety of his actions? Perhaps, he does, but I believe those qualms are diminished compared to the typical Dutch swindler. Chinese culture does not stigmatize improper means of acquiring money. (I am certainly aware of the ultra-wealthy like Soros who swindles everybody, not just one or two individuals.)

    No compassion for pain – The Chinese do not care about deliberate or accidental pain inflicted on others. They definitely do not care for about animal suffering. Most of the billion or so people on the coast don’t seem to care about oppression and genocide (yes, I used that word) of the Uyghur. On the individual level, I remember traveling in China and seeing people, who were presumably dying or in pain, lying on the ground after a car crash. The uninjured people just continued talking (probably about the car crash) and were seemingly oblivious to the maimed victims lying on the ground. Why were there no paramedics (or Chinese citizens) aiding the injured?

    Environmental apathy – China’s lax environmental laws are well known. Compliance with good environmental practices is sorely lacking at the individual level. I don’t expect the ordinary Chinese individual to understand the complexity of oil refining and its consequent effect on climate. I do expect them to understand the impropriety of littering. I do expect there to be some basic knowledge of which hazardous item can not be discarded in the street. The amount of litter – some of which is hazardous – in China is disturbing but even more disturbing is the prevalence of the Chinese engaging in dumping things carelessly. Large numbers of Chinese litter. Why?

    Who needs safety regulations? – I once saw an empty elevator shaft in a four story Chinese building. Certainly, no regulator enforced a working elevator or that the elevator shaft be sealed off, but I was most bothered that the building employees used caution tape and a hand written sign to warn of the impending fall. Nobody thought to close off the elevator shaft with some wood boards? Nobody thought about the person who can’t walk up and down four stories?

    I once used the restroom at a restaurant in China. While restrooms in China are mostly disgusting, this particular restroom was truly appalling. Right outside the restroom was the slaughtering area for chickens. I saw bloody axes and cleavers hanging on a blood soaked wall. The occasional decaying chicken part littered the blood soaked floor. The odor entering my nose was indescribably foul. Were any of the restaurant employees the least bit concerned that this bloody lack of sanitation posed a human health risk?

    And don’t get me started on traditional Chinese medicine. See here.

    Ukrainian (and Chinese) diaspora – Although I have never visited Ukraine, I do know Ukrainian people in the US because the global Ukrainian diaspora is relatively large compared to other diaspora. Neoliberalism has plundered former Soviet Union countries like Ukraine, resulting in a mass exodus. Hudson has written thoroughly about this. The Ukrainian friends I know do not use the term “neoliberalism”, but the implication is that the greed and corruption of Ukraine and its people make living conditions unsuitable.

    I discuss Ukraine here because some of my above criticisms of China apply to Ukraine. I know nothing about the Ukrainian ruling minority. I surmise that some Ukrainian diaspora do voice similar concerns for Ukrainian society. Neoliberalism enabled the elite to ruin Ukraine (George Soros probably helped here and in his home country, Hungary), but the culture of Ukraine from the bottom up tacitly encouraged this. I certainly do not understand the vagaries of Chinese diaspora. I am willing to bet that some of the Chinese diaspora simply left China because it was a terrible place to live.

    In summary, I claim that Chinese culture from the bottom up is conducive to neoliberalism running amok. What I find incongruent is Chinese officials neutering moneyed interests and the attitudes of the ordinary Chinese folks. Plutonium Kun once commented on how difficult it is for widespread changes to occur in regards to China’s one child policy. I wonder the same thing for Chinese society and culture.

    1. drumlin woodchuckles

      @Antagonist Muscles,

      Would your observations account for things like . . . melamine milk, poison pet food, lead paint toys, dirty honey and dirty honey laundering, fake drugs, real fentanyl and carfentanyl, etc. coming out of China from time to time as part of China’s “miracle economy” achievement?

  18. Egidijus

    Please oh please more of Professor Hudson’s comments in a such style! What a pleasure and fun to read. Thank you, indeed.

    1. Basil Pesto

      I saw Tooze had a covid book coming out. I hope it’s good/not undermined by a rush to publish. Thanks for the link to the piece, I’ll have a read later :) Goethe in China looks interesting, too

  19. drumlin woodchuckles

    While we celebrate the ChinaGov for keeping Soros and other racketeers out of money-raking in China, lets remember the real world impact of how China “created” all that “wealth”.

    Here is an animated chart showing the mix of fossil fuels over the past some years in a number of different countries’s energy portfolios. Note the respective countries’s use of coal, which is the most carbon skyflooding fossil fuel there is.

    And remember, George “Opium Poppy” Bush and Bill ” China’s running-dog lackey” Clinton made it all possible with their Free Trade With China policy. Here is the link.


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