Michael Hudson: America’s Real Adversaries Are Its European and Other Allies

Yves here. I must confess to remaining mystified about America’s obviously disproportionate interest in and belligerence over Ukraine. Germany needs Russian heating fuel, like it or not. Is it that there are too many Galicians in position of influence? That the military profiteers are upset about the loss of Afghanistan as a source of revenues and need a new hot or at least hottish theater? Or is there long-simmering upset about how Russia outplayed us in the Maidan coup by winding up with Crimea? And then they also checkmated us with Syria despite having a theoretically weaker hand?

Hudson’s argument about the bigger interests at play makes perfect sense. But there’s also a great deal of misplaced emotion that I wish I could fathom.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “and forgive them their debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year

The Iron Curtain of the 1940s and ‘50s was ostensibly designed to isolate the Soviet Union from Western Europe – to keep out Communist ideology and military penetration. Today’s sanctions regime is aimed inward, to prevent America’s NATO and other Western allies from opening up more trade and investment with Russia and China. The aim is not so much to isolate Russia and China as to hold these allies firmly within America’s own economic orbit. Allies are to forego the benefits of importing Russian gas and Chinese products, buying much higher-priced U.S. LNG and other exports, capped by more U.S. arms.

The sanctions that U.S. diplomats are insisting that their allies impose against trade with Russia and China are aimed ostensibly at deterring a military buildup. But such a buildup cannot really be the main Russian and Chinese concern. They have much more to gain by offering mutual economic benefits to the West. So the underlying question is whether Europe will find its advantage in replacing U.S. exports with Russian and Chinese supplies and the associated mutual economic linkages.

What worries American diplomats is that Germany, other NATO nations and countries along the Belt and Road route understand the gains that can be made by opening up peaceful trade and investment. If there is no Russian or Chinese plan to invade or bomb them, what is the need for NATO?  And if there is no inherently adversarial relationship, why do foreign countries need to sacrifice their own trade and financial interests by relying exclusively on U.S. exporters and investors?

These are the concerns that have prompted French President Macron to call forth the ghost of Charles de Gaulle and urge Europe to turn away from what he calls NATO’s “brain-dead” Cold War and beak with the pro-U.S. trade arrangements that are imposing rising costs on Europe while denying it potential gains from trade with Eurasia. Even Germany is balking at demands that it freeze by this coming March by going without Russian gas.

Instead of a real military threat from Russia and China, the problem for American strategists is the absence of such a threat. All countries have come to realize that the world has reached a point at which no industrial economy has the manpower and political ability to mobilize a standing army of the size that would be needed to invade or even wage a major battle with a significant adversary. That political cost makes it uneconomic for Russia to retaliate against NATO adventurism prodding at its western border trying to incite a military response. It’s just not worth taking over Ukraine.

America’s rising pressure on its allies threatens to drive them out of the U.S. orbit. For over 75 years they had little practical alternative to U.S. hegemony. But that is now changing.

America no longer has the monetary power and seemingly chronic trade and balance-of-payments surplus that enabled it to draw up the world’s trade and investment rules in 1944-45. The threat to U.S. dominance is that China, Russia and Mackinder’s Eurasian World Island heartland are offering better trade and investment opportunities than are available from the United States with its increasingly desperate demand for sacrifices from its NATO and other allies.

The most glaring example is the U.S. drive to block Germany from authorizing the Nord Stream 2 pipeline to obtain Russian gas for the coming cold weather. Angela Merkel agreed with Donald Trump to spend $1 billion building a new LNG port to become more dependent on highly priced U.S. LNG. (The plan was cancelled after the U.S. and German elections changed both leaders.) But Germany has no other way of heating many of its houses and office buildings (or supplying its fertilizer companies) than with Russian gas.

The only way left for U.S. diplomats to block European purchases is to goad Russia into a military response and then claim that avenging this response outweighs any purely national economic interest. As hawkish Under-Secretary of State for Political Affairs, Victoria Nuland, explained in a State Department press briefing on January 27: “If Russia invades Ukraine one way or another Nord Stream 2 will not move forward.”[1]The problem is to create a suitably offensive incident and depict Russia as the aggressor.

Nuland expressed who was dictating the policies of NATO members succinctly in 2014: “Fuck the EU.” That was said as she told the U.S. ambassador to Ukraine that the State Department was backing the puppet Arseniy Yatsenyuk as Ukrainian prime minister (removed after two years in a corruption scandal), and U.S. political agencies backed the bloody Maidan massacre that ushered in what are now eight years of civil war. The result devastated Ukraine much as U.S. violence had done in Syria, Iraq and Afghanistan. This is not a policy of world peace or democracy that European voters endorse.

U.S. trade sanctions imposed on its NATO allies extend across the trade spectrum. Austerity-ridden Lithuania gave up its cheese and agricultural market in Russia, and is blocking its state-owned railroad from carrying Belarus potash to the Baltic port of Klaipeda. The port’s majority owner complained that “Lithuania will lose hundreds of millions of dollars from halting Belarus exports through Klaipeda,” and “could face legal claims of $15 billion over broken contracts.”[2]Lithuania has even agreed to U.S. prompting to recognize Taiwan, resulting in China refusing to import German or other products that include Lithuanian-made components.

Europe is to impose sanctions at the cost of rising energy and agricultural prices by giving priority to imports from the United States and foregoing Russian, Belarusian and other linkages outside of the Dollar Area. As Sergey Lavrov put matters: “When the United States thinks that something suits its interests, it can betray those with whom it was friendly, with whom it cooperated and who catered to its positions around the world.”[3]

America’s Sanctions on Its Allies Hurt Their Economies, Not Those of Russia and China

What seems ironic is that sanctions against Russia and China have ended up helping rather than hurting them.

But the primary aim was not to hurt nor to help the Russian and Chinese economies. After all, it is axiomatic that sanctions force the targeted countries to become more self-reliant. Deprived of Lithuanian cheese, Russian producers have produced their own, and no longer need to import it from the Baltic states. America’s underlying economic rivalry is aimed at keeping European and its allied Asian countries in its own increasingly protected economic orbit. Germany, Lithuania and other allies are told to impose sanctions directed against their own economic welfare by not trading with countries outside the U.S. dollar-area orbit.

Quite apart from the threat of actual war resulting from U.S. bellicosity, the cost to America’s allies of surrendering to U.S. trade and investment demands is becoming so high as to be politically unaffordable. For nearly a century there has been little alternative but to agree to trade and investment rules favoring the U.S. economy as the price of receiving U.S. financial and trade support and even military security. But an alternative is now threatening to emerge – one offering benefits from China’s Belt and Road initiative, and from Russia’s desire for foreign investment to help modernize its industrial organization, as seemed to be promised thirty years ago in 1991.

Ever since the closing years of World War II, U.S. diplomacy has aimed at locking Britain, France, and especially defeated Germany and Japan, into becoming U.S. economic and military dependencies. As I documented in Super Imperialism, American diplomats broke up the British Empire and absorbed its Sterling Area by the onerous terms imposed first by Lend-Lease and then the Anglo-American Loan Agreement of 1946. The latter’s terms obliged Britain to give up its Imperial Preference policy and unblock the sterling balances that India and other colonies had accumulated for their raw-materials exports during the war, thus opening the British Commonwealth to U.S. exports.

Britain committed itself not to recover its prewar markets by devaluing sterling. U.S. diplomats then created the IMF and World Bank on terms that promoted U.S. export markets and deterred competition from Britain and other former rivals. Debates in the House of Lords and the House of Commons showed that British politicians recognized that they were being consigned to a subservient economic position, but felt that they had no alternative. And once they gave up, U.S. diplomats had a free hand in confronting the rest of Europe.

Financial power has enabled America to continue dominating Western diplomacy.

U.S. drives to keep its European and East Asian protectorates locked into its own sphere of influence is threatened by the emergence of China and Russia independently of the United States while the U.S. economy is de-industrializing as a result of its own deliberate policy choices. The industrial dynamic that made the United States so dominant from the late 19thcentury up to the 1970s has given way to an evangelistic neoliberal financialization. That is why U.S. diplomats need to arm-twist their allies to block their economic relations with post-Soviet Russia and socialist China, whose growth is outstripping that of the United States and whose trade arrangements offer more opportunities for mutual gain.

At issue is how long the United States can block its allies from taking advantage of China’s economic growth. Will Germany, France and other NATO countries seek prosperity for themselves instead of letting the U.S. dollar standard and trade preferences siphon off their economic surplus?

Oil Diplomacy and America’s Dream for Post-Soviet Russia

U.S. oil diplomacy aims to control the world’s oil trade so that its enormous profits will accrue to the major U.S. oil companies. It was to keep Iranian oil in the hands of British Petroleum that the CIA’s Kermit Roosevelt worked with British Petroleum’s Anglo-Persian Oil Company to overthrow Iran’s elected leader Mohammed Mossadegh in 1954 when he sought to nationalize the company after it refused decade after decade to perform its promised contributions to the economy. After installing the Shah whose democracy was based on a vicious police state, Iran threatened once again to act as the master of its own oil resources. So it was once again confronted with U.S.-sponsored sanctions, which remain in effect today. The aim of such sanctions is to keep the world oil trade firmly under U.S. control, because oil is energy and energy is the key to productivity and real GDP.

As the United States has de-industrialized, its trade and balance-of-payments deficit is becoming more problematic.

America has lost its industrial cost advantage by the sharp rise in its cost of living and doing business in its financialized post-industrial rentiereconomy. Additionally, as Seymour Melman explained in the 1970s, Pentagon capitalism is based on cost-plus contracts: The higher military hardware costs, the more profit its manufacturers receive. So U.S. arms are over-engineered – hence, the $500 toilet seats instead of a $50 model. The main attractiveness of luxury goods after all, including military hardware, is their high price.

This is the background for U.S. fury at its failure to stop European dependence on Russian heating oil – and at seeing Russia also break free militarily to create its own arms exports, which now are typically better and much less costly than those of the U.S. Today Russia is in the position of Iran in 1954 and again in 1979. Not only do its oil sales rival those of U.S. LNG, but Russia keeps its oil-export earnings at home to finance its re-industrialization, so as to rebuild the economy that was destroyed by the U.S.-sponsored shock “therapy” of the 1990s.

The line of least resistance for U.S. strategy seeking to maintain influence over  the world’s oil supply while maintaining its luxury-arms export market via NATO is to xry “wolf” and insist that Russia is on the verge of invading Ukraine – as if Russia had anything to gain by quagmire warfare over Europe’s poorest and least productive economy. The winter of 2021-22 has seen a long attempt at U.S. prodding of NATO and Russia to fight – without success.

U.S. Dreams of a Neoliberalized China as a U.S. Corporate Affiliate

America has de-industrialized as a deliberate policy of slashing production costs as its multinationals have sought low-wage labor abroad, most notably in China. This shift was not a rivalry with China, but was viewed as mutual gain. The rivalry was between U.S. employers and U.S. labor, and the class-war weapon was offshoring and, in the process, cutting back government social spending.

Similar to the Russian pursuit of oil, arms and agricultural trade independent of U.S. control, China’s offense is keeping the profits of its industrialization at home, retaining state ownership of significant corporations and, most of all, keeping money creation and the Bank of China as a public utility to fund its own capital formation instead of letting U.S. banks and brokerage houses provide its financing and siphon off its surplus in the form of interest, dividends and management fees. The one saving grace to U.S. corporate planners has been China’s role in deterring U.S. wages from rising by providing a source of low-priced labor to enable American manufacturers to offshore and outsource their production.

The Democratic Party’s class war against unionized labor started in the Carter Administration and greatly accelerated when Bill Clinton opened the southern border with NAFTA. A string of maquiladoras were established along the border to supply low-priced handicraft labor. This became so successful a corporate profit center that Clinton pressed to admit China into the World Trade Organization in December 2001, in the closing month of his administration.

Walmart, Apple and many other U.S. companies organized production facilities in China, which necessarily involved technology transfers and creation of an efficient infrastructure for export trade. Goldman Sachs led the financial incursion, and helped China’s stock market soar. All this was what America had been urging.

Where did America’s neoliberal Cold War dream go wrong? For starters, China did not follow the World Bank’s policy of steering governments to borrow in dollars to hire U.S. engineering firms to provide export infrastructure. It industrialized in much the same way that the United States and Germany did in the late 19thcentury: By heavy public investment in infrastructure to provide basic needs at subsidized prices or freely, from health care and education to transportation and communications, in order to minimize the cost of living that employers and exporters had to pay. Most important, China avoided foreign debt service by creating its own money and keeping the most important production facilities in its own hands.

U.S. Demands Are dDriving Its Allies Out of the Dollar-NATO Trade and Monetary Orbit

As in a classical Greek tragedy, U.S. foreign policy is bringing about precisely the outcome that it most fears. Overplaying their hand with their own NATO allies, U.S. diplomats are bringing about Kissinger’s nightmare scenario, driving Russia and China together.

While America’s allies are told to bear the costs of U.S. sanctions, Russia and China are benefiting by being obliged to diversify and make their own economies independent of reliance on U.S. suppliers of food and other basic needs. Above all, these two countries are creating their own de-dollarized credit and bank-clearing systems, and holding their international monetary reserves in the form of gold, euros and each other’s currencies to conduct their mutual trade and investment.

The United States cannot simply reverse its de-industrialization and dependence on Chinese and other Asian labor by bringing production back home. It has built too high a rentier overhead into its economy for its labor to be able to compete internationally, given the U.S. wage-earner’s budgetary demands to pay high and rising housing and education costs, debt service and health insurance, and for privatized infrastructure services.

That is not a way for national economies to grow. The alternative to neoliberal doctrine is China’s growth policies that follow the same basic industrial logic by which Britain, the United States, Germany and France rose to industrial power during their own industrial takeoffs with strong government support and social spending programs.

The United States has abandoned this traditional industrial policy since the 1980s. It is imposing on its own economy the neoliberal policies that de-industrialized Pinochetista Chile, Thatcherite Britain and the post-industrial former Soviet republics, the Baltics and Ukraine since 1991. Its highly polarized and debt-leveraged “prosperity” is based on inflating real estate and securities prices and privatizing infrastructure.

This neoliberalism has been a path to becoming a failed economy and indeed, a failed state, obliged to suffer debt deflation, rising housing prices and rents as owner-occupancy rates decline, as well as exorbitant medical and other costs resulting from privatizing what other countries provide freely or at subsidized prices as human rights – health care, education, medical insurance and pensions.

The success of China’s industrial policy with a mixed economy and state control of the monetary and credit system has led U.S. strategists to fear that Western European and Asian economies may find their advantage to lie in integrating more closely with China and Russia. The U.S. seems to have no response to such a global rapprochement with China and Russia leverage except economic sanctions and military belligerence. That New Cold War stance is expensive, and other countries are balking at bearing the cost of a conflict that has no benefit for themselves and indeed, threatens to destabilize their own economic growth and political independence.

Cutting back that spending, and indeed recovering industrial self-reliance and competitive economic power, would require a transformation of American politics. Such a change seems unlikely, but without it, how long can America’s post-industrial rentier economy manage to force other countries to provide it with the economic affluence (literally a flowing-in) that it is no longer producing at home?


[1]https://www.state.gov/briefings/department-press-briefing-january-27-2022/. Dismissing reporters’ comments that “what the Germans have said publicly doesn’t match with what you’re saying exactly,” she explained the U.S. tactics to stall Nord Stream 2. Countering a reporter’s point that “all they have to do is turn it on,” she said: “As Senator Cruz likes to say … it is currently a hunk of metal at the bottom of the ocean. It needs to be tested. It needs to be certified. It needs to have regulatory approval.” For a recent review of the increasingly tense geopolitics at work, see John Foster, “Pipeline Politics hits Multipolar Realities: Nord Stream 2 and the Ukraine Crisis,” Counterpunch, February 3, 2022.

[2]Andrew Higgins, “Fueling a Geopolitical Tussle in Eastern Europe: Fertilizer,” The New York Times, January 31, 2022. The owner plans to sue Lithuania’s government for hefty damages.

[3]Russian Foreign Affairs Ministry, “Foreign Minister Sergey Lavrov’s answers to questions from Channel One’s Voskresnoye Vremya programme,” Moscow, January 30, 2022. Johnson’s Russia List, January 31, 2022, #9.

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  1. anon y'mouse

    to Yves opening comments—we’re just that kind of family-blogging country.

    “if we can’t have full control over everything and be dictator, no one can.” we’d rather destroy the world if we won’t rule.

    i say “we” simply because i was born and forced to live here and will very likely die here as well.

    Hudson is likely right. i think i read a report from back in FDR’s day once that said that we can never allow complete alliance of even Europe itself, because they have just enough countervailing power to possibly hold us in check wherever we want to go and screw with people (and their vital resources) all over the world. the summary was “we can’t let Hitler take over because then we will have to face them everywhere instead of just there”. so it wasn’t to save the people in concentration camps or anything else, it just happened to end up that way, and we’ve been riding on “hero cred” ever since. we fought WWII for pure self interest.

    the self interest of an egomaniac who cannot stand to have anyone or thing over them with the ability to say “no”. so it’s hilarious to me that we’re pinned into a position with two countries who are essentially going “we said ‘no!’, now grow up and deal with it!”

  2. paul

    But there’s also a great deal of misplaced emotion that I wish I could fathom

    There i something i’ve always noticed in Michael’s work,that countervailing force will somehow, inevitably, force a change (perhaps not rational or even good ) and we will benefit.

    Yet to see it, but long to believe.

    Hoover I’ve always found his sentiments and outlook, remarkably robust and enormously entertaining,and illuminating

    A gift.

    Our world is better with professor Hudson than without.

  3. Colonel Smithers

    Thank you, Yves, for this timely post.

    From my time working with EU institutions and stakeholders, 2007 – 16, may I add that many, if not most, of the European PMC are content with being in the US orbit. Their interests coincide. Fraternising with Uncle Sam(‘s institutions) is like going to Hollywood. In June 2020, as the pandemic eased a bit, the European Commission invited leading financial institutions to discuss how to rebuild the economy and enhance the single market. Most of the invitees were US banks and investment firms. No doubt, some EU officials were looking at their next gig. Selling one’s country to Uncle Sam is financially rewarding. Just ask Jose Maria Aznar, later employed by Murdoch, and Jose Manual Barroso, later employed by Goldman Sachs (who also employ Ottmar Issing, the ECB’s first chief economist).

    An increasing number of the EU PMC and their progeny are educated in the US and often speak English with an American accent. Some go out of their way to deny that Europe(an culture) is different from the US. Gaullism is a dirty word in these circles.

    To quote Anatol Lieven’s recent words, “There’s [also] some ancestral russophobia.”

    It’s not just “financial incursion”. The Atlantic Council has recruited many former European officials, vide France’s Gerard Araud, former envoy to Washington, and Benjamin Haddad. US universities employ the likes of Olivier Blanchard, formerly at the IMF. They know where their baguettes are buttered.

    Last week, an Indian commentator highlighted the Indian elite’s obsession with the US and how their progeny are often educated in the US and work against Indian interests.

    One hopes David chimes in as he has much better, including insider, insights.

    1. eg

      This affinity for the US among local oligarchs is not unique to the EU — it is the favoured relationship for extractive local elites and kleptocrats everywhere.

    2. paul

      Happy new year,colonel,
      I’ve been particularly vexed by devi shridar, who has moved shamlessly from ‘zero covid’ to ‘covid totale’ while on our colour television screens daily.
      She is a young global leader as selected by the WEF.

      I think their puff page here will find a few names to be wary of:

      Your young global leaders

      A community of interests rather than dumb humans

  4. Airlane1979

    An excellent and insightful analysis from which I’ve learned a lot. However,

    $500 toilet seats instead of a $50 model

    Here in the UK, my local Wilko sells its most expensive Croydex White Slow Close Antibacterial Toilet Seat at £22 ($30). Just why are American toilet seats so expensive? I think we need to know.

    1. Michael Fiorillo

      It’s a reference to Pentagon cost-overrun scandals in the Reagan ’80’s, when $500. fighter jet toilet seats were the example… back when there was some residual elite media opposition to arms and war profiteering.

    2. cfraenkel

      It’s the result of negotiations between two parties that both have incentives for increased costs. Think of it as a $45 toilet seat (because they have to show that they were buying the lowest cost version), with a $350 ‘order handling cost’ (because the unit that needs the replacement only needs one, not 10,000, which would then cost $45), with a $105 profit line (because it’s a $395 order, not a $45 order).
      In practice, it’s even more complicated and byzantine, but that’s a reasonable consumer market level explanation.

    1. The Rev Kev

      Galicia is a region in western Ukraine and is the heart of the fascists and neo-nasties that have come to power and having such a big say in the running of the Ukraine. In fact, in WW2 there was a force of Ukrainians raised that became known as the 14th Waffen Grenadier Division of the SS (1st Galician) and they were mostly from this region.

        1. russell1200

          It should be noted, Ukrainian President Volodymyr Zelensky is Jewish. Pushing the Galatian angle can be overdone.

      1. Samuel Conner

        An interesting historical wrinkle is that between WW1 and 2, this region was part of Poland. It was occupied by the USSR in September 1939 after the collapse of the Polish State, under assault from the West by the Nazis.

        The donation of Crimea to the Ukrainian SSR is of slightly more recent ‘vintage’ than the annexation of Galicia into the Ukrainian SSR that occurred after the end of WW2. But they occurred within a decade or so of each other, so both are quite recent.

        Arguably, if one were to demand that the borders of Ukraine (pun not intended — ‘Ukraine’ is ‘borderland’, I think) be put right by returning Crimea, one would arguably also be obliged to consider who (Poland or the Ukrainian SSR/Ukraine) has the stronger claim to Galicia.

        A final hilarious thought is that a re-bordered Ukraine that added Crimea and removed Galicia would have a population whose sentiment was much more pro-Russia than the current arrangement.

        1. Michael Fiorillo

          Yes, Crimea has minimal historical or cultural connection with Ukraine, having been “annexed” to it by Krushchev (a Ukrainian) in the 1950’s. That, combined with the Black Sea Fleet located in Sevastopol, made it imperative that Russia reassert its historical control… and that ain’t gonna change anytime soon, US State Department tantrums notwithstanding.

          1. Darthbobber

            It gets even better. What agreement to reach with Ukraine on the future status of Crimea was one of the items in dispute between Yeltsin and parliament at the point when he dissolved and shelled parliament, effectively putting an end to the then-existing constitution.

      2. Anthony G Stegman

        Didn’t these Ukrainians commit mass murder in WWII? Perhaps it were other eastern Europeans who did much of the Holocaust dirty work.

        1. Michael Fiorillo

          Search “Stepan Bandera,” and then some of the slogans and iconography of the 2014 “Revolution” and you’ll learn quite a bit about our Ukrainian allies…

          1. drumlin woodchuckles

            A lot of ethno-fascist groups like to use symbols which look like they are inspired by the Nazi Swastika, but they are afraid to just simply adopt the Nazi Swastika itself. One could think of these symbols as being ” Nassi Swassikas”.

            Here is an example of a Nassi Swassika, in this case Svoboda’s Nassi Swassika.

            ( Well, it turns out this link only links to the wikipedia article. You have to go downscreen to see a tiny picture of the actual swassika on the left side of the screen)

      3. JoeC100

        The legacy of this unit is now the “Azov battalion” a major trouble maker. There is an annual holiday where these units and in some cases their children march – with SS linked symbols to celebrate this linkage. Lot’s of nice videos of on You Tube.

        I am working my way through Richard Sakwa’s “Frontline Ukraine” (completed after the 2014 conflict) that shows how far back the origins of today’s confrontation goes and that “Ukraine” is not a “coherent” entity.

        I have also wondered about possible linkages between corrupt Ukraine money and major Western politicians. John Helmer had some great material – I think before the 2014 conflicts about Victor Pinchuk’s (rich, apparently corrupt oligarch) annual party that was a “must show” for people like Tony Blair and Bill & Hillary Clinton. And this was way before the much more obvious Hunter Biden stuff (that Helmer covered I think way earlier than elsewhere).

  5. dftbs

    Great summary by Professor Hudson. Particularly good insight on our current situation being brought about by our “own deliberate policy choices.” I always wondered if these choices were made in “good faith”, did Bill Clinton truly believe that he would compensate the destruction of US wages and productive via ever more inches added to the average American TV?

    I tend to think that the political actors were more stupid than evil, although I’m open to have my mind changed. But more important than the motivation of these men and women whose names will be forgotten in short-order is the role of China and its communist vanguard in fulfilling the prophetic words attributed (thought likely incorrectly) to Lenin: “When it comes time to hang the capitalists, they will sell us the rope.” The Chinese, being good Marxist, will certainly sidestep any notion of historical determinism and explain this delicious irony in historically material terms.

    1. NotTimothyGeithner

      Stupid and evil go hand in hand. If you don’t give an eff, you will miss stuff, important stuff. The greatest trick the devil ever pulled was convincing the world he existed.

      Bill is just a huckster who came up before the Internet but could get on TV. He’s like a Democratic Party James Baker. He was an obvious roach, but too many people are attached to the compromises and nostalgia of being younger to derail his doofus spouse. They had to prove Bill wasn’t a fraud or they weren’t scammed. Does Bill know or care? I think he wants money before he moves to the next town. He’s Harold Hill who got conned by another climber.

    2. drumlin woodchuckles

      No. I don’t think he ever believed it. I think he was auditioning for the millions of dollars he hoped to get after leaving office. I also think he was motivated by a deep hatred for America’s industrial working class and wanted to destroy the lives of millions of them. Remember that he was Jeffrey Epstein’s good friend to get the smell of his true moral character as an individual.

      When Clinton once made his insulting speech about ” building a bridge to the 21st century” I remember wondering at the time how many people would be sleeping under Bill Clinton’s bridge to the 21st century.
      And as we can see, the number keeps rising.

  6. Boomka

    It is getting hard to believe Bloomberg headline was really a mistake. Opened The Guardian yesterday to find the top of the page saying “Russian troops ready to seize the capital, says Ukrainian former defense official”. And a photo of tanks rolling on the streets.
    The kind of impression this headline creates is that war has been going on a while already and the city was under siege and now Russians have started a push into the city proper – hence the tank photo.

    Most people just skim the headlines, as we know. So it looks like a media campaign to normalize in people’s minds that we are fighting another war. Since it’s already a fact you better be a good citizen and support our troops.

    1. Bart Hansen

      Early in WWII, in 1939, the British talked about a ‘Phoney War’. War had been declared and Hitler was on the move, but very little actual fighting was going on.

      And so now we have a kind of Phoney War or virtual war going on in our media.

    2. The Rev Kev

      Every night for the past coupla weeks when I tune into the news, one of the first stories is how Russia is about to invade the Ukraine. Literally. Every. Single. Night.

    3. Egidijus

      But of course 100 thousand of Russian soldiers (who are lame and incapable of fighting, when you read same propaganda) at the border will defeat more than 400 thousand Ukrainian standing army (not considering even mobilization). :)

      1. Polar Socialist

        It is made easier by Ukraine having the bulk (+200k) of their army positioned against Donbass area, which covers only 14% of Ukraine’s border with Russia or Belarus.

    4. Anthony G Stegman

      CBS opened its morning newscast today with a report saying that satellite images show Russian forces moving closer to the Ukraine border. The mainstream media saber rattling is increasing.

  7. divadab

    Hard not to conclude that the US of A has a parasitic if not entirely hostile elite. Hostile to its citizens; hostile to any concept of mutual obligation (“noblesse oblige”); hostile to honesty and good faith.

    There will be a reckoning.

  8. BillS

    A mistake in the opening sentence?? – “The Iron Curtain of the 1940s and ‘50s was ostensibly designed to isolate the Soviet Union from Western Europe – to keep out Communist ideology and military penetration.”

    How can this be said with any seriousness? The Iron Curtain, as far as I remember, was constructed by the Warsaw Pact nations to keep their citizens from escaping to the west. It was also built to keep Western ideology out of the Soviet sphere.

    1. Watt4Bob

      The physical Iron Curtain, while a unilateral project of the Soviet Union, was quickly augmented by a virtual twin constructed by the west to “contain communism”.

      The physical Iron Curtain fell, all that is left is NATO, the west’s system of containment and sanction.

      1. Watt4Bob

        Excuse my poor orientation in time.

        It’s even worse than I described poorly.

        We built the spiritual iron curtain way before Russia built the physical iteration.

    2. Polar Socialist

      Sir Winston’s speech about Iron Curtain was in March 1946, Treaty of Dunkirk signed inMarch 1947 and NATO appeared in April 1949. Warsaw Treaty Organization was established in May 1955 when West Germany joined NATO and Berlin Wall was build “as late” as in 1961.

      Now so easily forgotten was that at the end of the WW2 there was a strong movement to the left in most European countries. Many people believed the war was a result of the capitalist system between the wars and that Soviet Union had actually saved Europe from Nazism. Especially in Czechoslovakia people were still bitter about the way they were betrayed by the West in Munich in 1939.

      You rarely see it anywhere, except in the most dedicated and specific history studies, but most of the 30’s and in the late 40’s to early 50’s Soviet Union was working hard to build a common European security system without any divisions and blocks. Up until Hungary 1956 the Eastern European countries had a lot of leeway as long as they stayed friendly towards Moscow.

    3. Michael Hudson

      That was The Wall. Churchill used the term Iron Curtain in a speech. The Wall came considerably later.

      Galicia was long part of Poland, and actually should have been left with it after WW II. In Canada, at least in the prairie provinces, there seem to be as many Galicians as Ukrainians — with consequent pro-Neo Nazi foreign policy via their ass’t PM, whose grandfather (or was it father) worked for the Nazis there.

      1. ex-PFC Chuck

        Churchill’s Iron Curtain speech was given at a small college in Missouri in March, 1946, about 15 years before the Berlin Wall was erected.

        1. Dandelion

          Yes, and it’s also no coincidence Churchill gave that speech, essentially a declaration of (cold) war, in Truman’s home state.

      2. Keith Newman

        Crystia Freeland is Canada’s Deputy Prime Minister and Finance minister. Her paternal grand-father worked for the Nazis in WW2 and fled before the advancing Russian armies at the end of the war. Ms. Freeland has stated this is Russian propaganda but her uncle, a Canadian historian, has confirmed it to be true.
        John Helmer, a former colleague of Ms. Freeland’s at the Globe and Mail, has written extensively about this.

      3. Eclair

        My children’s great-grandparents, along with many other factory workers in Chicopee, Massachusetts, immigrated from Galicia, pre-WW1. ‘Galicia’ is the country listed on their original immigration documents; by the time I knew them, they talked of Poland, not Galicia. And, of course, they spoke Polish.

        Great post, BTW. Although a dark way in which to begin the first full week of Februar

    4. Michaelmas

      Bill S: How can this be said with any seriousness? The Iron Curtain, as far as I remember, was constructed by the Warsaw Pact nations to keep their citizens from escaping to the west. It was also built to keep Western ideology out of the Soviet sphere.

      You are wrong in the sense that the very concept of an Iron Curtain, alongside George Kennan’s containment policy, was initiated by the West, most conspicuously inaugurated in March, 1946, by Winston Churchill’s speech in Fulton, Missouri, where he literally introduced the phrase ‘iron curtain .


      You are right inasmuch as the Warsaw Pact countries did not like their citizens to flee or defect to the West, a policy most conspicuously exampled by the building of the Berlin Wall in 1961.

      You are presumably an American to be so ignorant of history. The only people more propagandized on the planet are the Han.

      1. BillS

        @michaelmas Thank you for your elaboration on my comment. You are correct that there are some holes in my historical knowledge. Your ad hominem, on the other hand, stinks of Anglo guilt.

      2. Susan the other

        The account I read about the Fulton speech (sorry can’t cite, maybe a biography) was that Truman was so embarrassed by Churchill’s bombastic eagerness to start another war – with Russia – that he had his advisors send Churchill off to” a nice little town” in his home state, a college town in America’s heartland, etc. to give his speech out of the limelight of a big city newspaper. We held off the war mongers until JFK was finally murdered. And George Kennan is often cited as a “cold warrior” and anti-Russian. He was much more complicated than that. He didn’t believe we should bludgeon Russia, but instead maintain a relationship and gradually come together. Containment was advised to that end.

    5. Kouros

      Iron Curtain was raised by Churchill in 1946 in his speech in US. NATO was formed in 1949. The Warsaw Pact was created only in 1955.

      Social democracy in Europe is a consequence of the WWII and the looming ideology from the East. Now that gone, there is little by little unravelling of that social compact in Europe. But not sure it will work. In Europe people do know how to protest.

  9. Louis Fyne

    after following the national security punditry, IMO, part of the answer is that the Establishment and pundits act like an insecure 12 y.o.

    Lose in Afghanistan? No problem, let’s try to beat up the quiet, skinny kid in the playground (who is 100% muscle under that baggy jogging suit) . Because “Honor,” “Sacred Obligations” and “Values”!

  10. ex-PFC Chuck

    Thank you! This meta-story of the Ukraine affair of the 2020s is likely the most important publication of the year. Pass the link on, everyone.

  11. KD

    Michael Hudson always shines the clear light into the darkness and obfuscation that characterizes the mainstream commentariat.

  12. The Historian

    One thing that has constantly confused me is why Ukraine – why now, and I think Michael Hudson’s rationale is the best I’ve read so far. But what I don’t see is what the US realistically expects to gain from this. Do the powers that be really think Russia will back down and not put up a huge and violent fight? Do they really think that this will end with the US plutocracy getting everything they want without extreme damage to everyone’s economies, not to mention lives? Exactly what do they see as the ‘end game’? And what will happen if the US fails in this gambit? Do they have an exit strategy? Where is the critical thinking here?

    1. Dandelion

      Some years ago (2014 or thereabouts?) via a NC link, I read an article in either Foreign Affairs or Foreign Policy that described a cohort within State and Defense that foresaw the prize Siberia would become due to global warming, saw that Russia was weak but would get stronger, and thought the time was now to attack in order to win the prize.

      The author said this group also had gamed out a war plan in which a US “limited” tactical nuclear strike would lead to “survivable” Russian retaliation and then surrender rather than all-out nuclear holocaust.

      So I’ve been watching the left hand showing us Ukraine as the territory we must defend while thinking about Siberia (vast arable land and mineral resources) in the hidden right hand.

      Given Putin’s 2015 speech, I think this US cohort are very wrong, but they were also in my mind when the D’s launched Russiagate in the wake of Trump’s desire for rapprochement with Russia.

      1. Cheney's Toy

        I doubt very much that trump knows what rapprochement means, let alone be able to spell or pronounce

      2. Phil in KC

        A small correction: China was indeed admitted to the WTO in December of 2001, but that was not during the waning days of the Clinton administration, but in the first year of Bush II. But certainly Clinton paved the way!

      3. Phil in KC

        I’d be curious to know how many immediate deaths, subsequent deaths from the blasts and radiation, and deaths resulting from long-term consequences of nuclear detonations are considered “survivable.” Of course, this group of warmongers would be among the survivors, yes?

    2. ISL

      If Russia can be provoked into a mild missile-ing of Ukraine, then the Belt Road Initiative entry into Europe through Russia can be postponed a decade (hopium for a Bezos /Musk techno-fix to put the empire back atop). The entry of Argentina (and other Monroe Doctrine countries) into the BRI is a harbinger how how fast the US is falling off its throne (and more importantly the US dollar).

      In any case, you are confusing oligarch-driven policies with the interests of the US – another decade could take the debt from what 30 trillion to 50 trillion and create a few hundred new billionaires or a dozen new hundred billionaires.

      The exit strategy is called New Zealand.

  13. Quentin

    The drift of Michael Hudon’s article, despite its title, seems to be ‘Europe’s Real Adversaries are the US and Canada.’ I find his analysis fascinating, never looked at it that way before. North America is on the ropes, displaying increasing anxiety and desperation. Too bad, they have only themselves to thank.

    1. Jonathan Holland Becnel

      POW POW!




    1. Shonde

      I looked at subscribing but you need Facebook or Google and I use neither. Anyone know how to sidestep those two options?

      Wish he was on Substack.

  14. John Mc

    It would appear that the US has miscalculated strategy on both Russia and China SO many times in the last 70 years, that the only strategy they have left is to flail wildly in public with bombast and narcissism.

    The fact of the matter is if Kennedy’s detente (attempting to help countries like Egypt, Indonesia, Venezuela, Chile, Brazil, Congo or Ghana, or other pan-African countries’ nationalizing movements develop their own resources for their own people) had been allowed to progress, the US would have been in a much better position to actually aid in transitioning China (late 70’s) and Russia (early 90’s) when their time for transition was to come because we would have had a track record. But fear was our guide during this period.

    Instead, we took on the role of the NEXT colonizing unipolar force, controlling oil, exterminating leftists over the globe in the name of peace and using US corporations to exploit geo-political battles, military interventions, and this fictitious control we seem to think we have in these failed institutions like NATO, IMF, the World Bank, and the US government.

    https://www.youtube.com/watch?v=0fkKnfk4k40 (Kennedy’s speech at American University – 6/10/1963)

    As Michael Parenti said: “It is the heart of US policy, Ladies and Gentlemen, to use fascism to preserve capitalism while claiming to be saving democracy from Communism.”

    It did not have to be like this.

    1. Tom Pfotzer

      Excellent post. “It did not have to be like this”.

      Doesn’t have to be like that now, either.

      There are some great alternatives to the “Emotionally Stunted Man Meets The Bomb” plan.


      This is slightly off-topic to this thread, but it is germane, if you’ll bear with me a sec.

      Remember the NC post the other day about the Chicago team that’s building up a local supply chain to feed and employ former prisoners?

      You may see that as a “one-off” nice little huggable story, but I see it as a crystal dropped into a super-saturated solution….actions like this have the potential to precipitate effects way beyond the immediate scope.

      Here’s what I thought extraordinary about that story:

      a. The locals decided it was “worth it”. The food probably costs a bit more, because it’s coming from new, smaller-scale businesses. Every new product, new service, new relationship takes a lot of work and grit to bring it into being. It’s a rough learning curve, and the learning has to take place at both the enterprise and the community level, at the same time. This is a real trick to do, darned near magic.

      b. The team doing the work is in it for the long-run. These aren’t flash-in-the-pan types. They may well be able to go all 15 rounds. I didn’t hear a lot of fluff in the commentary by the principals.

      c. In addition to commitment, they seem to know almost exactly what the stepping stones are in pursuit of the big pic. What functions, at what scale, when and by whom and what’s the cash flow nec to keep the mojo as each step is taken. This is good stuff they have on.

      So, why is this Chicago story germane to this thread?

      Because if we’re ever going to do as Dr. Hudson suggests and redesign/rebuild our economy…it’s probably not going to happen top-down, for all the reasons (and more besides) that Dr. Hudson pointed out.

      That leaves “bottom up” as one obvious option, right? OK.

      Well, that “feed others as we learn to make a living fixing the place we live in” strategy seems to be working in Chicago. These are people that didn’t get dealt the greatest cards in the world…and they are playing the hell out of that hand.

      Pretty neat. Wish I lived nearby so I could pitch in somehow.

  15. TimD

    Good analysis, it is almost as if Neoliberal American economists had never read a history book. What made the American economy dynamic was its ability to suck raw materials out of countries and supply the countries with cost-effective, American-made manufactures. This, combined with a labor force that could share the gains from increases in productivity, created growing markets both domestic and international; making the US the envy of the world. My only disagreement with Professor Hudson would be that the Democrats started going to the right well before Carter when they helped override Truman’s veto of Taft-Hartley in 1947 and that LBJ also predated Carter when he allowed American garments to start being made in the US, then after having most of the work done in Mexico, moved back to the US without tariffs, to be finally completed in the US and called American made.

    FDR showed that economies could be healthy when there was some balance of returns between the people who did the work and bought the production; and those that own and control production. As Professor Hudson points out, offshoring is a failed concept and shifts the returns from production to the very few. Now here America sits with an annual trade deficit that will reach almost $3000 per American, and annual federal budget deficits, under the Trump years, that almost double that amount. Listen carefully, that is the sound of an economy bleeding.

      1. TimD

        I am most of the way through it, so far it is an excellent economic history of the WWII period. At one time the US ability to pay for its imports with cash or debt was seen to be beneficial. I would have been if the country used that capital inflow to grow productive capacity – sadly this was not the case.

    1. ex-PFC Chuck

      ” My only disagreement with Professor Hudson would be that the Democrats started going to the right well before Carter . . “

      One source I read several months ago (forgot to make a note of who and where at the time) pinned the turning point down to the hour: 10:00 pm July 20, 1944, when an alliance of the Bourbon Democrats and the big city machine bosses conned thechairman of the Democratic National Convention session that had just renominated FDR for a 4th term by acclimation, and was on the cusp of doing likewise regarding the incumbent vice president Henry Wallace, into adjourning for the evening. Overnight deals were made and arms were twisted such that on the morrow the Veep didn’t get the votes on the first ballot. It went downhill from t here and Truman got the slot.

      1. TimD

        Good point, I have heard about that as well – I think from Oliver Stone. It is almost as if FDR was an aberration. That is sad because he did more for the average American and the health of the country than any politician since.

  16. LawnDart

    Two paragraphs really caught my attention, through the topic is regularly brought up on this site, I thought that this was written well and cannot be over-emphasized:

    It [China] industrialized in much the same way that the United States and Germany did in the late 19thcentury: By heavy public investment in infrastructure to provide basic needs at subsidized prices or freely, from health care and education to transportation and communications, in order to minimize the cost of living that employers and exporters had to pay.

    This neoliberalism has been a path to becoming a failed economy and indeed, a failed state, obliged to suffer debt deflation, rising housing prices and rents as owner-occupancy rates decline, as well as exorbitant medical and other costs resulting from privatizing what other countries provide freely or at subsidized prices as human rights – health care, education, medical insurance and pensions.

    I agree that addressing these issues would required us to reinvent or seriously reform our political system in USA… … …

    Does anyone know of any country willing to accept American refugees at this present time?

  17. Susan the other

    The Europeans are our adversaries because our obsession with them since WW2 has bloated our military, corrupted our finance, impoverished our citizens and alienated every country doing business with us. Our real adversary is our own business plan. It doesn’t work. Not for us and not for our nominal allies. The irony is that the only people that benefited from our way of doing business were our devoted adversaries – that is our NATO allies. We made a big mistake boxing ourselves into a free-market corner where we didn’t have a chance of winning the future. Now the prospect of being the last Lonely Neoliberal is too tragic to face. So we solemnly let the State Department rot from the head down and every American fall into debt poverty without health care. Without the magic fix – oil – we are a joke. Probably, for our last disgraceful act, we’ll invade Venezuela.

    1. Tom Pfotzer

      The Europeans aren’t our adversaries. It’s not useful as a concept, and not helpful as a title to an otherwise excellent article.

      We are our own worst enemy. Those are _our_ dumb ideas.

      What we need is an emotional re-boot; a referendum on values, and a whole-scale “walk-out” from the Stupid Train we’re on. Subway comes into Metro Center, everyone off.

      New train, new direction.

      No tracks going our way? Build new ones. The Ladies of Chicago * did it, we can do it, too.

      * See the Cooperative Run by the Formerly Incarcerated story here @ NC a few days back.

  18. Mikel

    What can I say after that summary other than “BOOM!”

    One thing that crosses my mind when I hear all the apparachiks of US national security beat their war drums: They are actually thumping their chests and thinking they can take this country into a major conflict after they’ve seen what a virus outbreak (one they want to insist is “mild”) has done to supply chains.

    1. Anon

      It doesn’t all add up to me really. For all the reasons Michael has stated. The machine simply cannot do anything but what it was made to do, so it ploughs mindlessly into a conflict that will likely do it mortal damage? Either somebody has an ace up their sleeve (one that doesn’t rhyme with puke), or they’re a bunch of idiots. IRL… as stupid as the blob is from a humanist perspective, it is markedly efficient at extracting rents; they are not stupid, they are amoral, and very smart when it comes to being counterproductive.

      The irony is, you end up fighting the war they start anyway.

  19. RobertC

    I thank Dr Hudson for his historical review and economic analysis.

    But I have a minor disagreement: Russia and China are not being driven together, they are driving (acting) together.

    Shortly after his inauguration, President Biden in his autocracy vs democracy challenge said confrontation would be one policy. And Russia and China have responded Your Proposal is Acceptable.

    I believe Putin and Xi gamed out and are executing a confrontation with Biden in Europe, splitting the Atlantic alliance, using Ukraine as their cat’s paw and commodity prices as their lever. And so far everything is moving according to their plans.

    1. RobertC

      Professor Sergey Karaganov, honorary chairman of Russia’s Council on Foreign and Defense Policy, explained it better:

      But the task is wider: to build a viable system on the ruins of the present. And without resorting to arms, of course. Probably in the wider Greater Eurasian framework. Russia needs a safe and friendly Western flank in the competition of the future. Europe without Russia or even against it has been rapidly losing its international clout. That was predicted by many people in the 1990s, when Russia offered to integrate with, not in, the continent’s systems. We are too big and proud to be absorbed. Our pitch was rejected then, but there is always a chance it won’t be this time.

  20. Darius

    A magisterial, yet pithy, description of the current state of affairs and motivations of the actors. I have one correction. I think Clinton’s action on China and WTO was in December 2000, not 2001.

    1. Michael Hucson

      Right. 2000. I’m a terrible typist — and a worse proofreader.
      I could swear I wrote 2000. I was THINKING it. :)-

  21. Scott1

    I desire for Michael Hudson to describe a US write down and write off of debts the average American is finding either impossible to pay, or cause them to live in wage slavery. It is clear that the majority of Americans will never see legislation they ask the congress to enable.
    Europeans will be sorry for deals they think they have done to their benefit with China or Russia.
    That is to top it all off. Neither Russia or China can be trusted. There is little clean water in China. I can’t think of anyone I know who would thrive in either country. The corruption and lies that are operating procedures in China mean that doctor may have paid bribes for their degree. You’re sick because you drank the water or ate the food. Russia under Putin bet on fossil fuels so the world will continue to heat and oceans to rise.

  22. VietnamVet

    The extractive Western Empire (USA/UK) is running out of human resources, it is killing them. It has ginned up a new scheme to market its expensive liquid natural gas to Europe which only will work if the supply of the cheaper Russia natural gas terminated. This post documents that this is behind the warmongering. Push Russia to invade Ukraine or pave the way for false flag operation to trigger an European War. For some ungodly reason the schemers refuse to acknowledge that this risks a global nuclear apocalypse.

  23. CBBB

    I would not be so sure that China has escaped neoliberal financialization; housing prices are sky-high in many Chinese cities. This is a world-wide problem not just a US one.
    Furthermore China and Europe are fundamentally dependent on US consumer demand to keep going given the current structure of their economies. When you have a country like Germany say, whose GDP is somewhere around 50% exports you have extreme dependence on outside consumer demand that their economy cannot generate for structural/policy reasons. Ultimately it is countries like the US that has to provide that demand.

  24. Sound of the Suburbs

    Where did it all go wrong for the West/US?

    Remember the good old days?
    Thirty years ago.
    The West was triumphant, and western liberalism had won the day, it was the end of history.
    The Berlin Wall had fallen and a uni-polar world was born.
    The US reigned supreme.
    China was insignificant and Russia was moving towards the West with Gorbachev.

    Western policymakers were thinking about things at the individual level, as they were immersed in an individualistic ideology.
    They just thought about individuals competing against each other in an open, globalised world, so it was all about individual productivity.
    They weren’t thinking about the advantages one nation might have over another.
    All the cards were stacked in China’s favour in an open, globalised world, which the Americans created with the Washington Consensus.

    Maximising profit is all about reducing costs.
    China had coal fired power stations to provide cheap energy.
    China had lax regulations reducing environmental and health and safety costs.
    China had low taxes and a minimal welfare state.
    China had a low cost of living so employers could pay low wages.
    China had all the advantages in an open globalised world.
    Western companies couldn’t wait to off-shore to low cost China, where they could make higher profits.

    Western businesses tried cutting costs here, but could never get down to Chinese levels and they needed to off-shore to maximise profit.
    They gave away decades of Western design and development knowledge in technology transfer agreements.

    China was a new, fast growing economy compared to the mature, slow growing economies of the West.
    Investors would be able to achieve better returns in the new, fast growing Chinese economy and this is where the money headed.
    US investors love China and know it’s the best place to make real money.
    George Soros, Bill Gates, Warren Buffett, Elon Musk, Jeff Bezos …..

    The wealthy and corporations made lots of money as the balance of power shifted from West to East.
    They didn’t notice what was happening until very late in the day as they were making so much money, they couldn’t imagine anything could be going wrong, but it was.

    1. Questa Nota

      Policy changes in government and in media that leveraged the means to newly desired ends.
      Eliminate the Fair Trade policy and then experiment with deregulation of various sectors.
      Pay the price later.
      Reorient what was once at least a semi-free and quasi-independent press via the Neo-Lib business model.
      No more equal time, no more public consideration, just consolidation and elimination of dissenting views.
      Decline of standards through crapification.
      Keep pushing trickle-down everything.
      Others keep paying the price now and later.

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