Yves here. Below is the text of a paper Michael Hudson presented to meeting in France for anthropologists and others on David Graeber. Construire des passerelles: Autour de l’œuvre de David Graeber was organized by Graeber’s wife Nika and is intended to become an annual event. Hudson’s talk on how the destructive fantasies of modern economics not only misrepresent the history of the development of taxation, money, and land ownership, but also produce inequality and debt peonage, led the 3-day conference.
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 The Destiny of Civilization. Originally published at his website
It may seem strange to invite an economist to give a keynote speech to a conference of the social sciences. Economists have been characterized as autistic and anti-social in the popular press for good reason. They are trained to think abstractly and use a priori deduction – based on how they think societies should develop. Today’s mainstream economists look at neoliberal privatization and free-market ideals as leading society’s income and wealth to settle at an optimum equilibrium without any need for government regulation – especially not of credit and debt.
The only role acknowledged for government is to enforce the “sanctity of contracts” and “security of property.” By this they mean the enforcement of debt contracts, even when their enforcement expropriates large numbers of indebted homeowners and other property owners. That is the history of Rome. We are seeing the same debt dynamic at work today. Yet this basic approach has led mainstream economists to insist that civilization could and should have followed this pro-creditor policy from the very beginning.
The reality is that civilization could never have taken off if some free-market economist had got into a time machine and travelled back in time five thousand years to the Neolithic and Bronze Age. Suppose that he would have convinced ancient chieftains or rulers how to organize their trade, money and land tenure on the basis of “greed is good” and any public regulation is bad.
If some Milton Friedman or Margaret Thatcher had persuaded Sumerian, Babylonian or other ancient rulers to follow today’s neoliberal philosophy, civilization could not have developed. Economies would have polarized – as Rome did, and as today’s Western economies are doing. The citizens would have run away, or else backed a local reformer or revolutionist to overthrow the ruler who listened to such economic advice. Or, they would have defected to rival attackers who promised to cancel their debts, liberate the bondservants and redistribute the land.
Yet many generations of linguists, historians and even anthropologists have absorbed the economic discipline’s anti-social individualistic world view and imagine that the world must always have been this way. Many of these non-economists have unwittingly adopt their prejudices and approach ancient as well as modern history with a bias. Our daily discourse is so bombarded with the insistence by recent American politicians that the world is dividing between “democracy” with “free markets” and “autocracy” with public regulation that there is much fantasy at work about early civilization.
David Graeber and I have sought to expand the consciousness of how different the world was before Western Civilization took the Roman track of pro-creditor oligarchies instead of palatial economies protecting the interests of the indebted population at large. At the time he published his Debt: The First Five Thousand Years in 2011, my Harvard group of assyriologists, Egyptologists and archaeologists was still in the process of writing the economic history of the ancient Near East in a way that was radically different from how most of the public imagined it to have occurred. David’s and my emphasis on how royal Clean Slate proclamations cancelling debts, liberating bond-servants and redistributing the land were a normal and expected role of Mesopotamian rulers and Egyptian pharaohs was still not believed at that time. It seemed impossible that such Clean Slates were what preserved liberty for the citizenry.
David Graeber’s book summarized my survey of royal debt cancellation in the ancient Near East to show that interest-bearing debt originally was adopted with checks and balances to prevent it from polarizing society between creditors and debtors. In fact, he pointed out that the strains created by the emergence of monetary wealth in personal hands led to an economic and social crisis that shaped the emergence of the great religious and social reformers. As he summarized “the core period of Jasper’s Axial age … corresponds almost exactly to the period in which coinage was invented. What’s more, the three parts of the world where coins were first invented were also the very parts of the world where those sages lived; in fact, they became the epicenters of Axial Age religious and philosophical creativity.”Buddha, Lao-Tzu and Confucius all sought to create a social context in which to embed the economy. There was no concept of letting “markets work” to allocate wealth and income without any idea of how wealth and income would be spent.
All ancient societies had a mistrust of wealth, above all monetary and financial wealth in creditor hands, because it generally tended to be accumulated at the expense of society at large. Anthropologists have found this to be a characteristic of low-income societies in general.
Toynbee characterized history as a long unfolding dynamic of challenges and responses to the central concerns that shape civilizations. The major challenge has been economic in character: who would benefit from the surpluses gained as trade and production increase in scale and become increasingly specialized and monetized. Above all, how would society organize the credit and debt that was necessary for specialization of economic activities to occur – and between “public” and “private” functions?
Nearly all early societies had a central authority in charge of distributing how the surplus was invested in a way that promoted overall economic welfare. The great challenge was to prevent credit leading to debts being paid in a way that impoverished the citizenry, e.g., through personal debt and usury – and more than temporary loss of freedom (from bondage or exile) or land tenure rights.
The great problem that the Bronze Age Near East solved – but classical antiquity and Western civilization have not solved – was how to cope with debts being paid – especially at interest without polarizing economies between creditors and debtors, and ultimately impoverishing the economy by reducing most of the population to debt dependency. Merchants engaged in trade, both for themselves and as agents for palace rulers. Who would get the profits? And how would credit be provided but kept in line with the ability to be paid?
Public vs. Private Theories of How Land Tenure Originated
Ancient societies rested on an agricultural base. The first and most basic problem for society to solve was how to assign land tenure. Even families who lived in towns that were being built up around temples and civic ceremonial and administrative centers were allocated self-support land – much like Russians have dachas, where most of their food was grown in Soviet times.
In analyzing the origins of land tenure, like every economic phenomenon, we find two approaches. On the one hand is a scenario where land is allocated by the community in exchange for corvée labor obligations and service in the military. On the other hand is an individualistic scenario in which land tenure originated by individuals acting spontaneously by themselves clearing land, make it their own property and producing handicrafts or other products (even metal to use as money!) to exchange with each other.
This latter individualistic view of land tenure has been popularized ever since John Locke imagined individuals setting out to clear the land – apparently vacant wooded land – with their own labor (and presumably that of their wives). That effort established their ownership to it and its crop yield. Some families would have more land than others, either because they were stronger at clearing it or had a larger family to help them. And there was enough land for everyone to clear ground for planting crops.
In this view there is no need for any community to be involved, not even to protect themselves from miliary attack – or for mutual aid in times of flood or other problems. And there is no need for credit to be involved – although in antiquity that was the main lever distorting the distribution of land by transferring its ownership to wealthy creditors
At some point in history, to be sure, this theory sees governments enter the picture. Perhaps they took the form of invading armies, which is how the Norman ancestors of landlords in John Locke’s day acquired English land. And as in England, the rulers would have forced landholders to pay part of their crops in taxes and provide military service. In any case, the role of government was recognized only as “interfering” with the cultivator’s right to use the crop as he saw fit – presumably to trade for things that he needed, made by families in their own workshops.
My Harvard-sponsored group of assyriologists, Egyptologists and archaeologists have found an entirely different genesis of land tenure.Land rights seem to have been assigned in standardized plots in terms of their crop yield. To provide food for these community members, late Neolithic and early Bronze Age communities from Mesopotamia to Egypt allocated land to families in proportion to what they needed to live on and how much they could turn over to the palace authorities.
This tax yield turned over to palace collectors was the original economic rent. Land tenure came as part of a quid pro quo – with a fiscal obligation to provide labor services at designated times of the year, and to serve in the military. It thus was taxation that created land-tenure rights, not the other way around. Land was social in character, not individualistic. And government’s role was that of coordinator, organizer and forward planner, not merely predatory and extractive.
Public vs. Private Origins of Money
How did early societies organize the exchange of crops for products – and most important, to pay taxes and debts? Was it simply a spontaneous world of individuals “trucking and bartering,” as Adam Smith put it? Prices no doubt would have varied radically as individuals had no basic reference to cost of production or degrees of need. What happened as some individuals became traders, taking what they produced (or other peoples’ products on consignment) to make a profit. If they traveled large distances, were caravans or ships needed – and the protection of large groups? Would such groups have been protected by their communities? Did supply and demand play a role? And most important, how did money emerge as a common denominator to set prices for what was traded – or paid in taxes and to settle debts?
A century after Adam Smith, the Austrian economist Anton Menger developed a fantasy about how and why ancient individuals may have preferred to hold their savings in the form of metals – mainly silver but also copper, bronze or gold. The advantage of metal was said to be that it did not spoil (in contrast to grain carried around in one’s pocket, for instance). It also was assumed to be of uniform quality. So pieces of metal money gradually became the medium by which other products came to be measured as they were bartered in exchange – in markets in which governments played no role at all!
The fact that this Austrian theory has been taught now for nearly a century and a half is an indication of how gullible economists are willing to accept a fantasy at odds with all historical records from everywhere in recorded world history. To start with, silver and other metals are not at all of uniform quality. Counterfeiting is age-old, but individualist theories ignore the role of fraud – and hence, the need for public authority to prevent it. That blind spot is why U.S. Federal Reserve Chairman Alan Greenspan was so unprepared to cope with the massive junk-mortgage bank crisis peaking in 2008. Wherever money is involved, fraud is omnipresent.
That’s what happens in unregulated markets – as we can see from today’s bank frauds, tax evasion and crime that pays very, very well. Without a strong government to protect society against fraud, lawbreaking, the use of force and exploitation, societies will polarize and become poorer. For obvious reasons the beneficiaries of these grabs seek to weaken regulatory power and the ability to prevent such grabitization.
To avoid monetary fraud, silver and subsequently gold coinage from Bronze Age Mesopotamia down through classical Greece and Rome was minted in temples to sanctify their standardized quality. That is why our word for money comes from Rome’s temple of Juno Moneta, where Rome’s coinage was struck. Thousands of years before bullion was coined, it was provided in metal strips, bracelets and other forms minted in temples, at standardized alloy proportions.
Purity of metals is not the only problem with using bullion money. The immediate problem that would have confronted anyone exchanging products for silver is how to weigh and measure what was being bought and sold – and also to pay taxes and debts. From Babylonia to the Bible we find denunciations against merchants using false weights and measures. Taxes involve a role of government, and in all archaic societies it was the temples that oversaw weights and measures as well as the purity of metallic metals. And the denomination of weights and measures indicate their origin in the public sector: fractions divided into 60ths in Mesopotamia, and 12ths in Rome.
Trade in basic essentials had standardized customary prices or payments to the palaces or temples. Taxes and debts were the most important used for money. That reflects the fact that “money” in the form of designated commodities was needed mainly to pay taxes or buy products from the palaces or temples and, at the end of the harvesting season, to pay debts to settle such purchases.
Today’s neoliberal economic mainstream has created a fairy tale about civilization existing without any regulatory oversight or productive role for government, and without any need to levy taxes to provide basic social services such as public construction or even service in the military. There is no need to prevent fraud, or violent seizure of property – or the forfeiture of land tenure rights to creditors as a result of debts. But as Balzac noted, most great family fortunes have been the result of some great theft, lost in the mists of time and legitimized over the centuries, as if it were all natural.
These blind spots are necessary to defend the idea of “free markets” controlled by the wealthy, above all by creditors. This is claimed to be for the best, and how society should be run. That is why today’s New Cold War is being fought by neoliberals against socialism – fought with violence, and by excluding the study of history from the academic economics curriculum and hence from the consciousness of the public at large. As Rosa Luxemburg put it, the fight is between socialism and barbarism.
Public vs. Private Origins of Interest-Bearing Debt
Interest rates were regulated and stable for many centuries on end. The key was ease of calculation: 10th, 12thor 60th.
Babylonian scribes were trained to calculate any rate of interest as a doubling time. Debts grew exponentially; but scribal students also were taught that herds of cattle and other material economic output tapered off in an S-curve. That is why compound interest was prohibited. It also was why it was necessary to cancel debts periodically.
If rulers had not cancelled debts, the ancient world’s takeoff would have prematurely suffered the kind of decline and fall that impoverished Rome’s citizenry and led to the decline and fall of its Republic – leaving a legal system of pro-creditor laws to shape subsequent Western civilization.
What makes Western Civilization Distinctly Western? Has It All Been a Detour?
Civilization could not have developed if a modern Milton Friedman or kindred Economics Nobel Prize winner had gone back in time and convinced Hammurabi or the Egyptian pharaoh to just let individuals act by themselves and let wealthy creditors reduce debtors to bondage – and then to use their labor as an army to overthrow the kings and take over government for themselves, creating a Roman-style oligarchy. That is what Byzantine families tried to do in the 9thand 10thcenturies.
If the “free enterprise” boys had their way there would have been no temple coinage or oversight of weights and measures. Land would belong to whomever could grab, foreclose on or conquer it. Interest would have reflected whatever a wealthy merchant could force a needy cultivator to pay. But to economists, everything that occurs is a matter of “choice.” As if there is no outright need– to eat or to pay.
An economic Nobel Prize was awarded to Douglass North for claiming that economic progress today and indeed throughout all history has been based on the “security of contracts” and property rights. By this he means the priority of creditor claims to foreclose on the property of debtors. These are the property rights to create latifundia and reduce populations to debt peonage.
No archaic civilization could have survived for long by following this path. And Rome did not survive by instituting what has become the distinguishing feature of Western Civilization: giving control of government and its lawmaking to a wealthy creditor class monopolizing the land and property.
If an ancient society had done this, economic life would have been impoverished. Most of the population would have run away. Or else, the Thatcherite/Chicago School elite would have been overthrown. The wealthy families that sponsored this grabitization would have been exiled, as occurred in many Greek cities in the 7thand 6thcenturies BC. Or, discontented populations would have walked out and/or threatened to defect to foreign troops promising to free the bondservants, cancel their debts and redistribute the land, as occurred with Rome’s Secessions of the Plebs in the 5thand 4thcenturies BC.
So we are brought back to David Graeber’s point that the great reformers of Eurasia rose at the same time that economies were becoming monetized and increasingly privatized – an epoch in which wealthy families were increasing their influence over how city-states were run. Not only the great religious reformers but the leading Greek philosophers, poets and dramatists explained how wealth is addictive, and leads to hubris that leads them to seek wealth in ways that injure others.
Looking over the sweep of ancient history, we can see that the main objective of rulers from Babylonia to South Asia and East Asia was to prevent a mercantile and creditor oligarchy from emerging and concentrating ownership of land in their own hands. Their implicit business plan was to reduce the population at large to clientage, debt bondage and serfdom.
That is what occurred in the West, in Rome. And we are still living in the aftermath. Throughout the West today, our legal system remains pro-creditor, not in favor of the indebted population at large. That is why personal debts, corporate debts, public debts and the international debts of Global South countries have mounted up to crisis conditions threatening to lock economies into a prolonged debt deflation and depression.
It was to protest this that David helped organize Occupy Wall Street. It is obvious that we are dealing not only with an increasingly aggressive financial sector, but that it has created a false history, a false consciousness designed to deter revolt by claiming that There Is No Alternative (TINA).
Where Western Civilization Went Wrong
We have two diametrically opposed scenarios depicting how the most basic economic relationships came into being. On the one hand, we see Near Eastern and Asian societies organized to maintaining social balance by keeping debt relations and mercantile wealth subordinate to the public welfare. That aim characterized archaic society and non-Western societies.
But the Western periphery, in the Aegean and Mediterranean, lacked the Near Eastern tradition of “divine kingship” and Asian religious traditions. This vacuum enabled a wealthy creditor oligarchy to take power and concentrate land and property ownership in its own hands. For public relations purposes, it claimed to be a “democracy” – and denounced any protective government regulation as being, by definition, “autocracy.”
Western tradition indeed lacks a policy subordinating wealth to overall economic growth. The West has no strong government checks to prevent a wealth-addicted oligarchy from emerging to make itself into a hereditary aristocracy. Making debtors and clients into a hereditary class, dependent on wealthy creditors, is what todays economists call a “free market.” It is one without public checks and balances against inequality, fraud or privatization of the public domain.
It may seem amazing to some future historian that the political and intellectual leaders of today’s world hold such individualistic neoliberal fantasies that archaic society “should” have developed in this way – without recognizing that this is how Rome’s oligarchic Republic did indeed develop, leading to its inevitable decline and fall.
Bronze Age Debt Cancellations and Modern Cognitive Dissonance
So we are led back to why I was invited to speak here today. David Graeber wrote in his Debt book that he was seeking to popularize my Harvard group’s documentation that debt cancellations did indeed exist and were not simply literary utopian exercises. His book helped make debt a public issue, as did his efforts in the Occupy Wall Street movement.
The Obama administration backed police breaking up the OWS encampments and did everything possible to destroy awareness of the debt problems plaguing the U.S. and foreign economies. And not only the mainstream media but also academic orthodoxy circled their wagons against even the thought that debts could be written down and indeed needed to be written down to prevent economies from falling into depression.
That neoliberal pro-creditor ethic is the root of today’s New Cold War. When President Biden describes this great world conflict aimed at isolating China, Russia, India, Iran and their Eurasian trading partners, he characterizes this as an existential struggle between “democracy” and “autocracy.”
By “democracy” he means oligarchy. And by “autocracy” he means any government strong enough to prevent a financial oligarchy from taking over government and society and imposing neoliberal rules – by force. The ideal is to make the rest of the world look like Boris Yeltsin’s Russia, where American neoliberals had a free hand in stripping away all public ownership of land, mineral rights and basic public utilities.
David Graber, Debt: The First 5000 Years (Brooklyn, 2011):224.
Piotr Steinkeller and Michael Hudson, eds., Labor in the Ancient World (Dresden 2015).
An unclosed “Bold” tag somewhere seems to be causing trouble, following the subhead “Public vs. Private Theories of How Land Tenure Originated”.
The problem is actually a mismatch between html tags, I think.
immediately prior to the heading “Public vs. Private Theories of How Land Tenure Originated” there is a “b” tag that is apparently then attempted to be closed by a “/em” tag following the heading.
The answer seems to be to replace the trailing “/em” with a “/b” if the heading is to be rendered in bold.
“em” tags are for italics and either “strong” tags or “b” tags are for bold.
When I just looked at the html, there’s actually an ‘extra’ “b” tag at the beginning of the next chapter (“Ancient societies…”).
Removing that “fixes” the page until other ‘extra’ “b” tags enclosing the “div”s for printfriendly and comments.
That’s interesting. When I look at the html using firefox browser’s “ctrl-u” function, it highlights the “/em” tag after the “Public v Private…” as being an orphan and I do not see the “b” tag that you mention.
We may be seeing products of different browser renderings, or it may be that “printfriendly” tries to resolve orphan tags on its own.
At any rate, the site works fine, it’s just a bit unnerving to have all the comments in bold!
oops. misunderstood your reference to printfriendly. Chalk it up to browser differences I suppose.
Also, while I may have your attention, I am about 200 miles south of you on the double nickel. Follow your comments and would love to meet up some time when I’m around your town.
Fixed it. Thanks.
Completely besides the pint of the article, but Hudson’s casual use of autisic makes me ponder how the term gets used these days.
Anyways, my layman impression has been that the catholic church was what kept debt at bay after the fall of the western roman empire. And that is came back in force after the protestant reformation, in particular in Holland where it funded mercantile expeditions.
Also, much of economic theory seem to have come about in order to weaken the aristocracy of England.
It is curious how the land assignment system Hudson describes seems to be what gets partially ragged on in say Robin Hood as tyrannical. Never mind that it will easily lead people these days to think about serfdom, something that Tsarist Russia gets lambasted for sticking to longers than most.
Anyways, coming at economics from a certain angle it really seems to have been a way for the mercantile and later industrialist class to one up the land “owning” nobles of England.
One may also argue that early USA was their refuge from the political power of said nobles, after all they didn’t clamp down on immigration until impoverished peasants started coming over in boatloads.
Maybe the closest to a economist utopia was back when USA expanded westwards, and anyone could potentially claim a plot of land by living off it for a certain period of time.
But such a utopia would require infinite land to expand into. USA kinda had that until it ran into the pacific. And Rome certainly had it on the heel of their legions (Wonder what came first, actual roman encampments or their popular imagery that echos US cavalry forts).
Ugh, i guess i’m rambling.
I know it’s just rambling but….
that utopia “the USA” had till the pacific…ummm .. except ; ALL the people who already lived there didn’t think so…. I’m guessing. probably still don’t.
And why i invoked the similarities between the popular image of the wild west cavalry fort and the roman legions. Sorry if i got a bit too wry there.
In order for Jacob Fugger to advance Pope Leo X the funds for one of his wars, Fugger extracted a letter from the Pope re-defining Usury in such a way that interest for commercial and state loans got Papal blessings.
The Pope got his loan and with the interest on it Fuggar went on to fund the Aristocratic army that slaughtered several hundred thousands in “The Peasants Revolt” of 1524-25.
So, while Martin Luther does figure in the re-legitimation of usury, t’was the Pope selling indulgences who also sold out Christianity to Finance.
Prior to that the unclean practice of usury was relegated to non-christians in Europe.
The casual use of the term ‘autism’ as being synonymous with abstract reasoning leading to delusion is neither a common misconception nor an accurate description of a condition the general ignorance of which contributes to an average life expectancy of 54, it appears to be a contrivance entirely of the professor’s own ignorance.
I don’t take that as the way it has been used in France, who were the ones to first accuse economists of being autistic. The criticism is not delusion but complete lack of interest how markets affect humans and societies.
“The criticism is not delusion but complete lack of interest how markets affect humans and societies.”
Selection for those traits in finance and tech are worthy of an investigation/study.
“The criticism is not delusion but complete lack of interest how markets affect humans and societies.”
Why would lack of interest in how markets affect humans and societies be anything to do with autism? Autistics are just as interested in those things as any one else so this is a slander on autistics.
The salient characteristic of autistics is difficulty or inability in understanding the emotions of others. How markets affect society is very much tied up in ideas of fairness and social relations and how abuses of those internalized norms is destructive to individuals and society. Economics posits that humans operate like machines, without emotional considerations. Autistics are not not emotional but they do have great difficulty understanding/relating to emotions, so the charge is that economics is an effort to describe the provisioning of society without making any allowance for interpersanal dynamics.
My understanding is the French who came up with this framing have not backed down from it.
One could observe the use of the term ‘autism’ being not unlike a conversation I had years ago with a hard core credentialed AET sort where a discussion about society vs markets ended up with them saying – “we just need to better harness the creative powers of the sociopath – in they were market[tm] driving forces to advance humanities future”.
This also is noted by the fact some trade on the psychological condition of some CEOs et al because its not representative of the larger population e.g. individual and environmental conditions.
BTW there is levels to spectrum disorders and it can be a bit of mixed bag.
So what I’m saying is it seems Hudson’s choice of term is not the big issue here, what is at issue is the human condition of a very small percent of the over all population driving the human agenda, more so in a framework of incentives which seem to bring out the worst in some and then drag everyone else along … hence the antiquarian notion of a debt relief to keep that potential for social control from veering off into the ditch and everyone with it.
Skippy, please forgive this dunce for not knowing this, but to which of the 51 definitions of AET are you referring? https://www.acronymfinder.com/AET.html
Austrian Economic Theory, Mike. Sorry its just a habit to use it as an acronym after so many years on this and other economic blogs. But hay … watch out for those synergies … sorta like the libertarian bolt on to any other past or new school of thought. Libertarian Marxism for example … whoboy …
Tom Hayes, the man most heavily punished for Libor rigging some years ago, was later diagnosed with Asperger’s. In the book, The Spider Network by David Enrich, the author argues that Asperger’s is what led to Hayes being made the fall guy because he didn’t think to cover his tracks or manipulate the investigators like his coconspirators did.
So being on the spectrum is actually detrimental to homo economicus, because the real life rational actor has to use emotions to manipulate people to get away with it.
“Hudson’s casual use of autisic makes me ponder how the term gets used these days.”
I actually think he was using the term literally.
He is saying some of them are actually on the spectrum.
The same has been said about some quants on Wall Street. Not all of course, but sometimes a bit of selection goes on for the trait.
Wikipedia: Post-autistic Economics
For certain severely-limited definitions of the term “anyone”, if we are being honest with ourselves.
It wasn’t a utopia for the Native Americans.
What an important lesson this would be for society at large.
This is the mindset of reality.
even if high school kids had to get a 10 week class, just to begin to realize the “gist” of this, and how this IS the world we live in now.
To begin to disassemble the illusion
and all that goes with that. After all, not only is the rest of the world in the sights of the western elite, but so are we… the nobodys’
funny though that since the roman era, there has only been one continuously consistent institution,the vatican.
Maybe them trying to sell their snake oil of the divinity of jesus, has somehow become like the proverbial stepping on something smelly(debt) and tracking it through the house. I know the two are completely unrelated, except they exist in the same world,at the same time.
After all, look at the dereliction of all the catholic/christian/protestant churches in the us.. preaching to all these political diatribes… and creating the atmosphere where these self defeating tendencies are encouraged…. with the “big thumbs up” from jesus… himself.
WWJB who would jesus bomb?
Then there is the point that we can cancel some of our own debt,
We can pass a law, like “the NEED act” HR 2990 112th congress 2011/2012, and stop creating our money as a debt, and take the first step in wresting control of our society from wall st.et al.
I consider myself a fan of Dr. Hudson, but I have to admit I feel a bit of reverse Orientalism in some parts of this piece, in particular here:
There’s a difference between a country like China organizing the social balance for the public welfare and organizing the social balance to promote the interests of the state and its elites. Most native Chinese will tell you how nepotistic society there can be (which is the most ancient and blatant practice used by elites to manipulate societal outcomes, in my view), and many of the Chinese I’ve met in the states will give this as a primary reason for wanting to leave China.
While I don’t dispute the notion that, on balance, the Chinese state is willing to stand up to oligarchical interests for the public more than Western governments are, the idea that it is doing this out of some notion of Asian-inspired “divine kingship” is a bit fatuous, in my view. The state has also instituted a censorious regime in which dissent and competing views are suppressed; surely this is done in the interests of the state itself and the elites, not the common people. In addition, the idea of “divine kingship” evokes religious overtones, and one doesn’t need to use one’s imagination much to appreciate the significance of Mao’s face above the central gate to the Forbidden City and how it fits into this motif. Perhaps it’s my Protestant roots, but I’m a ‘smash all idols’ type of guy and I’d find it hard to compromise on that even for the most velvet-gloved authoritarian.
Is the protection of the state worth the accompanying costs, in this case?
That would be a hard ‘no’ for me. If it means I cling to my inferior Western notions and fight the neoliberal order with inferior tools, then so be it.
Great post, especially this line:
Kryptid: have you formulated a mechanism or philosophy whereby we USians get from where we are toward “organizing the social balance for the public welfare”?
Isn’t that where we are currently stuck? We kinda know what we don’t want, but we don’t know how to get what we do.
I realize that my query is probably totally unfair; the subject’s really a tough nut to crack. But…maybe you’ve put a dent in it. If so… :)
I’ll take a crack at it, although I’ll say this is rather extemporaneous and not something fully sussed out in my mind.
I think the impulse of centralizing power in the state is ultimately rooted in the need for societies to manage scarcity of resources. ‘Scarcity’ in this sense, does not necessarily encompass goods that are publicly scarce, but scarcity as it would be understood and felt by the elites of the state. The modern nation-state uses its monopoly on violence to enforce the will of the elites on the rest of society and the ensure that their slice of the pie stays the same size (at minimum) while the public, which grows at a much faster rate, shares the shrinking pile of leftovers.
So, the state becomes sort of the vertically-integrated mechanism for managing resource scarcity in such a way that the benefits percolate upward in the social/state hierarchy. A ‘strong government’ as portrayed by Hudson not only would have the power to expropriate from the elites in favor of the public, but also the power to expropriate both elites and public for its own benefit, creating a new elite strata over time, which I think Hudson does not sufficiently account for in this piece.
My position is that there are two ways we could deal with this: 1) decentralization of the state, giving people more local autonomy in managing resource scarcity without regard to far-removed elites and their interests, 2) the implementation of sunset clauses on large institutions such that they cannot maintain and concentrate power across multiple human lifetimes.
Both of these methods are incredibly threatening to a consolidation of centralized power, state or otherwise, and the entrenchment of a permanent class of elites, and don’t require violence or revolution (hopefully). 1) restricts the ability of the state to vertically integrate, and thus could ‘flatten’ the social hierarchy and bring the elites ‘down’ to the level of the common people. 2) restricts the ability for power to be passed through institutional mechanisms from elite-to-elite indefinitely and also makes systemic corruption more difficult.
Ultimately, as the state becomes more powerful and more centralized, it serves a narrower and narrower section of elites and subordinates a larger portion of the society to their will. These two mechanisms would undeniably make this centralization more difficult.
I guess to tie this back to Dr. Hudson’s piece, I’d argue that ‘strong government’ is not the answer, and in fact may often be part of the problem. ‘Strong, locally-driven and locally-accountable government’ is maybe how I’d put the finer point on it to encapsulate some of what I’ve stated above.
The above is great stuff but I somewhat agree that there is a dark side to strong, society promoting government and we saw that in the Soviet Union and Stalin. The Russian Revolution pulled Russia out of the Middle Ages but at tremendous human cost. So rulers can be just as corrupt as the grasping aristocrats who surround them. The US Founding Fathers–who were great students of Rome–tried to create a balance of forces with, as we know, uneven results. But they were aware of the problem. That doesn’t mean Milton Friedman etc weren’t snake oil salesmen. The Founders were at least serious if somewhat personally hypocritical in their aims. Friedman and his neoliberals–students of Bernays–were out to pull a fast one.
Like Smith’s “Wealth of Nations”, Gibbon’s “Rise and Fall of the Roman Empire” was published in 1776.
Our founders largely absorbed Gibbon’s hostility to the “communistic” aspects of Christianity and were careful to overwrite those tendencies with Roman property rights, right down to owning people, in the institutions they built.
Propertarianism vs communism and the market as an alternate “invisible hand” deity were the ideas lying on the table at the founding.
Our founders thought that slavery was an evil foisted on them by England or so Jefferson said in the Declaration before the Southerners made them take that out.
But they certainly weren’t what we would call leftists. Current cliches about the founders and the Revolution ignore that it started in New England and the Southerners went along.
It is interesting how people use history for their current agendas. In the “Wealth of Nations,” Smith wrote a fair amount about how the royalty would grant licenses to their friends and ensure that they were well paid for it. Smith wanted and end to such practices and vouched for competitive markets. When the neoliberals grabbed Smith, they railed against governments interfering in free markets and used Smith as a cudgel. The difference is that that Smith was talking about absolutist regimes doling out favors and the neoliberals were talking about democratic governments that were using regulations to protect people and the environment.
Smiths previous book was “A Theory of Moral Sentiments” which grounded his “Wealth of Nations” in a humble, humanist world view.
Gibbon, on the other hand, saw Rome, with it’s propertarianism and economics of plunder, as a “Republican” set of “virtues” “Eastern” Christianity corrupted.
Per Carolinian, I see both ethos as central at the moment of US independence with the North moved by the former and the South the latter. Fifty years later this could clearly be seen in the political chasm between JQ Adams and Calhoun.
The kernel of Hudson’s argument as I see it. As compared to the seat of the West’s new Rome.
One could argue that, like the US in the Hofa era, there is an epidemic of petty graft in China, but industrial, corporate scale graft is nipped in the bud by the strange tendency of Chinese billionaires to fall of cliffs and that sort of thing.
And the Iron Law of Institutions is no doubt at play as China scales its power structure. Still, at present the West is actually, physically committing suicide while China continues to increase both nominal wealth and life span for its citizens.
With regards to authoritarianism, well, you need a government as complex as the technologies you chose to live with. Through the inertia of modernism, the world has “chosen” to live with very complex technologies requiring governing structures adequate to maintain some public good in their deployment. Ours worked okay into the 70s when our Oligarchy took it over, China faces the same challenges going forward in maintaining public benefit in the complexity it lives with. Having watched the advance of Cancel Culture into a coordinated corporate media censorship regime in a nation with the highest violent crime and incarceration rates in the world where one of the two political parties has clearly been taken over by the Surveillance State presiding over an accelerating mortality rate, I hesitate to call others authoritarian while their life span is rising. I understand that’s a weird metric, but it’s a complex world.
Good food for thought. I like what you said here:
My question would be about what those governing structures look like. If it is a clear, concise rule to be followed and is implemented based on public input, then I think it works; but if it requires some enormous bloated technocratic effort, then I think it’s ultimately part of the problem itself, because it will inevitably become captured by and serve elites.
Clear rules including prohibitions of antisocial uses.
Uniform enforcement with graduated harshness according to impacts of the violations. All transparently public.
I think the China he alludes to is the pre-Marxist revolution China. Marx brought a lot of western ideas into China when it was feeble and vulnerable to the new world hegemons.
In prior dynasties, as long as the emperor had the “divine” (not in a religious sense as a westerner steeped in violent monotheist religions might imagine) “mandate of heaven”, when functioning well, tended to to restrain commercial and financial interests growing too big or having too negative impact on the public wheal, or governments ability to function for public good. Occasionally, ossified regimes lost contact with a balanced encouragement of learning and became stultifying.
Science in China, as explored by Joseph Needham, was being done, and say in the 1100s was at least 500 to 700 years ahead of Europe. The magnificent Chinese Treasure fleet visited Italy in 1434. The Chinese freely lent scientifically advanced illustrated books that detailed much of Leonardo de Vinci’s inspirations and seemingly prophetic genius.
An earlier Tong Dynasty had developed a philosophical neo-confucian fusion that injected integration of environmental and social values into the Chinese scientific process. This prevented much of the ecologically and economically ‘value-free’ exploitive tenor of the Enlightenment western research program.
This has led to ineffectual hand-wringing instead of applying brakes on dangerous engineering, i.e., ‘forever chemicals’, radioactive waste and atmospheric CO2 overloading because Aryan influenced Baconian value free science driving rentier oligarchic economic interests all for personal enrichment through a “subjugation of nature” driven project cloaked in claims of freedom and tattered democratic trappings.
Values that might slow roll-outs of the ‘next great thing’, to first confirm it really is great or safe, are rarely applied. Thoughtful deliberation is seen in medical research when humans, not only white humans these days, can be constrained by an Institutional Review Board.
But this is a very limited Precautionary Principle safeguard. Edward Bernay, nephew of Freud, was constrained in turning his uncle’s psychotherapeutic theories into tools of advertising as scientific propaganda, he simply left the university and got rich. His commercial and political clients got even richer. He left a toxic pseudo-science legacy quickly embraced by political economic actors everywhere that continues to sabotage democracy.
Nineteenth century Progressivism launched the FDA and eventually the EPA. These and other post New Deal independent agencies were designed to ensure best scientific industrial practice for the public. They had early successes. That made them targets. They have been largely muzzled by big money and a pro-creditor legal state. Commercial and financial actors also ignore value centered constraints as profits are the only value.
So, yes, our western cultural foundations have few restraints (i.e., class action suits) on the profits-only value economic actors, or the value-free scientific and engineering implementers that enable the technology that drives the economy. Whereas, some of the stronger pre-marxist Chinese governments did maintain control of economic and scientific actors in the interest of some aspects of the public good, until the Paper Tiger years. The best of these Chinese eras at least attempted forward-thinking of complex social and economic consequences, not j
just quarterly profits.
A fine rebuttal. Agree with most of your points.
The ‘inward-turn’ of China and Japan away from the West from 1600-1850, I think, is actually superb evidence that these states were just as interested in preserving elite power at the expense of the public as any other. I would contend their motivation was not the public good, but it was because the technological and theoretical unknowns carried by Europeans were a threat to the established institutions of the day, much like Galileo was a threat to the Catholic Church and its authority.
To use a more modern, non-Chinese example, I would point to the impact of so-called ‘zombie companies’ in Japan. One might argue that the continued existence of these institutions serves the public by maintaining employment, but I would counter that the public and private wealth and energy of Japanese citizens is being used to sustain a revolving door of Japanese elites. And even though Japan is highly westernized, I think it’s uncontroversial to say that their traditional culture significantly informs their way of life even today and that this phenomenon is not of Western origin.
Years ago i ran into this Japanese concept: giri.
It was described as a reciprocal relationship between lord and peasant, where the lord provided security and the peasants provided labor.
Supposedly this relationship was transplanted to the corporations as Japan industrialized, thus producing a management that is reluctant to fire workers.
This is an excellent paragraph:
The impact of this malware on the public is immense, and it constitutes the root of my deep suspicion of Google and Facebook, two of the predominant current resultants of this phenomenon. Main-stream media & consumer market companies are two other more general instances.
Much of our current consumer and political behavior-shaping is accomplished with this toolset, and most of us have no idea it’s happening, or how it works. And it does work.
More discussion on the mechanisms of psychology as applied to social behavior-shaping would be very helpful, IMHO.
Funny thing is that much of the power of Google could have been removed if the net had a billing system akin to the phone networks of old.
Meaning that if you were to go and read an article on NYT, your ISP got billed for the access, and then they in turn would add that to your next internet bill.
Instead we rely on entering credit card information, and those cards have a processing fee that makes it a loss for sites to charge pr article read. So instead they want you to sign up for monthly subscriptions.
I would agree on your point regarding the neo-oriental aspect of Dr. Hudson’s article. Portraying Russia and China as somehow autocratic in a socialist sense is simply non-sense. Sure they have a more dynamic fiscal policies and they crack down on monopolies once in a while, but ultimately the oligarchic elites are pretty much married to the political ones. The social state in a “communist” China is there just in name: you’ve got to have private insurance for healthcare (except basic emergencies), universities (again) have tuition fees, and property rights are usually flexible not for the benefit of individuals of the community but rather government “developmental” policies. In other words, one one hand you have the lack of liberal social freedoms (expression, assembly, etc.) and on the other hand, there’s still a more or less free market married to autocratic “supervision,” which doesn’t really benefit the majority of population.
Biden’s existential struggle is to figure who has a hand up his backside to manipulate him, puppet-style. He can thank Bill Clinton for pivoting to the Wall Street
menaceinfluence, and Barack Obama for doubling down on their cancerous bugsfeatures.
The pivot you mention predates Clinton by at least 20 years.
The Clinton era was simply the point at which we started to consider the possibility that we had been abandoned.
The ‘pivot‘ happened slowly, and then all at once, and by that time, the IDPOL silos were doing a marvelous job of supplying the miss-leadership necessary to assure there was never a chance of effective collective resistance.
And we can’t forget Maggie and Ronald convincing the dims that we were special, and they could be special too, if only they would agree to go along for the ride, and besides,TINA.
That’s a KiloWatt, not just one Watt.
Really nice prose, and lethal accuracy.
Thank you sir.
Obama’s Economic Advisers
Austan Goolsbee: U. of Chicago neoclassicist and “single payer universal health care critic claiming “it doesn’t follow free market principles”
David Cutler: Harvard economist who believes that high health costs are good for the economy
Jeffrey Liebman: another Harvard economist and former Clinton adviser who favors privatizing social security
“Bill Clintons economic advisor Brad Delong, So, he’s saying two things. One, he says–and he says this flat-out–politically, we failed. We were a disaster. Everything we did was a disaster politically. Economically, he says, again, the left’s view of the world is a lot more accurate than ours was. So a number of our policies, presumably, really need to be changed, even just in terms of the economics.”
Obama’s Clintonite advisors electing to grant only tepid funding to some of these measures.
“Treasury Secretary Tim Geithner, chosen precisely for the Wall Street-friendly credentials.
Larry Summers, chair of the National Economic Council, believed too much debt was the country’s economic problem, opposed infrastructure investment, and habitually dialed back proposals based on what he believed could pass Congress. Rahm Emanuel was, well, Rahm Emanuel.
Expanding unemployment compensation was ruled out. Long-term infrastructure projects were rejected, unless they were smaller, “shovel-ready” ones that could “get into the economic bloodstream as quickly as possible.”
Geithner convinced the team the amount of bailout money was nonnegotiable, but the stimulus total was lopped down again and again to the point of just barely being adequate.
They wouldn’t pursue a more ambitious size without “supply-side” measures like tax cuts, and that would make it impossible to balance the budget later on. Besides, a stimulus that was too big “could spook markets or the public.”
Great article. Well-selected by NC, well-done by Dr. Hudson.
This article is important to me because it clearly frames the dichotomy between neoliberalism and socialism*. The closing paragraphs deserve repeating:
Dr. Hudson is advocating for a modulated capitalism, one that is regulated in the broad public’s interest, while using the constructive forces of capitalism to guide and motivate productive behavior.
It seems that China has also identified this key dichotomy, and has organized their society to implement that same “modulation”.
Here in the U.S., our problem is that oligarchy is so well-entrenched as to prevent any emergence of this “modulation”. We are left to fester till crack-up.
I’m not interested in festering. What I want to see happen is emergent behavior, wherein the disenfranchised members** elect to organize their households and their immediate econ surrounds (villages, neighborhoods) to capture for themselves the full fruits of their enterprise.
I continue to think this is quite possible, albeit difficult and slow.
The job is mostly an educational and culture-evolving task; the existing laws and property-rights regime permits grass-roots capitalism, communism (co-ops), and socialism (farmers’ markets supported by the local counties), for example.
The basic behaviors necessary to achieve this bottom-up emergent behavior do exist, and no attempt to stamp them out seems evident. Yet.
For many years now I’ve heard the term “neoliberalism”, and I have struggled to understand what that really means. This article presents as clear and definitive an explanation as I’ve encountered, and the concept is illustrated with plenty of examples through history. That was especially helpful.
Lastly, the phrase “corvée labor” and the term “latifundia” were new to me; I had to look them up. “Latifundia” – what it is and which parts of the world it flourished in (still flourishing in parts) is easy reading and very illustrative.
* The term “socialism” as antithesis to neoliberalism throws me off-trail a bit, because I conflate “socialism” with “public ownership”, and that implies “no private ownership”. I like private ownership and capitalism; they have strong positives.
What I would prefer is a term that says “modulated private behavior” – e.g. regulation to prevent the excesses, like concentration of wealth, that neoliberalism clearly leads to. The key aspect of that neoliberal antithesis seems to be that the public always retains sufficient power to rein in the emergent oligarchic tendencies. Like China did with Jack Ma.
** My working definition of “disenfranchised members” is people that aren’t leading or party to (benefiting from) the principle wealth-extraction / rent-seeking mechanisms. Here in the U.S. they include defense, education, ag, energy, finance, health-care, and others. Whole sectors, optimized not for performance, but for rent-seeking! If you’re not attached to one of those feeder-stations, then you’re a “disenfranchised” in my book.
Yes, that is over-simplified, and if you’ve got a better definition, please share it.
I’d like to correct myself, if I may.
The alternative to neoliberalism that Dr. Hudson seems to advocate for has two main components:
a. Allocation of resources to sector or strategy, and to econ-player. Econ priorities and participant-selection
b. Regulation of private-enterprise excess: “modulation”.
So Dr. Hudson’s alternative isn’t just “modulation”. It’s also “navigation” – the “what to do” and the player-selection, the “by whom”. That’s an important difference, and a very big expansion of scope.
Sounds like what you describe is the Nordic model, before the neolib generation got control of things.
Digi_owl: Tks for pointer. Yes, what I’m advocating is certainly a lot like the Nordic Model.
Lot to like there. In my quick read, one of the probs of the Nordic model, as in most societies, is that the social services are tax-funded, and that means the populace needs to keep the econ engines going. Society members need to be capturing the bennies of their productivity. Unions, local-buy-loyalty, etc. need to keep directing wealth to the leaves of the tree, not just the trunk (oligarchs, big scale ops, etc.)
And that’s one key place where U.S. econ wheels fell off. Automation and more recently outsourcing deprived many of the leaves of the tree their nourishment (wealth capture). We fed the tree stim-sugar and debt for a while, and that worked great except its just not sustainable until we figure out how to effectively tax the daylights out of the oligarchs, et. al. Dim chance of that succeeding in the short run.
So to implement the Nordic Model here in the U.S., we’d need:
a. Product lines which are defensible from the oligarchs. That’s major heavy-lifting, and it ain’t getting done right now. Those local products would also have to enjoy major loyalty from local communities, and that’s not generally available yet. See Walmart: buy there because it’s cheaper, knowing full well you sign the death-warrant for your Main Street.
b. New culture emphasizing and rewarding local entrepreneurship. That’s going to take a major overhaul of info-comm-channel. Some of that is, actually, happening. Ex: PBS is really into “create TV” – all manner of hobby DIY stuff. Not so much on the entrepreneurship bent, but the culture of “creating” … seems to be the cool thing to do. I say that’s way good.
So, I see some signs of life, it’s just not got critical mass.
And that’s why I said the main challenges are education and culture-shift. I don’t think there are any insurmountable technical problems; local can be engineered to be pretty competitive on many product-lines with global/national (oligarchic) supply chains.
What it needs is a big influx of new designed-for-local components to get built (local-scale-directed tech innovations). The cost advantages of centralized production need to be chipped-away at by innovations that increase distributed-production efficiencies, and eliminate or reduce marketing costs (packaging, distribution, promotion, retailing), which often comprise the bulk of the delivered-cost to the consumer. “Local” has some important advantages w/r/t marketing costs that can be better-exploited. If we ever got to the “circular” economy – re-use and all that – local would win the game hands-down.
Why do I favor “re-use”? Because it’s a winner for local. Feeds the leaves of the tree.
Moving toward the Nordic Model, or a derivative can be done, but it’s not a focus yet.
The forever problem of humanity is that we take the present state of things, and project it into the future. So much of the foundation was laid down back during the post-war baby boom, projecting a future population growth that would more than cover the expenses.
This kind of simplistic projection is a trap that i keep observing the stock markets and like fall into time and time again.
Nordic model, with perhaps Yugoslav model. Our tour guide forty years ago repeatedly said her country had a mixed, not a communist, economy: that it was the government’s responsibility to provide for security, education, health care, utilities etc and that citizens were free to start and run private businesses. Shops and restaurants were like those elsewhere in Europe. Of course, she worked for the state, and there was Tito…
“It is very clear that President Clinton lied to justify the bombing of Serbia. It is also clear that he is guilty of war crimes. He and other NATO leaders inflicted great suffering and destruction on the Serbian people because their leaders were attempting to preserve the Federal Republic of Yugoslavia. The Serbs were by no means innocent of atrocities but neither were the KLA. The greatest perpetrators of atrocities in Yugoslavia were the NATO leaders.
The bombing of Serbia and human rights violations are impeachable offenses. It says something about American political culture that when a president gets impeached it’s for a lie of little consequence compared to the death he wrought.
President Clinton lied about the atrocities of the Serbs and the targeting in Serbia to justify an intervention whose real purpose was to dismantle a country which refused to cooperate with the U.S. and other Western powers.”
Tom, I wrote my long comment in response to your reply above, and only just read this after.
It heartens me to see that we are of a similar mind on this issue. I think that’s good news for your ‘slow and steady’ approach to changing this over time.
Kriptid: thanks for taking time to reply above, and indeed I’m heartened also to hear and think about what you’ve said.
I’d like to reiterate the point you made above about having some caution about investing too much power in central gov’t, especially to your point about the government’s main function being to preserve the existing social order, and how that process tends to extreme concentration over time. I think that succinctly describes the recurrent problem of civilizations losing their mojo over time.
It also explains why its so devilishly difficult for new social-order housekeeping. Almost any biological food-web you can point to needs predator pressure to keep it in balance, and our branch of the biological tree’s no different. But few organisms self-regulate, do they?
I occasionally raise the question, in the context of social-order (econ) renewal, of “where’s the agency?” Who actually has the motivation and the capacity to effect change? I also frequently assert that “it’s not gonna come top-down”, and you explained well in your piece above why that’s the case: the system exists to preserve the elite’s place in the order, and they have absolutely no motivation at all to institute systemic change. The most change you can expect from them is for them to grab more pie from someone else. That’s it.
I believe the answer to the “who’s got agency” question is centered on the household and local village/neighborhood. There is plenty of agency there. The downside, of course, is that at the moment there’s insufficient coherent organization among all those parts. Each one of them is struggling to change the social order individually, e.g. all by themselves. I call that “digging a mountain with a teaspoon”.
They have agency, but few tools, and maybe not the best grasp on what their interests are and how to pursue those interests.
Hence my remark above about Bernays and the social-order maintenance tools in play top-down.
We come here to NC precisely because we’re trying to escape the Bernays trap. We’re here to learn what our interests truly are, to perfect our situational awareness, and maybe to learn a little about what to do about it if things don’t work quite as well as we’d like.
Much thanks to NC for printing Hudson’s multilayered, compressed and dense view of history and how it has led to the present deteriorating situation.
The long history of civilization is a sequence of finding solutions for needs. And counterfeit solutions. And recently with materialism, consumerism and and tons of leverage we also have counterfeit needs. So we’ve turned it on its head by creating the needs that only more money can resolve. My question is, How did money emerge as a token of wealth? I can see how it became a token of credit and exchange, even of accounting, but I can’t see how it managed to transform itself from token to wealth. It can’t all be the extortionate effects of centuries of theft by compound interest – that’s almost meaningless. But there’s something about the basic human instinct to hoard that lends credibility to money being wealth. “If all hell breaks loose, at least I’ll have my stash of coins.” Oh, great. If all hell breaks loose we’ll be back to square one, relying on each other. If some hapless shred of neoliberalism survives, the government will rely on private investors, the private investors will rely on the synergies in society, and society will rely on the government – in a balanced world. So private money, and it’s henchman Debt, might have painted itself into an embarrassing corner.
“Public vs. Private Origins of Money”
It often seems to me that these two opposing narratives about the origins of money mirror one another. Any sense of politics is absent in the barter account where the state is completely missing but in the Public Origins account it is largely assumed that the state is fully formed. and money is whatever one is forced to pay in taxes.
It more and more strikes me that money is not just a derivative of political power but is also inherently a source of power and maybe is a much more ambivalent political project, that is not reducible to either trade or taxes.
Perhaps Hudson needs to introduce more specifically into his fascinating historical discussion more questions about the issue of democratic governance and modern money.
I also would be curious about Dr Hudson’s view about the question of money. Specifically, comparing the viewpoint of those that think the creation of money as debt, by private entities(as we have now in the US); where the federal reserve on one end is a consortium of private banks ,carrying out the functions of a public charge. While on the other end, most of the money created in the US is created by private banks(and other credit creating institutions),as loans. Which means a person,or group are making the decision to make money, based on expectations of profit. Not in any way connected to any “greater good”….
the viewpoint of “public money”, where money SHOULD be created ONLY by gov’t fiat, as would be the result of passage of the NEED act HR 2990 112th congress, which was a bill proposed in 2011, to end the federal reserve act, and end the banks ability to create money by making loans.
This new “fed” would be rolled into the treasury, while all debts will be paid in full as they come due with US dollars. Fully backed by the US gov’t. With no debt.
There would still be a monetary authority to keep the elastic currency stable, as in what is best for “the greater good”.
After an act such as the need act were passed, then the misconception of MMT, where money can be created for good useful purposes, could be true.
This seems to be the point he seems to say often, when he points out china is keeping their central bank, away from the oligarchs, and is engaging in industrial capitalism.i.e. they are doing it.
while alluding to the fact that “other” nations let their money be made by private interests, and have relinquished control of their economy to wall street monied interests.
While it seems like a contentious issue for some, I don’t see why it should be, and would be curious to hear where someone with the depth of knowledge of the facts, factors and actors.. on all sides, comes in on this issue.
some people, myself included ; really do think Monetary reform should be one of the top priorities for the people of this country. It is the road on which other top priorities can be reached. Like no other. then comes universal healthcare, political reforms, environmental realignments, energy, etc.
My understanding from reading Hudson’s books and monographs is that what I think you are calling “money” emerges from the ledgers kept in the Palace/Temple complexes of the near East city-states and empires of the Bronze Age. The underlying commodity was grain and the ledgers (which predate and are a precursor of writing) were records of measures of grain to be paid on the threshing floor during harvest time.
Weights of silver were used initially only for merchant exchange and external trade (to the extent that the latter wasn’t simple barter between states).
All of which is to say that debt (and debt records) predates money, a fact which is difficult to grasp for people such as ourselves for whom money has always been with us and which we first encounter as a physical object (as coins or notes) rather than as a sophisticated and highly flexible form of corvee labour — a “network” rather than a “thing.” This notion that money is a thing rather than a network of obligations then leads to all manner of pernicious misunderstandings as to its origins, purpose and operations.
Does anybody know if money was invented independently by several civilizations, like writing? (Not big stones like the Yap, or cowrie shells, or whatever but at scale.)
I think per eg comment and I do agree in general is that accountancy through the notation of goods via clay tags and the reconciliation to satisfy a contract and through that process money tokens sprang forth haphazardly and always a product of the city/nation state because laws e.g. laws are the foundation to contracts.
Per se so much religion that does not get talked about is all about property laws …. and who grants them.
To my knowledge, coinage appears to have been invented independently in the Near East and China. The first mints in the Near East appear in the roughly the 7th century BCE in Anatolia, and in China around roughly the same time.
But I suppose the answer is ultimately determined by how you define money: is ‘money’ simply something used in common by people for everyday commerce that is valued only as a medium of exchange and without any formal enforcement mechanism, or does ‘money’ not become money until it has an enforcement arm, i.e., the support of the state, and takes a recognizable, physical form, i.e. coinage? I tend to favor the first definition, and thus consider ‘money’ to likely be older than even the earliest written records (and thus the origins of money are ultimately unknowable and can only be surmised), but if you favor the latter definition, there might be a better answer.
Yet coinage is not synonymous with money see jade in South America.
Yeah it seems to be a far hairier concept to untangle than economists pretend.
Going by memory i think Graeber’s book makes the claim that barter only really happened between unknowns. An example used was of two wandering tribes of aboriginals meeting, and while the men were off having a “dance off” the women would engage in barter.
Another take i have seen, not sure if it was Graeber, Hudson, or someone else, is that coin was initially used as symbolic offerings in temples. This via the kind of money lenders that Jesus so famously drove out. So you brought a lamb or bushel to the lender, he would provide you some coins, and you would leave those coins at the altar as part of the prayer.
My personal, layman’s, take is that they may also have started as weights. Meaning that merchants used scales to agree on the exchange. That needed weights certified by some regional power. Then over time the number of weights produced, and their reliability as a measure gets well known, it becomes easier for many small purchases to simply pass the weights around without measuring them.
Supposedly the most common coin used in Rome was not gold or silver, but simple copper. Silver in particular was instead used for eastern trade, with Roman coins making it all the way to Japan (found inside a temple wall there in recent years!). This because European mountains had a fair bit of it in easy reach, while it was far rarer in China.
It is a mistake to think of “neoliberalism” and “socialism” as distinct and oppositional terms. Certinly “socialism” as a political idea comes in a variety of flavours, while “neolibralism” is a reasonably strictly economic term that argues for a minimally (if at all) regulated market idea.
It might be a good idea to develop a Devil’s Dictionary of all these terms.
Dr. Hudson wrote: “Rome did not survive by instituting what has become the distinguishing feature of Western Civilization: giving control of government and its lawmaking to a wealthy creditor class monopolizing the land and property.”
This sounds very strange. What was the Roman Senate–quite explicitly–but a wealthy creditor (landowning, rent-receiving) class claiming decisive control over the government though sometimes in rivalry with members of the other wealthy creditor class, the “Equites?” Even in the late Republic and Imperial epochs, as reforming politicians like Caesar and Saturninus or reforming emperors like Nero and Julian found out to their cost, the power of the Senatorial class (whether Christianized or not) remained supreme.
In addition, why such admiration for ancient Monarchical/Temple state regimes? Haven’t we seen, in the Bible, how through debt-bondage Joseph and “Pharaoh” enslaved “all the Egyptians?” and haven’t we seen (in the Books of Kings and Chronicles) how the popular revolution of the Israelite small-holders led by Jeroboam made a clean sweep of the Solomonic Monarchical/Temple establishment?
I think Hudson means that Rome collapsed for precisely the reason you give — that it was run not with an eye to the well-being of the populace, but rather the oligarchs of the Senate. The failure to institute periodic “clean slate” debt cancellations prevented the renewal which was a feature of the Bronze Age civilizations of the near East.
Thanks for this great post. I see so many examples in today’s neoliberal order. It’s astonishing something so apparent (to me, at least) can be disguised so thoroughly by the MSM as the inevitable path of ‘progress.’
Professor Hudson is a good writer. He writes clearly and simply. I also like his use of examples in explanations. I only wish that he and other economic writers and economists would stop trying to sell the idea that there is a Nobel Prize for Economics.
I can forward to anyone that asks a picture of both the certificate and medal awarded to the winners of the Swedish Central Bank (the Swedish “Fed”) prize in economics. The phrase “Nobel Prize” does not appear, but the the Swedish version of “Swedish Royal Bank etc.” does. This prize was created in 1967 by the Bank and awarded first in 1968. The prize money is comes from the Bank and has no relationship to the Nobel Prizes awared from the fortune of Alfred Nobel.
The conditions for the real Nobel Prize are vastly different in character than the conditions of the Swedich Central Bank prize. Among other things the SCB prize has been awarded to a mathematician (not possible for NP) and the brilliant (psychologist ?) Daniel Kahneman. I suppose that economists won’t ‘fess up as they enjoy basking in the glow of supposedly being NP winners.
Reference: The Nobel Factor Gabriel Söderberg and Avner Offer, Princeton Univ Press, 2016.
I am not aware that Hudson has ever been complicit in this misrepresentation by the mainstream/orthodox economists you otherwise accurately describe.
“An economic Nobel Prize was awarded to Douglass North for claiming that economic progress today and indeed throughout all history has been based on the “security of contracts” and property rights. “ is written in the 17th paragraph from the end. (My count may be off by 1 or 2. I apologize.)
It surprised me, too.
Then in Wikipedia:
He was the co-recipient (with Robert William Fogel) of the 1993 Nobel Memorial Prize in Economic Sciences. In the words of the Nobel Committee, North and Fogel “renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change.”
The mind is its own place. You can get excited about whatever you want.
No matter where one’s mind is, there is no “Nobel Prize” in economics. It doesn’t exist.
Reference follows, and there are many more besides the book mentioned earlier.
There is no Nobel Prize in Economics
12:00 AM, October 22, 2020 / LAST MODIFIED: 12:38 AM, October 22, 2020
Let’s debunk a myth. There is no “Nobel Prize in Economics”. On Nov 27, 1895, when Alfred Nobel signed his will, he left five prizes in alphabetical order to: chemistry, literature, peace, physics, and physiology or medicine. The Nobel Prize in Economics is declared after the Panchapandavas above.
It’s the most anticipated one. And yet it doesn’t exist.
In 1968, the central bank of Sweden, Sveriges Riksbank, the oldest central bank in the world, decided to celebrate its 300th birthday. The bank pledged a donation to the Nobel Foundation to award a prize in memory of Alfred Nobel. It was officially christened “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”, and popularly as the “Nobel Memorial Prize in Economic Sciences”. The first prize was awarded in 1969 to Ragnar Frisch of Norway and Jan Tinbergen of the Netherlands.
Sveriges Riksbank pledged to match the prize money of the original Nobels, and bear all administrative expenses. The prize would be administered by the Nobel Foundation. However, the bank kept one card up their sleeves. The Royal Swedish Academy of Sciences (RSAS) would administer who is the winner. This is where our story starts.
Michael Hudson mentions Hammurabi only once here, but does so many times in “…and forgive them their debts”
I believe there is a statue of Hammurabi somewhere in the U.S. Capitol which celebrates him for being an early law giver. But his image relates nothing about him being an early debt forgiver. His Wikipedia entry does not contain any of the following words: debt, forgive, slate or jubilee. It would seem he has been cancelled.
However, we still have the Liberty Bell inscription from Leviticus 25:10 which proclaims liberty throughout the land, where liberty means freedom from debt.
What is the distance between the new deal regulations that made banking a middle class job, and simply socializing credit. What difference does it make if low level bureaucrat who authorizes your loan works for the Post Office, instead of Chase?
But if we really socialize credit, is it still capitalism?
I don’t feel that debt jubilees will save capitalism from itself. Capitalism is too destructive to be saved. It will collapse eventually, as it must. How the collapse ultimately unfolds and what replaces capitalism remains to be seen. May we all live in interesting times.
Which Capitalism is it that you speak of – ????? – its not a monolith IMO.
The same is true in China. Its earliest extended narrative text, the Book of Documents / Classics of History / 书经 or 尚书 (written and compiled over approximately the same centuries as the Hebrew Bible / Christian “Old Testament”, but blessedly godless and priestless) recounts its cultural hero Sage Kings taking the equitable apportionment and taxation of land as one of their highest duties. Sumptuary codes were also strictly placed on the hierarchy of nobles, limiting the amount of wealth they could accumulate and/or display. Most beautifully, merchants were placed below farmers and artisans in the social hierarchy. They were allowed to devote themselves to buying low and selling dear, but were looked down upon by “upright” classes.
I was amused to learn that my great great ancestors living in Connecticut in the mid 1700s were “Yankee Peddlers” for half of the year. At least those who were not farmers. They worked in the forge in the winter making everything from clocks to needles and nails and when the weather was breaking into spring they headed out for a southern circuit through the Carolinas and then back up in time to make more trinkets for the next season. They took the surplus down to the rural southern colonies where those manufactured items were rare and prized and got a good price for them. And all by foot and handcart of course as none of them could afford a horse. Needless to say, capitalism ain’t what it usta be.
Michael Hudson is a God That Walks The Planet !!!!!!