Michael Hudson Answers Questions on Europe’s Self-Immolation, Fed’s Malpractice, Changing World Order

Yves here. We trust you’ll enjoy this wide-ranging but compact interview with Michael Hudson on Lebanon’s Almayadeen TV. The topics include Europe’s de-industrialization, the Fed fighting the wrong war and hurting innocent bystanders, the rise of new power blocs, and debt.

Questions from Almayadeen TV, Lebanon by Mohammad Itmaizeh

1 – In light of the conditions that Europe is experiencing, in terms of high energy prices and the repercussions on the industrial sector, like the closure of factories and the high cost of production. In your opinion do European countries have the capacity and resources to prevent industrial investments from “escaping”? Especially since the US plans in general to restore industry to its lands, thus, it may represent an opportunity to lure European industries to move to there and take advantage of cheap energy prices. This shift will have wide repercussions on Europe’s productive capacities and competitiveness, as well as on its trade balance. So, what happens to the position of Europe in the global economic system? Will it remain part of the capitalist center or deviate from it?

MH: The wording of your question basically answers iself. The European political leaders are unwilling to resist U.S. demands. All they can do is complain at their mistreatment. That has led to a split between German and other European businessmen and the European political parties.

See for instance Politico, November 24, 2022: Europe accuses US of profiting from war.

Biden’s green subsidies and taxes that Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down. … the price Europeans pay is almost four times as high as the same fuel costs in America. Then there’s the likely surge in orders for American-made military kit as European armies run short after sending weapons to Ukraine.

But even businesses are surrendering, and planning to move to the United States and become American companies. “Businesses are planning new investments in the U.S. or even relocating their existing businesses away from Europe to American factories. Just this week, chemical multinational Solvay announced it is choosing the U.S. over Europe for new investments.”

For a scenario of the resulting depopulation and deindustrialization of Europe, see the mass exodus of people from Latvia, estnia and Lithuania since 1991. The alternative is to move to Russia or China, which produce energy – and also arms – at much lower cost than the United States.

The problem is that Europe cannot withdraw from NATO without dissolving the European Union, which commits military policy to NATO and hence to an immense balance-of-payments drain to purchase high-priced U.S. arms as well as other necessities. If the question is how long Germany and Europe can put political and military loyalty to the United States over their own economic prosperity and employment, the answer by the Greens is that “shock therapy” will help make Europe greener.

At first glance that is right as heavy industry is shut down. But it seems that Europe’s fuel of the future is coal and cutting down its forests.

The US Federal Reserve is pursuing policies that lead to internal and external results:

2- At the domestic level: If the source of inflation is supply and not demand, then what is the purpose of raising interest rates, especially since the US Federal Reserve is aware, as stated by many of its officials, that its measures will lead to an economic recession. Why insist on such measures even though they did not save the US economy from  further increase in inflation rates?

MH: Blaming today’s price inflation on workers earning too much is simply an excuse to impose a new class war against labor. It is obvious that wage levels did not force up prices for oil, gas, fertilizer and grain. These price rises are the result of U.S. sanctions. But the central claim of today’s neoliberal economic orthodoxy is that all problems are caused by labor being too greedy, and putting its own living standards above the ideal of creating a wealthy rentier class to lord it over them.

The aim of  cutting back credit is to reduce employment by bringing on a new recession, there by rolling wages back – and also making working conditions  much harsher, blocking labor unionization, and cutting back public programs on social spending. The economy is to be Thatcherized – all by riding the crest of the American anti-Russian sanctions and claiming that this creates a crisis requiring dismantling of public infrastructure and its privatization and financialization.

3- On the external level: raising interest rates has sparked many crises around the world. It was not only the “developing” countries or the countries of the global South that were affected by the repercussions of interest rates hikes, such as high costs of debt and decrease in investment and savings, but it was also reflected in Europe (Britain included), and it appears that American monetary policies do not care about what happens outside the territory of the United States. While in 2008, for example, the US Federal Reserve was forced to open credit lines to save countries such as Japan from the collapse caused by the global financial crisis that originally originated in America. Is this the same pattern that America imposes/will impose today? Or will it proceed with no regard for what will happen around the world?

MH: The United States does indeed care about what happens outside of the United States. That is the essence of imperialism: You take care to conquer other counries economically, financially and technologically, making them dependent on yourself so that you can charge monopoly prices and siphon off their economic surplus for your own financial and corporate elites.

The aim of U.S. unilateral diplomacy is to stablish trade, monetary and military dependency. That is how politicians “care” about what foreign countries are doing – and why the U.S. meddles so much in their political processes.

4- After the Russian-Ukrainian war, features of the formation of economic blocs between countries apart from the Western bloc. emerged. The blocs that had previously formed, became stronger due to the new reality resulting from this war, such as the agreements between Russia and China, Russia and India, and between Iran and Russia, and Iran and China. Even the behavior of some of the “BRICS” countries, that are close to the West, was not hostile towards Russia . It seems that the aim of these blocs is to be against the Western empire led by the United States, does this imply that we are witnessing a reshape of the economic globalization? And why has this not happened before now?

MH: U.S. sanctions and military confrontation are driving other countries to defend themselves by creating alternatives to the US dollar and also to dependency on U.S. suppliers for food, energy and critical technology so that they can avoid being “sanctioned” to force them into compliance with U.S. dictates.

This break did not occur before because it was not urgent. Is has been the U.S. sanctions and threat that the US/NATO war against Russia will persist much longer than Ukraine. It is ultimately a drive against China, and President Biden has said that this will take twenty years or so. For Americans, the threat of losing their ability to control the economic policy of other nations is a threat to what they view as civilization itself. The clash of civilization is between U.S. attempts to create a neo-rentier, neofeudal world order, and one of mutual gain and prosperity. As Rosa Luxemburg put matters a century ago, the clash is between barbarism and socialism.

5- In recent decades, the world has witnessed a significant rise in debt, whether it is household debt or sovereign debt, where does this end? Will debt continue to rise infinitely or will things reach a global debt crisis? And if that happens, what are the consequences on the shape of the global financial system?

MH: The exponential mathematics of interest-bearing debt makes debt crises inevitable. That has been the case for thousands of years. The expansion path of debt is more rapid than that of the underlying “real” economy.

At some point, either debts will have to be wiped out – annulled – or countries will fall into debt peonage to the creditor powers, just as within creditor nations the economy is polarizing between the creditor One Percent and the increasingly indebted 99 Percent.

I explain these dynamis in “The Destiny of Civilization,” as well as in “Killing the Host.”

The global system will need to move beyond reliance on the US dollar, and turn national banking and credit systems into public utilities. That is the only way that governments can write down debt – mainly, debt owed to themselves – without inciting a political and even violent fight against their moves to free the economy from its debt overhead.


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  1. The Rev Kev

    ‘The aim of cutting back credit is to reduce employment by bringing on a new recession, there by rolling wages back – and also making working conditions much harsher, blocking labor unionization, and cutting back public programs on social spending. The economy is to be Thatcherized – all by riding the crest of the American anti-Russian sanctions and claiming that this creates a crisis requiring dismantling of public infrastructure and its privatization and financialization.’

    I think that it is a given that the unipolar world is now history and is not coming back. And as the US has selected both Russia and China as enemies, that is a crisis of their own making. But the response in that paragraph to the challenges faced by America in this new era is just nuts. Deciding what America really needs at the moment is a new Recession will be spectacular own goal.

    Say, does anybody remember that time back in the 40s when America found itself in a fight for its life against Nazi Germany, Imperial Japan and Fascist Italy and how FDR decided that the best thing he could do in response was to dismantle public infrastructure, privatize it and then employ financialization of what was left as their best way forward? No, me neither.

      1. digi_owl

        There were latent elements of that back then as well, if nothing else because the monied saw fascism as preferable to communism.

    1. Mikel

      After some thought, I’ve begun to see why some Euro companies would relocate to the USA. At frist, I thought the high cost of living for workers would ultimately undermine the anti-union, cheap energy benefits.
      But I was totally forgetting the USA’s tolerance for child labor and its prison-industrustrial complex of institutionalized slavery.

      1. Mark Gisleson

        Signs are that we’re about to move into an era of fanatical copyright enforcement. ZLibrary is just the beginning. Deep State has always known where every pirate site is (as evidenced by the sheer volume of pro-Ukrainian propaganda being uploaded/shoveled on top sites this past year).

        Given the extraordinary fines for copyright violation/piracy, I could see the courts OK cities and states using copyright violators to do weekend shifts in factories as a form of public service. Given how serially the courts have undermined labor laws and the Constitution, I think this could be done using existing laws. Each song represents a potential fine of $20,000. Multiply your average personal music library by $20,000 a pop and pretty soon you’re talking real money/insurmountable debt.

        Other than Kim Dotcom and ISP operators, the copyright crowd hasn’t really gone after individual users, cherrypicking the cases and using cutouts to test the law. After the authoritarianism has been ramped up, what better way to keep the Zoomers in line than crushing them with multi-million dollar fines? Plus the sweet irony of being fined for having unauthorized digital copies of Philip K. Dick books on your hard drive or in your cloud!!!

        1. Mikel

          They aren’t trying to make artists any money. Big corps aren’t the only ones with copyrights.

          More bang for the buck in bringing back debtors prison.

    2. Karl

      Deciding what America really needs at the moment is a new Recession will be spectacular own goal.

      I agree. “Own goal” here would mean a mistake that inflicts self-injury in the global arena. MH sees all of this playing out according to a plan with this logic:

      The aim of U.S. unilateral diplomacy is to establish trade, monetary and military dependency…. The clash of civilization is between U.S. attempts to create a neo-rentier, neofeudal world order, and one of mutual gain and prosperity.

      Maybe there is a macro logic to what’s going on (as in the quote above), but our (US’s) steps along the way — e.g. the “fog of the great game” — seem to be a series of micro-“own goals” (of which Ukraine is just the latest).

      Where I may disagree with MH is the seeming intentionality of the US seeking dependencies around the world for US advantage. Is this a well-formulated intention on the part of the deep state? We know that neocons do have a long term quest for “full spectrum” dominance around the world. But does that mean turning once-strong allies (EU) into weak dependencies? Is our leadership that consciously malignant, unconsciously malignant, or just stupid?

      Consider Hanlan’s Razor:

      “Never attribute to malice that which is adequately explained by stupidity.”

      I don’t know which explanation of our predicament is scarier: that the US’s leadership is that pervasive in its blindness and stupidity or that it is continually doubling down on malignancy (consciously or unconsciously).

      Like Britain’s loss of empire after WW II, is the neo-liberal “great game” about to come to an end? Have the fruits of globalized neoliberalism (e.g. as manifested in fair trade/WTO rules) turned so utterly rotten for the West? Can’t we peacefully compete with China and other countries on a level playing field?

      Lots of questions, no answers. But clearly the current logic of the West is tangled and unsustainable, perhaps as it was for Britain after WW II…?

      If so, this means, to me, that something is about to break. Was WW II the necessary cataclysm to force the changes that needed to be made after it ended? If so, the world may be in for a heap of conflict ahead.

      1. Scylla

        The destructive policy decisions are too consistent to be chalked up to stupidity. If we were dealing with stupidity, we would expect a more normal distribution, where a major fraction of the policies would turn out to be beneficial by sheer chance, but we see far too much destruction that harms the lower classes and enrich the upper classes. The only conclusion that can be drawn is that this is all deliberate.

          1. DanB

            I would add that the foundational concept and meaning of public health no longer exists in the federal government. To the elite of both parties public health is about poor people going for STD tests; therefore, overall, public health is a lower class phenomenon from which political/economic elites feel immune because they have personal physicians. As someone who worked for several years at a School of Public Health, the massive resignations, retirements, and other forms of decampment from public health in the wake of Covid is not surprising.

  2. Patrick Donnelly

    One way to reduce banking power with boom and bust cycles is to tax land so that it is essentially free to purchase. It belongs to the people of the nation occupying it, after all. Increasing the tax is not just a revenue raiser. It means that lending is then mostly for investment or housing alone, not the land.

    The UN was forged after WWII and supposedly guarantees housing as a right. This is more likely to be fulfilled if land is cheaper.

    Inflation is a far larger and socially damaging tax.

    1. Cristobal

      Patrick, Exactly how does that work? Can you give an example? I have heard this many times but cannot understand.

    2. Objective Ace

      It means that lending is then mostly for investment or housing alone, not the land.

      This is already generally the case unless your talking about rural getaways on 100+ acreas. In cities and suburbs land costs are generally around 1/4 or less the cost of a build. If the cost of land starts getting much more expensive–higher density buildings are built. For condo or apartment buildings in even the most expensive cities–the land will fetch 5 or 10 million while the build can cost 100+ million

      Theres room to increase the tax on land slightly, but thats not going to change the final outcome much. You’d just lower the market cost of vacant land, not the market cost of a house on land

  3. El Slobbo

    “Europe cannot withdraw from NATO without dissolving the European Union”

    Is this is a legal requirement or Dr. Hudson stating a defacto state of affairs? There are six EU countries that are not officially a part of NATO.

    1. digi_owl

      Latter, as he clarifies further on.

      EU, for all its pretense of being a pan-European government, has no unified foreign or military policy.

      At best they would need to basically oust USA from NATO (keep in mind that while the civilian leadership is chosen among the European members, the chief military commander is always a Pentagon general), and then adopt what remains as the the EU army.

      EU is in much the same situation as USA was before the civil war, where states were overtly ignoring DC.

  4. Stephen

    A very informative interview with a lot said in a few words.

    Am currently reading “The Destiny of Civilization”. It is excellent and does help to explain a lot of our current situation.

    Also reminded me of many economic / historical topics such as economic rent, unearned income and social costs that I learned about in my youth but which are rarely part of our political and corporate discourse today. Or if they are; then they are often presented as good thing with different language!

  5. Insouciant Iowan

    A discussion involving M. Hudson and J. Mearsheimer would be very illuminating. Their approaches seem complementary.

  6. Oh

    The global system will need to move beyond reliance on the US dollar, and turn national banking and credit systems into public utilities.

    This is the right advice to the other countries. Unfortunately, many of the countries, e.g. India are getting deeper into trade with the US which will make them more reliant on the USD.

    1. Bakunin17

      India is doing what countries have always done, play the double game. Just sit in a position between both blocks to get maximum advantage.

      The BRICS block will not replace the dollar so much as create an alternative and system alongside it for now for its own survival.

  7. Mikel

    I’m still looking for more signs of decoupling in academia between China and the USA.
    What’s the situation there?

  8. Kana

    Most people see the European elite and American elite as competitors, and some are, but many are part and parcel of a global elite class who only make plans for their social group:

    Many people are perplexed at why European leaders are going along with the sanctions against Russia since it causes so much blowback on their own economies. Not only are there going to be shortages of many essential commodities Russia usually provides, but also much higher prices which can bring entire industries to a slowdown or even halt.

    The truth is that Europe is under the same type of exploitative domination by an upper-class elite social group of financiers who have been intermarrying and are interconnected with American elite society since the late 19th century. They do not make their business plans for the benefit of America or Germany, England or France, Italy or Greece. Their plans are to benefit their social class. An elite family with a lot of sway over various German corporations is often related to similar families all over Europe and America. Their business agenda is to safeguard their interrelated class priorities over national priorities.

    It’s just like how even though most organized crime groups are based on a shared ethnicity or nationality, their business model is to exploit and harm the people of their home countries or ethnic groups. Their strongest loyalty is to fellow criminals regardless of where they are from rather than a country or ethnic group. Gangs from all over the world work together to make money from crime and have more loyalty to each other then they do to people of their own ethnicity or nation. The upper-class power elites in America, Europe, etc., are similar to organized crime groups from around the world who join forces because they have a shared interest in corrupting governments and law enforcement to increase their power and wealth.

    I see many people speculating that European elites have been bribed or threatened to go along with America on Russian sanctions since they are so damaging to European businesses and economies. That isn’t necessary, they are friends and family, and they plan these big moves and agree on them in private settings or corporate boardrooms before they then clue-in the big politicians and powerful business people not in their social class. That is what the famous forums like The Bilderberg meetings, The Aspen Institute meetings, The World Economic Forum at Davos, The Trilateral Commission meetings, and many others are for, to tell the politicians and business people not in their social group what to do.

    From The Power Elite Says The Quiet Part Out Loud

  9. flora

    Thanks for this post. A bit hard for me to follow the layout of the transcript with its question and answer 1.2.3 format, but I think I got the general ideas, or the gist of it.

    That said, from this interview I have the impression that western EU is sadly only a suzerainty of the US and the anglo 5-Eyes associaton or consortium as it’s called. My 2 cents.

    1. HotFlash

      And some of the 5-Eyes are more equal than others. Canada is definitely a (very) junior partner — they pretend it was b/c we had a Russian mole (maybe) back in the 50s-60s, but the Big Boys have had a few themselves. Australia and NZ are simply convenient listening posts in the Pacific. After all, USA USA helped to coup Gough Whitlam. Very few people ever knew about that, and fewer still remember.

      1. eg

        Canada is the remora of empires, having slithered off the dying carcass of the British to affix itself to the American …

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