Russia Leaves Neoliberal West to Join World Majority

Yves here. As many of you know, despite being willing to give economists with a broad range of views a hearing, Putin’s approach to the economy has been pretty neoliberal, particularly in hewing to strict budget orthodoxy. The latter was arguably necessary when Russia had a chronically weak currency and a dollarized financial system. But the absence of any bank collapses during the shock and awe economic sanctions showed that, unlike the 1990s, Russian banks no longer made use of foreign currency financing.

However, consider this section of a 2006 Brookings paper on Putin’s economics dissertation, which received an award equivalent to a PhD:

There’s one important aspect of Putin’s learning process that has become the leitmotif of stories about his childhood but is rarely projected onto his professional life. This is that he always remembers his challenges — and especially his failures — and always draws lessons. He is patient and persistent in his attempts, and when he understands the ineffectiveness of his actions, or when he fails, he makes sure never to repeat the mistake. In light of this observation and in the context of the dissertation, we single out a few major events that were a challenge to Putin and resulted in his initial failures to adequately counter them, and then I emphasize the lessons that he learned from his experiences….

The test of how well Putin learned the lesson of basic food security came unexpectedly with the breakup of the Soviet Union….

In Moscow, Yury Luzhkov, a deputy mayor at the time, struck a deal with Gazprom to assist Moscow in purchasing food for the city during the first post-Soviet winter. Gazprom sold gas to Central Europe in exchange for basic foods: Moscow received 600,000 tons of potatoes and 100,000 tons of apples and onions in exchange for 1.5 billion cubic meters of natural gas in a deal negotiated between Luzhkov and Polish deputy prime minister Leszek Balcerowicz.

In Leningrad, Putin, then a member of the City’s Committee on Foreign Relations, was assigned to negotiate similar resources-for-food agreements. He assigned several private trading companies to facilitate the barter schemes, because the city lacked its own independent mechanisms to execute them. In other words, he delegated authority to the emerging private

While Vladimir Putin realizes that market economy is the only system capable of effectively delivering on the set goals, he accepts its introduction in Russia with caution and some reservations. He contends that since Russia’s natural resources bear critical strategic properties for the state, their management should not only be heavily regulated but also controlled by the state. Therefore, mineral resources should always remain at the ultimate disposal of the state — regardless of their ownership and the model of the economy. He sees the state as the only institution that can responsibly secure resources for the long-term development of Russia rather than for private corporate interest sector….

To make the story short, Putin’s scheme failed. The deals for the most part fell through because companies never fulfilled their obligations, delivering only a fraction of the initially agreed quantities of food. Luckily, the winter was not a severe one, and household food stocks, a traditional, almost instinctive, survival mechanism, helped to relieve the shortages.

This early experience and failure in his public career taught Putin two lessons. First, in addition to reinforcing his belief in the importance of food security and essential survival, Putin realized that the ultimate currency that a Russian official can have at his disposal is raw materials. It is therefore not surprising to find a lengthy list of strategic materials in Putin’s 1999 article, where he lists basic foods along with uranium, oil and gas, and other materials. To sum up the first lesson, during cataclysmic events, Russia’s ultimate guarantee of survival, and subsequently of wealth and development, is natural resources. Since they are essential to Russia’s survival and security, they should always be kept in strategic reserve.

Putin drew a second lesson from his mismanagement of the resources-for-food schemes: private companies can’t be trusted. Therefore, the state has to exercise some degree of control. Having trusted private companies, he failed because in an unstable and unpredictable environment, private companies may often disregard their obligations and act exclusively for their private interest. In the ideas he expressed in the dissertation, Putin favors a market economy with strong state regulation and preemptive power in the economy….

At the time of completion of the dissertation, Putin’s approach to management and governance was fully developed. He argues that the cornerstone of his policy — to provide for the well-being of the population and ensure stability — is economic security, and that raw political power and patriotic commitments of governing and enforcement structures need to be complemented with economic state order. To him this order is only sustainable through various control mechanisms over essential strategic commodities. As a former deputy mayor of a large industrial city, Putin is aware of the inefficient and uncompetitive nature of the existing manufacturing sector and Russia’s economy in general. He sees Russia’s mineral resources as the only “hard currency” that ensures not only the economic and political security but also the very survival of Russia. Mineral resources are the ultimate insurance for overcoming any crisis, and they represent a disaster contingency plan. And, of course, they are the source and engine of Russia’s economic and political recovery.

While Vladimir Putin realizes that market economy is the only system capable of effectively delivering on the set goals, he accepts its introduction in Russia with caution and some reservations. He contends that since Russia’s natural resources bear critical strategic properties for the state, their management should not only be heavily regulated but also controlled by the state. Therefore, mineral resources should always remain at the ultimate disposal of the state — regardless of their ownership and the model of the economy.

So one could argue that Russia’s neoliberalism under Putin was partly a financial necessity, a response to the banking failure of the 1990s, and also due to following the long-standing Russian impulse to orient towards Europe, which meant to a fair degree accepting their economic model. In keeping, Alexander Mercouris pointed out that the reason Belarus and Russia only recently have moved to considerably more economic integration was that Belarus’ long-standing president, Alexander Lukashenko, had seen Russia’s economic model as too neoliberal to allow for much integration. Russia has now moved towards more dirigisme, which reduces frictions.

Published by Geopolitical Economy Report

What follows is an edited transcript. Square brackets indicate material which has been corrected for factual accuracy or in order to provide differentiating information.

RADHIKA DESAI: Hi everyone, welcome to the seventh Geopolitical Economy Hour, a program about the political and geopolitical economy of the fast-changing world of today. ‘m Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: And as some of you know I just got back from Russia which is why we are doing this show with a week’s delay.

Of course it’s been a really interesting time there. I attended many conferences, talked to loads of people: economists, political observers, commentators, etc.

Michael and I thought that what we’d do today is talk about my impressions, and also weave them into a broader discussion about how the world order is changing towards multipolarity. So many things have happened.

President Xi went to Russia, and President Macron went to China, and so many things are going on. So we’ll weave all of that into a broader discussion about my impressions from Russia.

So what Michael and I thought we’d do is focus on two particular points that we thought were interesting that I picked up when I was in Russia is that during the whirlwind of conferences that I was at, at which some very prominent Russians spoke, the one thing that I heard that was really interesting is a decisive statement coming from some of the most influential speakers, that essentially Russia is moving away from the West and will never return.

And the second idea, which is also very fascinating, is that increasingly the Russians are now thinking of themselves as part of a world majority.

Right, Michael? To us these are the two most interesting things.

MICHAEL HUDSON: The important point is that once you break away from the West, what are you going to break to?

And while you were in Russia talking about how they wanted something new, the whole West was in a turmoil. We’re really at a turning point of a civilization, probably the biggest turning point since World War I.

Where, in order to not follow the West, there has to be a whole new set of institutions that are non-Western. A new kind of International Monetary Fund (IMF), meaning some kind of a means of financing trade and investment among the non-Western countries.

Some kind of a new World Bank. Well so far we have the Belt and Road Initiative for a new kind of investment.

And what we’re really talking about, since a theme of our talk all along has been Biden saying that this split is going to go on for twenty years, we’re really talking about the split between Western finance capitalism and the global majority moving towards socialism.

RADHIKA DESAI: Exactly. And it seems as though there has been an increasing consciousness of this in Russia. So, just to elaborate on the first point, which is of Russia turning away from the West.

I was at a conference at the Higher School of Economics, and it’s important to underline this is a very prestigious, post-communist institution which was designed in order to essentially develop and entrench neoliberalism in Russia.

And in the hallowed halls of this institution, which by the way is very beautiful. It was a former military academy. They have an annual conference every year on economic policy and so on.

And this is where, in a [panel] on the “world majority”, as it was entitled, I heard Dmitri Trenin make a really interesting statement.

Now, Demitri Trenin is also interesting and important. He used to be, again, part of this larger pro-Western, pro-neoliberal group of people. He headed the Carnegie Institution in Moscow and interestingly particularly after 2014, and after 2022, when many people of his ilk had left Russia, he has decided to stay and he is still very much in the forefront of the commentariat in Russia.

He said, — When the war is over, he said, — Russia will not strive to be part of the West. That chapter, he said, — is over.

So that’s really fascinating. That somebody like he should say that. And just as a matter of settled fact.

And this is interesting because if you sort of cast your mind back, you know, Lenin, from the earliest days of the Russian Revolution, and even before realizing that Russia’s fate was tied up with the East.

But then in particular, after the Second World War and Khrushchev all that, you saw an increasing turn to the West and Russia has remained very oriented to the West. And now this is over.

And the chair of the session was an elderly professor called Sergei Karaganov. And he had been one of the founders of the Valdai Club. Again, the Valdai Club, which is sort of the equivalent of the Council on Foreign Relations in the United States.

The Valdai Club was also set up as a way in which Russian intellectuals would meet Western intellectuals and think about Russia as part of the West.

But Sergei Karaganov also concluded the session by reiterating, and he said, — Russia, he said, — Russia will never come back to the West. It’s done there, he said. So I thought this was really fascinating.

MICHAEL HUDSON: Well the interesting thing there is that while you’re talking about what Russia’s future is with China, Iran, and the rest of the Shanghai Cooperation Organization, there was a sort of frantic talk in Washington, especially at this week’s meetings with the IMF and the World Bank about, —Well, if Eurasia goes that way, what is going to happen to what we call the Global South. What’s going to happen to Latin America and Africa?

Well you’ve had the first Mr. Blinken of the US, and then Vice President Harris go to Africa and to say, — We want to make sure that we have your cobalt, we have your raw materials, and that you leave all of the US and NATO investments in place and do not give any of the cobalt or lithium or other raw materials to China and Russia and Eurasia.

So, essentially, the southern hemisphere countries are being faced with a choice. What’s so interesting is what makes this choice different from what it was in, say, 1945.

After World War II, the United States had all sorts of economic arguments as to why capitalism was going to offer prosperity to the whole world, including the southern hemisphere. And Soviet Russia at that time was pushing communism.

Well, there’s no ideological discussion today.

On the one hand, the West doesn’t have any attempt to justify joining the US and NATO bloc. All it says is, — If you don’t join us, we’re going to do to you what we did to Libya, and we’re going to do to you what we did to Ukraine. Use pure force.

The question is now what the global majority and what Eurasia is going to say. — Well, we’re not going to force you. We’re not going to attack you. We’re not going to have a color revolution. But here is the economic future and the way of organizing the international trade and investment market that is going to help you.

Well, you can just imagine if Jesus had come in and tried to found Christianity by saying, —We’re going to kill everybody who disagrees with this.

That would not have ever taken off.

I think that the neoliberal plan today has about as much chance of taking off. You’re not going to get the world to follow you just by threatening to bomb it, but that’s all that America and NATO have to offer: refraining from  bombing other countries if they don’t leave things the way they used to be.

RADHIKA DESAI: Exactly. All the West has to offer is sticks. Whereas China comes loaded with all the carrots that you can imagine. The juiciest carrots that you can imagine.

So this world majority concept that’s come up is essentially all the non-Western world, the world majority, can see these carrots, they are responding to these carrots.

And the other interesting thing is that these carrots are not neoliberal carrots. This is the other thing that is very clear.

But let me just first deal with this world majority thing, because again, at the same conference, it turned out that the session was titled “Development for the world’s majority”.

And so the the chair of the of the meeting, Professor Karaganav, also said that this idea had actually come up at the Higher School of Economics in some kind of a brainstorming session in which the purpose was to say, — Okay, Russia is not the Third World, Russia is not the developing world, so Russia is part of the post-communist world, so how do we conceive of a single entity of which Russia is now very active part, and is going to be one of the leaders of this?

And so, having brainstormed a lot, somebody came up with this idea of world majority. So increasingly, the Russians are thinking of themselves, not as being part of the West, whose attractiveness is shrinking and whose borders are also rather small if you think about it.

The bulk of the GDP and people in the world are outside the West. And this is also becoming increasingly clear. The West now accounts for about 30% of world GDP, so this is the rest of the 70%. And it’s only going to grow.

Meanwhile, the West’s neoliberal policies are accelerating the decline of this.

And Michael, we’re going to talk about these institutions in a second, but let me just say one other thing about the domestic policy which you touched. Then we’ll move over to the institutions that the world majorities work to create.

And that is that, we attended another conference as well at the start, that’s where we arrived, the St. Petersburg  Economic Forum].

And the St. Petersburg [International Economic Forum] is another annual event. And what really struck us this time, we attended the plenary session at which a lot of very important people, including Sergei Glazyev, who is leading the Eurasian integration process in Russia, spoke.

The President of the Free Economic Society of Russia spoke. A number of important ministers and others also spoke.

And at this conference, what was remarkable is that, barring the one or two diehard neoliberals who also spoke at the main plenary session, the overwhelming majority of the speakers voiced an anti-neoliberal consensus.

Neoliberalism is finished in Russia. The overwhelming consensus is that behind some sort of a developmental state that is going to engage in a fairly effective, high degree of state intervention to ensure that Russia does not lag behind technologically. That Russian industry is revitalized. That Russia, in trade terms, is in a winning situation.

Basically, across the board there was a consensus against neoliberalism which I thought was really remarkable.

MICHAEL HUDSON: Well, the problem in what you say is the word “finished”.

It’s one thing to say, — We are going to have a new non-neoliberal new order. And of course that’s what Russia, China, and Iran, and the other countries, India, are all trying to do.

But the problem is that there still is a neoliberal world order that covers a lot of the world majority.

And what are we going to do about the survival of these neoliberal institutions? What are we going to do about all the massive foreign debt that’s owed to the West by what we can call here the Global South, because that’s really who owes the debt, not the world majority.

And that’s really what has been under discussion in the United States while you were in Russia.

How do they use this carryover, this legacy of debt, as a stranglehold on the Third World countries?

Well, there have been a lot of articles about what China has to say about this.

The Americans and NATO are all in agreement. South America and Africa can of course pay their debts if they don’t pay China. They’re blaming China for everything, who’s the last newcomer of all and is the least neoliberal.

China says, — Well wait a minute, we are not going to write down our debts to Africa and South America just so they can afford to pay you, the bondholders, for your loans that have gone bad. A loan that has gone bad is a bad loan and should be written off.

But there isn’t any system for government bankruptcy because the whole purpose of having a financialized world order and finance capitalism is, you never let other countries declare bankruptcy and wipe out their debts like you can do in America and Canada and other domestic countries.

You want to keep this debt forever as an irreversible burden so that an indebted country can never break away from the US and NATO.

So the question is: How will these new organizations, these alternatives to neoliberalism for trade and investment, that you’ve been hearing them talk about, how are they going to deal with countering this legacy?

President Biden says, —You’re either with us or against us.

So how are the rest of the countries going to choose which bloc they want to join?

RADHIKA DESAI: Well I think that the whole issue of debt, world debt in particular, has become a really important issue at this point, and it’s become an important issue because precisely now China is such a large part of the scene.

I remember going back to the earliest days of the pandemic when Third World debt had also figured as a major issue. Already at that point, the key reason why the debt issues were not going to be settled is because the West could not come to terms with the fact that it had to deal with China, and that it had to deal equitably with China.

Because what the West wants to do is precisely to get China to refinance the debt owed to it so that Third World debt repayments go to private lenders.

And China is basically questioning the terms of all of this, because for example China is saying, — Why should the IMF and the World Bank have priority? Why should its debt not be canceled?

And the West is saying, — But this has always been so.

And China is saying, — Well, if you don’t want to reform the IMF and the World Bank, then we are not going to accept their priority. If we have to take a haircut, they will also have to take a haircut.

They simply do not accept that these institutions, the Bretton Woods institutions, have any sort of priority.

And this is part of the undermining, as you were saying. This is one of the biggest changes since the First World War. And part of these changes is that the world made at the end of the Second World War by the imperialist powers, who are still very powerful, is now increasingly disappearing.

MICHAEL HUDSON: You and I have been talking about this since Covid began in 2020, and it’s only right now that finally the IMF and the World Bank meetings are getting around to finding this out, three years too late.

They didn’t want to confront that finance capitalism has a problem. The debts ultimately cannot be paid. The debts mount up faster, especially on the Third World.

And the reason we discussed it and they didn’t was they didn’t want Africa and South America to deal with the problem. They wanted the problem just to go on and get worse and worse.

So now the IMF has published charts saying, — Wait a minute, most of the Third World countries are now in crisis.

They are not attributing the crisis to the sanctions against Russian oil and food exports. They’re not attributing it to the increase in the dollar’s exchange rate by the Federal Reserve. They’re just blaming statism.

Well obviously, the one thing the characterizes the new global world majority order is a mixed economy where other countries will do what China has done. They will make money and land, meaning housing, and employment into public rights and public utilities instead of commodifying them and privatizing them and financializing them as has occurred in the West .

So we’re really talking about, in order to move away from the dollar-NATO-sphere, we’re not really talking about just one national currency or another.

It’s not going to be a question of the Chinese yen and the Russian ruble and other currencies replacing the dollar. It’s a whole different economic system.

That’s the one thing that is not permitted in the mainstream media to discuss. They’re still on the “There Is No Alternative” Margaret Thatcher slogan, instead of talking about: What is the alternative going to be?

Because obviously things cannot last the way they are now.

RADHIKA DESAI: Absolutely. And I think that we want to talk about exactly what these new institutions are, because the thing is that you see two very different things going on.


On the one hand, there are a number of bilateral and multilateral arrangements being made on a regional basis, whether it’s the BRICS or the Shanghai Cooperation [Organization] and what have you. These arrangements are being made.


But on the other hand, people are also talking about trying to create some sort of universal system, some kind of bancor or International Clearing Union arrangements.


But the problem with them is that of course, at the moment, precisely because the West is taking the position that it’s taking, it is not going to cooperate in anything universal, and without that we will not have a universal agreement.

And in that sense, what we will see is necessarily the emergence of regional agreements, maybe quite substantial, but nevertheless they will still be regional.

MICHAEL HUDSON: Well, the question then is: What kind of a revolution is there going to be?

Pepe Escobar just wrote an article a few days ago saying that what’s happening now is, the world’s in another 1848, meaning a revolution.

But the 1848 revolution was a bourgeois revolution. It was the progressive force of industrial capitalism against the landlords, and against the banks, and against the rentier class that had survived from feudalism.

What was needed is a further revolution, obviously, a 20th century revolution, in order to not only free capital from the landlord and the banking class, but to free the whole population from the capital class in general.

That’s what nobody dares talk about.

And obviously you’re not having China proselytize. It’s not coming out and saying, — Here’s our economic system as opposed to yours.

And yet all of this philosophy is going to be implicit in any kind of restructuring that they’re going to have.

And so the question is: What will be the guidelines behind this?

To what extent are they going this far in the discussions you heard?

RADHIKA DESAI: That’s a really interesting point. I wanted to also say that, the impression one got when in Russia was: you didn’t get the impression that this is a nation at war.

There was no jingoism. There were hardly ever any of those “Z” signs to be seen. Maybe I saw a total of two or three of them, maybe perhaps all total during my travels around Russia.

And in many ways, support for the war is there, and it’s a very quiet kind of support. Whatever view one may have, everybody can see that Russian victory is absolutely essential, that a NATO victory would be disastrous for Russia and the rest of the world.

All of this is very clear. And in many ways it is a criticism of the Putin administration made by those who are some partisans of his developmental state. It is that the Putin government has not used the opportunity created by sanctions to move more decisively.

On the one hand, to mobilize for war more decisively, both in terms of mobilizing troops as well as economic mobilization, in order to win the war.

And then as part of the economic mobilization, the point that people would make, and some critical economics have made, is that the Putin administration is still leaning a little too much in the direction of neoliberalism.

For example, capital controls aren’t as extensive as they should be. Monetary policy is far tighter than it should be. The state has not tried to intervene in sectors other than defense production in order to try to increase production.

In all of these ways there is a criticism of the Putin administration. It comes from the fact that he has not been decisive enough.

So I would say that a couple of things emerged from this.

On the one hand, sanctions have definitely created the objective conditions in which anti-neoliberal direction of policy and developmental state direction of policy has become a necessity.

And I think that this is most important to remember: I think most countries will find that, if they wish to create any kind of development, they will have to adopt anti-neoliberal developmental policies.

So in that sense there are residual effects of neoliberalism, but circumstances are going to ensure that neoliberalism is essentially finished, because any successful attempts at creating development will have to involve the kind of state interventionism which is sort of “this far” away from socialism.

MICHAEL HUDSON: Well, while you were there both President Putin and Foreign Minister Lavrov have been using the same word over and over again, and that is “multipolarity”.

But multipolarity, that’s the sort of modern world for the 1648 [Peace of] Westphalia that ended the Thirty Years’ War.

The Westphalian system was that no nation should interfere with the policies of other nations.

And that was the law that governed basically all international relations until 1945 when the United States said, — Well, we get to interfere with every other nation, but no nation has any authority over us. And we will never belong to any organization in which we do not have veto power, as America has in the UN, IMF and the World Bank.

You can see the first stage of this. Countries are trading with each other. The recent deals between Saudi Arabia, China, Russia, to denominate their trade in their own currencies.

Well, this means that countries are going to hold, in their foreign reserves, each other’s currencies.

And the first question is: What will this mix of foreign currencies be?

Well I think the natural solution would be for the mix of currencies to reflect the proportions in which a country’s foreign trade is in.

Because China is the major trader of so many countries, obviously the Chinese currency is going to play a major role.

But as we’ve talked about before, this does not mean that China’s currency is going to replace the dollar. No currency will replace the dollar because there will never be a dollar standard again.

There will never be anything like one country controlling other countries with the ability to grab their money at will to cause a crisis by cutting them off from the SWIFT bank clearing system, from doing the things that the dollar did.

But much more than just holding each other’s currency, there’s the whole superstructure of how the economy is going to be structured behind that.

You and I have talked before about, given the fact that many countries now are having difficulty, to put it mildly, paying their foreign debts, the countries that agree to join with Russia and China and Eurasia are going to have access to a new kind of international bank.

And this international bank will create something that, in one sense, is like gold, in the sense of being a currency, a vehicle, that countries can use to pay debts to each other. That governments can use with each other. Not to be spent domestically.

Under the gold exchange standard, nobody was paying [domestically] in gold in the 1930s and 40s, or 1950s and 60s, but gold was used amongst central banks.

So we’re going to see something like the Keynes’s bancor currency that you and I have discussed so much, or like the International Monetary Fund’s SDRs, except that the new international bancor will not be created just to give to military countries to wage war against countries that the United States doesn’t like.

RADHIKA DESAI: Exactly. Moving towards that sort of situation, the bancor-like situation, would be very helpful. Because if you think about the principles that Keynes took into account when designing the International Currency Union and bancor and so on, what were some of the key things?

I would say the first and most important thing is that countries would implement capital controls. Which is why central banks would retain their power to settle balances with this multilaterally-agreed international currency, which is not the domestic currency of any country.

So capital controls are also important because look at it this way.

One of the key reasons why a kind of sensible economic policy of the sort that you and I would endorse, a developmental economic policy, one that is designed to create a productive economy and a broadly-based prosperity, one of the key hindrances to this is the excessive financialization of the dollar system, and all the elites in various Third World countries and the world majority countries, including Russia, that participate in this dollar system.

So I would say that imposing capital controls would be critical.

Another really important thing that comes out of this system is that Keynes’s system, the International Currency Union, was designed to minimize imbalances, persistent imbalances.

Countries would never have persistent imbalances in terms of trade or investment or anything. There would be no persistent export surpluses, no persistent trade deficits.

This is also the opposite of what we have right now. The US dollar-based system in fact relies on the systematic creation of imbalances in which the United States must run current account deficits in order to provide the world with liquidity.

And of course the United States and the Federal Reserve have also, in order to make the dollar more acceptable, sponsored the massive financialization of the dollar system generally.

And it would also therefore be a more stable system, and it would also be one in which the development of some parts of the world, and the underdevelopment of other parts of the world, does not become a perpetual part of the system.

Because what does balanced trade mean?

If one country starts generating too much export surpluses, and this is discouraged by taxing their earnings at the level of the International Clearing Union, then this creates an incentive for the country that is the most successful to invest in the success of other countries so that trade rises, but it does so in a balanced fashion.

So that is another principle.

And a final point I would like to make is that this new currency order that will be created, and I’m sure that when it’s already coming into existence the question is only: To what extent can it become a universal order?

But this new currency order will have one very important advantage, which is that the dollar system has always rested on the systematic devaluation of the currencies of other countries, which means that the rest of the world has to work its guts out in order to export vast volumes to First World countries, which is of course one of the key reasons why inflation has been so low in Western countries in the neoliberal period.

So they have to work harder and harder to export vast volumes and earn tiny amounts in value terms. So the discrepancy in the volume and value of Third World exports, or world majority exports, is massive.

If the rest of the world, if the world majority, starts getting a better value for their exports and starts enjoying a better exchange rate, essentially, then it will be better remunerated for its efforts.

And I think this is going to be very important for so many world majority countries.

MICHAEL HUDSON: Well you’ve made the key point right there. The dollar system has produced austerity. The international financial system’s result is austerity, and one way that it locked this in is in forcing other countries to devalue. They try to throw more and more of their currency onto the world market to pay their foreign debt.

Now, when a country devalues, what’s really devalued? The price of raw materials isn’t devalued. There’s a common world price for all raw materials. There’s a common world price for oil and energy. There’s a common world price for food. There’s a common world price for machinery and capital goods.

When you devalue, only one thing is devalued: the wages of labor, and domestic rents.

So when the IMF talks about austerity, what it really means is, our class war against labor to make sure that we can increase profits in the US-NATO core by continually reducing what we have to pay for labor that’s paid abroad.

And of course the sin of China was not letting its labor be devalued, but instead using industrialization, and even its financial links to the West, to build up and increase living standards, not roll them down.

So if you realize that the whole point of the financial system is: How do you make a financial system that doesn’t result in debt peonage and degradation of labor?

Well then, you may not want to use central banks. Central banks are created by the commercial banks, against the rest of society. It’s the central banks that have helped destroy industrial capitalism in the West.

You really only need the treasury, which is what you had before central banks, and what China uses.

Its Bank of China is really an extension of the treasury. It’s not an American- or European-style central bank whose job is to support real estate prices and make housing more expensive so that the domestic labor has to go into debt to buy more and more debt-leveraged housing, and that’s not to push up stock and bond prices of the 1%.

The treasury would represent the population as a whole.

Now, this used to be called democracy. But President Biden calls it autocracy. So “autocracy” is supporting labor. What he calls “democracy” is the financial war against labor, just to get the Orwellian vocabulary straight.

RADHIKA DESAI: Absolutely. Michael, you know better than me that the very origin of the word “tyrant” comes from the fact that debt crises in Rome regularly led to the election of rulers who ruled in the interests of the majority of the people, the debtors, and against the interests of the small number of creditors, which is why the creditors ended up calling them tyrants.

In fact, apparently the word tyrant does not mean anything bad, but it’s come to mean something bad because basically we live in a world in which our vocabulary tells us that anything that is against the interests of a tiny minority is somehow against everybody’s interest. But of course this is not so.

Michael, what you say makes me think of several things. Just one tiny clarification, and that is of course you’re absolutely right that the central banks as we have in the United States and most European countries are totally agents of big financial capitalists. I agree completely and that’s how they have behaved.

In a sense, the idea of a central bank is precisely to act as a buffer between the internal domestic economy and the external economy in a way that it acts as a kind of shock absorber, that if there are external shocks that the vast majority of the people are not to suffer them.

And that should be the case. Of course, this is subverted, but therefore central banks are important.

As you say, they should become arms of a broader financial system which is aimed at creating productive growth, stable growth, of course in our time ecologically sustainable growth. So just a small clarification about central banks.

But then three quick points.

Number one, you were pointing to how the dollar system bakes austerity into our system, and of course, again, Keynes’s design of the International Clearing Union and bancor was also interesting from this perspective because its thrust was the opposite.

Of course, capital controls was a keystone of the system. You have to have capital controls, and the purpose of doing that was to ensure that all governments, if they so wish, that is to say, if they were so inclined, they could run their economies for full employment with as much state intervention as necessary with as big a role for the government and the economy as necessary. And this could be done because of capital controls.

And this also brings me to my second point. It has been very fashionable, in our neoliberal era, to talk about the so-called trilemma of policy, which is that there are three goals which are considered by neoliberalism to be desirable, namely, having a stable exchange rate, having an autonomous monetary policy, and free capital flows.

They say you can only achieve two of these at any given time. But my point is, actually it is not a trilemma at all. It is an absolute no-brainer.

If you have capital controls, then you can have both an autonomous monetary policy and a stable exchange rate. There is no need to worry about it.

It is only by adding free capital flows as a desirable end to this mix that you create this artificial trilemma. It’s a completely artificial trilemma.

And my final point. If currencies were really valued realistically rather than this strange overvaluation of the dollar that we have all suffered from for so long, then in fact there would be even less need, even among the rich people of any country, would not feel such a big pressure to hold their money in dollars as they do today, because they only wish that because their own currencies are so subject to the vagaries of the dollar system.

The Fed decides to jack up interest rates, then all the money that has hitherto been flowing into these non-Western economies flows right out, creating currency crises, debt crises, trade crises, and all of these sorts of things.

The currencies of the rest of the world, of the countries of the world majority, would also be more stable and that would actually decrease the attractiveness of dollars to even the elites of these societies.

MICHAEL HUDSON: Well I think you’re quite right about capital controls.

When I went to work in international finance in the 1960s, there were dual exchange rates. The IMF every month would publish the exchange rate for normal trade in goods and services, and a different exchange rate for capital transactions, for debt and investments.

So you had two exchange rates. And that’s because there were capital controls.

The United States, via the IMF, got rid of capital controls so that other countries could not protect themselves. Only the United States could protect itself. That’s the double standard.

Also, as we discussed before, Keynes wanted to solve this by something that is very interesting that the US fought like anything not to accept.

Keynes said, — How do you make an international financial system that is not going to be dominated by the strongest currency, by one currency swamping the others? In other words, how do we avoid the disaster and world depression that the United States has brought on?

He said, — If one country continues to run a balance of payment surplus and has enormous claims on other countries, and other countries accumulate a deficit, we can’t let them just be painted into a corner or we’re going to be back to the position of Germany and France in the 1920s.

— The country that has the major currency has it because it’s refusing to import from other countries. It’s refusing to help create an international, equitable world order, and so the dominant currency’s claims will be written down.

Well of course the United States knew that Keynes was talking about the dollar that was going to grow.

But just imagine today if China could say, — We thought about the discussions that took place at the end of World War II shaping how the world financial system developed and, yes, I know that the US and NATO say, — Well China’s going to dominate the whole area and end up being another America.

Well, China can say, — We’re in agreement with Keynes’s principle. If we really get so many export surpluses and so many claims on the rest of the country that they can’t pay, of course we’re going to write it down in order to maintain stability.

Imagine if the United States had done this in 1945 and accepted what Keynes did. Imagine how the whole world’s development would have been different for the last 75 years.

That, I think, would be a great ploy by China.

RADHIKA DESAI: Absolutely. Remember that at the 1944 Bretton Woods conference, Keynes had gone there with these proposals for bancor, for International Clearing Union, and they were nixed by the United States because the United States wanted to impose the dollar on the rest of the world.

By contrast, by the way, you should know that in China there is quite a lot of interest in Keynes’s proposals for bancor and so on, for a couple of different reasons.

One thing I remember very vividly is I was precisely writing an article about Keynes and bancor and so on around the time of the 2008 financial crisis.

So I wrote it in the fall of 2008, and it was published in early 2009, and just before it went to press, the governor of the People’s Bank of China issued a short paper in which he recalled that Keynes had proposed a bancor and we need to return to those principles, and so on.

And thankfully I just managed to stick a reference to that into the article just before it went to press which was really lucky.

So the Chinese have a lot of interest. And that’s one thing.

I think you have to understand that the Chinese know the price that the Western economies, the American economy in particular, has paid for making the dollar the world’s money, which is an undermining of its own productive capacity, the financialization of its financial system in such a way that it is geared towards predatory and speculative activity rather than being geared towards financing productive investment.

So in all of these ways, actually all of the Americans have paid a huge price for making the dollar the world’s currency, which is only a good thing for the cream of the American elite and not for anyone else.

The second thing I wanted to say is, this idea that the national currency of any country can easily, stably, reliably, in a good way, be the currency of the world has become naturalized in our time, but it is a completely false idea.

And you see, Keynes’s career is very interesting from this perspective. I’ve written about this as well.

When Keyenes started his career in the teens, he was fresh out of college, he went to work for the India Office, and there he learned how the British financial system worked, because as we’ve talked about before, it was so reliant on British India.

So his first book, published in 1913, was called “Indian Currency and Finance”, and it is widely regarded as the primer. If you want to understand how the gold standard worked, read “Indian Currency and Finance”.

And of course, why would a book like “Indian Currency and Finance” be the primer on the gold standard? Because British India was critical to its functioning.

Anyway, if you read this book, it’s full of praise for how wonderfully the system works. Keynes was completely uncritical.

And then over the course of the rest of his life which, if you think about it, Keynes’s career spanned the First World War, the thirty years’ crisis. The First World War began it, and the Second World War more or less ended it. He died in 1946.

So over this period, Keynes was witness to the steepest fall in the international standing and economy of any country he’d seen. Britain went from being the head of the empire on which the sun never set, to essentially being on the cusp of losing that empire and being turned into a weak, industrially declining, medium-sized economy.

So Keyes designed bancor. Keynes, over the course of his life, became a critic of the gold standard, its deflationary character, the costs it exacts on other countries. He absorbed all this.

And of course towards the end of his life he proposed a replacement for what used to be this gold-sterling exchange standard, which was a complete contrast. Which would not impose austerity. Which would not create financialization. Which would allow countries to run their economies for development, for prosperity, for full employment.

MICHAEL HUDSON: Well, you can say that Eurasia today is picking up the strain of world history where the world left off in 1913 and 1914.

World War I changed the whole direction of the world. It stopped the evolution of industrial capitalism into socialism, with the Russian Revolution and the great fight against the Soviet Union. And it replaced industrial capitalism with finance capitalism.

And today, over a century later, now finally Eurasia is taking the lead in rejecting this retrogression into neo-feudal finance capitalism and picking up where the world was evolving from industrial capitalism into socialism, which seemed to be the wave of the future for everybody who was writing until World War I was such a shock that it traumatized history.

We’re only right now getting over it with Europe and America fighting against it.

They don’t want the world to continue the way it was going in 1914. That’s why they sent all the troops into Russia to try to overthrow the revolution. They’re doing everything they can to prevent it and the rest of the world’s task is to fight for civilization against the forces of reaction.

RADHIKA DESAI: That’s so interesting. And I would say, Michael, that even Europe is probably going to get off this crazy pro-American track that it’s been on since early last year since the military operations began in Ukraine.

I mean, Europe’s position is definitely suicidal, I think increasingly there are voices emerging that are counseling against that. It is not a surprise that Macron, on his visit to China said, his words, not ours, — Europe should stop being a vassal of the United States.

I think that it’s very possible, although certainly the bloody-mindedness and crazy policies of European leaders are not giving us much hope, but nevertheless statements like Macron’s point to the fact that Europe is not in a very comfortable place and it’s going to have to, if only for its own economic survival, break these crazy attachments to US policy.

So that’s one thing. But I’ll say a couple of other things as we should probably wind down soon.

One thing is that, I completely agree with you. I’ve even written stuff about this, for example in this article about Keyes and bancor.

The last section, which looks at the US role in all of this, for example in nixing Keynes’s proposals and trying to exert its dominance over the rest of the world, which I have argued was never successful. I argued this in my “Geopolitical Economy”.

Anyway, the point is the section was entitled “The Strange Afterlife of Imperialism”, in the sense that the United States, in its desire to recreate the kind of dominance that Britain had enjoyed in the 19th century, the 20th century, that the US would enjoy the same sort of dominance.

This attempt managed to, of course, influence world history, but even still it was not successful.

But now the story of that attempt is also at an end. It can no longer realistically even try to create this sort of dominance.

And that means that the anti-imperialist tide that had begun with the outbreak of the First World War and in the thirty years’ crisis of 1914 to 1945, that anti-imperialist trend is now resuming in a bigger way after being sort of held back a bit by American attempts.

But you have to understand that even though the United States wanted to exert its power over the world, in the post-Second World War period it was never entirely successful for the simple reason that the communist world existed.

The communist world stretched from Prague to Pyongyang. It was huge. The United States was not the master of this world. Its existence put serious limits on what the United States could do.

In that sense,what you have seen is that only after the end of the Soviet Union you saw this hubristic attempt on the part of the United States to try to now finally exert its dominance over the world, but that has as we know ended really badly.

There is no unipolarity. Instead there is multipolarity, and the United States has reacted to this very badly and has therefore been engaged in nonstop wars since then.

MICHAEL HUDSON: Well, you’re right to point out Macron’s statement that Europe is caught in the middle. He’s sort of France’s Donald Trump. He’ll say whatever he thinks is going to a be popular, and then he’ll just turn around and say to another side the exact opposite.

But Europe was in the middle after World War I. It agreed to pay the inter-ally debts, and that’s what forced it to impose the reparations on Germany that wrecked all of its development.

It was so rigid in holding to the old financial system in which a debt has to be paid, that it could not break.

But right now Europe is in the middle again, America’s war against Russia being fought in Ukraine.

I think that when Macron made his statement, that maybe Europe should go its own way, he’s trying to take the voting power away from the right wing of France.

The irony is it’s the right wing in almost every European country, the nationalistic wing, that is breaking away from the US, leaving the left way behind.

So the irony is that the left is not playing a role in creating an alternative to neoliberalism. The left has embraced neoliberalism ever since Tony Blair and Bill Clinton.

So it’s very unique that we’re seeing civilization, a new path of civilization, being developed without any reference to the past discussions at all.

I think it would be nice to have a discussion of classical economics, of the political economy of Adam Smith and John Stewart Mill and Marx about value and price. I think they were on to the important things in the 19th century.

It’s as if there’s a kind of technocratic class that is trying to reanalyze the world without really any reference to history at all, and I think that’s what you and I are trying to do in our lectures here.

We’re trying to provide a basis in history to say, — All this has happened before. What can we learn from the experience of what to do and what to avoid?

RADHIKA DESAI: Absolutely. And Michael, maybe we should bring this to an end, but I totally agree with you.

And indeed this is much of the argument of my book “Capitalism, Coronavirus, and War”. It tries to explain why it is that the left has essentially failed to understand imperialism, and this failure today accounts for the fact that it has uniformly become a cheerleader for the West’s disastrous policies against Russia, against China.

Whereas what I find really interesting, particularly in recent foreign policy statements, major statements that have come out of China and come out of Russia, is that they have put imperialism, and the understanding of imperialism, at the center of their understanding.

Every time I read these I’ve been like, this is astonishing. This is what we have been arguing for such a long time. And now the leaders of these major countries, the governments of these major countries, are essentially behind this, which is really so important.

I think that if the West finally wakes up and realizes what it needs to do, I think this can only be a very good thing for us here, because otherwise we are going to be in some sort of spiral of political dysfunction for a very long time.

MICHAEL HUDSON: Well the West may wake up, but the Western leadership of politicians won’t wake up.

America’s had its own color revolution by Wall Street here, and you can say that Europe had its color revolution.

RADHIKA DESAI: I like that. That was a very good way of putting what’s happening in Europe right now. Europe has been subject to a color revolution by the United States.

We’ve come up to nearly an hour. This has been a great discussion Michael.

Next time we are going to decide what exactly to talk about, but we have a couple of pending topics.

One of them is of course to examine in greater detail the political and geopolitical economy of the conflict in Ukraine, its effects on the various parts of the world, including Russia and Ukraine and the United States and Europe.

And of course we still have to finish our dedollarization final program.

If you have any other suggestions for topics, please let us know. Thanks for your attention, and see you in a couple of weeks.

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  1. WestCountry

    Love that podcast. Very informative. I’m probably showing my age but can’t believe Hudson is so razor sharp at his age. Hope I have half the wits that he does if I get there!

    1. britzklieg

      What you said. M.H. continues to amaze. I.F. Stone was like that – brilliant and cogent and still writing into his 90’s.

    2. LawnDart

      Thanks for the post– it give me hope that the Western, neoliberal ruling-class grasp on power may be a tenuous one.

      A friend recently returned from overseas where he began a construction project last summer: he financed using local currency while his partner chose to use USD, and this partner is now deep, deep in the red as depreciation has shaved 1/3 of the value– not even in a year’s time!

      The turmoil that we see as the broad economic shifts take hold is a wonder to watch, and I appreciate Hudson’s efforts to put it into context and to make it more understandable.

      1. kam

        Finding a working balance between laissez-faire free enterprise and government edict is the challenge. Of necessity government needs something to tax or government dies. Therein lies the endless dilemma.
        Financial “Capitalism” is really just a form of banking. Rather than traditional Commerical banks providing aggregation and intermediation between savers and borrowers, today’s “banks” use savers and Central Bank funds to earn profits outside and outsized by churning and skimming in paper products.
        But like every drug addict, those profits/highs are illusory since ther is no value added, just nominal price increases.
        We are well and truly inside the trap, where the filthy rich are immune from common sense and the industrious/entrepreneurs see no point in travelling down the path full of traps to find the cheese.
        NeoLiberals are just a name for Totalitarians oblivious to the foundation of Classic Liberalism

        1. Grebo

          Nah, the government taxes away money that it creates itself. Without that markets and free enterprise could not exist. Nor should they if they are not serving some public purpose.

          Banks do not intermediate, loans create deposits. They lend against existing assets (thus upping the prices) not so much for the production of new assets.

          NeoLiberalism is warmed-over Classical Liberalism, just tweaked to better suit the modern trans-national corporation.

  2. Neoliberal Blue Economy

    Since the collective West have decided to further militarize its neoliberal economies, this study is of interest. It shows that the multiplicator effect of military spending is low in comparison to other, more useful spending. So our misleadership is choking is from every angle: sanctions, militarization, financializstion… so when do the economies just die?

    1. NarrativeMassagerInc

      In “the West’ we’re in for a short period of stagnation/stagflation that’s occurring right now, to a currency crisis and potential very high inflation as our massive debt can no longer be financed as the world slowly dedollarizes. I think it may happen in some order of those events or other events might intervene, such as a realization that perhaps half our US gdp is fake. Once the Ukraine war lie that Russia is losing is exposed — when Russia wins — which will likely be by end of summer — the tide on our lies will recede and the world will finally, fully see how naked our emperor really is. I have to say, there are many fathers of this utter western failure, and many have seen it slowly coming but I don’t think any of us saw how fast it would unravel with the incompetent flailing of Biden and the neocon maniacs he runs with. And there is an establishment plan to essentially neuter the Republican party via any means necessary and with the 2024 election fast approaching, that plan is going to create intense chaos and unrest, which might also be the event that brings on the aforementioned economic tragedy. Its baked in by this point, just a matter of the details. I don’t think it takes a seer to figure this out. The neoliberal project won’t die without thrashing and crushing much in its path as it does. In their final throes they may even try to launch the nukes — many in the west are operating under the delusion that the US’s nuclear arsenal is strong and Russia’s is weak — another fantasy they may learn too late is completely the reverse. As someone on twitter pointed out yesterday: Russia’s latest new major missile system was built a year ago. The US’s was 30 years ago. They have the poseidon, hypersonic mirv missiles and a ton of other offensive and defensive systems that we don’t even come close to. Western delusion about Russia’s weakness is possibly the most dangerous delusion we currently hold, and that’s saying a lot given how many we are desperately clinging onto. Putin’s slow roll through Ukraine, while more humane to Ukraine and his own soldiers in the short term, is read in the west as weakness and incompetence (they project a lot) and may come to decide all our fates. I personally think God has better plans for us but I know that sort of thinking is out of fashion since science has answered the “most important” questions, “AI” is here and all is known ;). Let’s pray the final epitaph of humanity isn’t “the facts were known man” (to quote from the great Tinker Tailor). Were they indeed.

  3. Maxwell Johnston

    Thank you for this excellent post. I agree with their conclusion that Russia has broken conclusively with the west; it matches my personal observations during my quarterly visits to Moscow.

    The Higher School of Economics is “neoliberal central” in Russia, with a very pro-western orientation (and yes, its facilities are nice and modern, much more so than other prestigious RU universities). So it’s remarkable that the conference held there produced such an anti-neoliberal atmosphere. I have a lot of respect for both Karaganov and Trenin, they are keen observers and their viewpoints are worthy of consideration. Glazyev is essentially a Russian MMT proponent; he has been a consistent and vocal critic of Russia’s neoliberal policymakers (notably of Nabiullina, who heads the RU central bank). Interesting if his influence is rising.

    Irony 1: Russia is now a member of the global south, despite its physical location and arctic coastline.

    Irony 2: Putin, a product of Sobchak’s liberal mayoral administration and purported inheritor of Peter the Great’s modernization efforts, is the leader who (in contrast to Peter the Great who dragged Russia’s boyars–the oligarchs of their day–kicking and screaming into the west) is dragging today’s Russian elites kicking and screaming away from the west and towards the emerging global south.

    Re bancor: it’s clear to me that, eventually, some kind of Eurasian non-dollar regional currency will emerge. Probably backed by gold to some extent, given how much China and Russia have been piling up over the past decade. Which doesn’t necessarily imply a total replacement of the dollar-based international system because, as Hudson points out: “…this does not mean that China’s currency is going to replace the dollar. No currency will replace the dollar because there will never be a dollar standard again.” Exactly.

    Re debt: when the Soviet Union collapsed, Russia inherited its assets and debts. Among its assets were tens of billions of loans to countries in the developing world. Which Russia eventually wrote off. Short-term loss, but a huge long-term gain: one of many reasons that Russia is generally viewed favorably in the global south, with consequent non-adherence to USA’s anti-Russia sanctions.

    Final point: the Brookings paper notes in describing Putin’s character that “…when he fails, he makes sure never to repeat the mistake.” IMHO, the absolute turning point in the UKR conflict came not after the seizure of Russian central bank reserves and not even after the destruction of Nordstream, but after Merkel and Hollande admitted that they had played Putin for a shmuck during the Minsk Agreement negotations. I think this caught Putin by surprise, and he admitted his error publicly. I don’t think he (or any future Russian leader) will repeat the mistake of trusting the west, and I don’t see any prospect for a return to Russia-EU relations as they were before 24 February 2022. That world has vanished.

  4. Tom Pfotzer

    I wonder about two things:

    a. How will the U.S. enforce its first-claim on repayments from the global south, if the global south has alternative trade and finance options from the rest of the world? Wars conducted by the West have turned out to be net drains on the war-maker (economic and political), and have concurrently delivered net benefits to the rest of the world via reduced war-making capacity by the West. The West is stretched pretty thin right now, and that’s likely to persist and intensify

    b. How has Belt and Road and the other multi-lateral trade operations been able to grow so much and so fast without capital controls, and without central currency clearing and centralized currency value-setting? The authors of this piece seem to predicate the “future regime” upon the existence of such international monetary authorities, but trade seems to have progressed quite well to date without them

    1. NotTimothyGeithner

      I think the premise of Brzezinki’s chess board is ultimately the US can only enforce the global payment system if there is no alternative, hence the need to control the Middle East and create chaos. I don’t know how on the ball Biden is (world class moron), but the goal of the neocons was to publicly punish Russia with the message if that could happen to Russia look what will happen in Brazillia and Mexico City next.

      Biden wanted to send a message that “America is back.” Its just he’s emptying out everything and showing how relatively the weak the US has become since 2000.

      1. Tom Pfotzer


        That’s what I’m seeing, as well.

        Unless the U.S. can really punish the countries that stray off the reservation, they’re going to leave, find better options elsewhere, and report in to their friends and co-sufferers. So the window of culture (existing norms of behavior) enforcement seems to be closing.


        And while I was musing on this subject later today, I wondered if the central bank clearing house, and its attendant “smooth out risk spikes in commerce” mission isn’t really a mechanism to socialize the losses of credit mis-allocation.

        Back in the day, didn’t banks make their money assessing credit risk, syndicating that risk (spreading the risk and attendant risk-reward across several players, so a failure doesn’t bring down one bank that assumed all the risk)…wasn’t that what banks were in business to do?

        So why is it so very necessary for some supra-national entity to perform that function on behalf of the banks? The World Bank, the various Export banks (state institution), maybe even the IMF…they are basically loan repayment enforcement mechanisms, are they not?

        The banks borrow / direct the State-wielded payment enforcement leverage, in order to make high-profit but risk-avoided loans. Correct?

        So I’ll ask again: is it not the job of a bank to assess and manage risk? Why do we need supra-national entities to perform that job on behalf of the banks?

  5. Lex

    What a fascinating conversation. It may be worth pointing out that the one time potential charges of corruption against Putin might have stuck was the resources for food scheme, but in the context provided there’s a reasonable chance that it wasn’t his corruption but the corruption endemic in the post-soviet neoliberalism applied to Russia.

    Hudson’s mention of 1848 is instructive. That year is probably the benchmark for the modern world as we know it. There was a social component to the revolutions when they started. Early industrialization hurt traditional cottage industry badly. It was a time where the creation of the industrial proletariat wasn’t yet cast in stone. My understanding of the broad strokes is that the social component was cast aside by the bourgeoisie once they got the political revolution goals of constitutions and their own political power. Those most concerned with the social aspect, the poor, were left with nothing but the first whispers of nationalism. The lack of addressing the social component of 1848 is still with us and may yet be settled.

    As an aside, I tend to agree with historians who posit that the Russian revolution(s) were as extreme as they were because Russia never got the political revolution of 1848 and so lacked the “relief valve” 1848 provided in giving the bourgeoisie increased political power. Or perhaps better stated Russia never got the alliance of the bourgeoisie and traditional power against the lower classes.

    1. Questa Nota

      1848 was also during Queen Victoria’s reign when the world knew of the Empire and the Pound Sterling.

      Almost 100 years later, the British had lost a generation of young men in WWI and then another in WWII, and the international role of the Pound was increasingly in doubt. Hardly surprising given what happened in the real economy, as the financial economy can mask reality for only so long and at significant costs.

      Comes then America and the engineered transition to the Dollar but without enough historical awareness to provide some longer-term perspective. Those Wise Men in Washington and New York, with their supporting cast in Langley and elsewhere, told everyone about Pax Americana while then engaging in Vietnam and subsequent undeclared wars. They convinced Americans and many others that all was available cheaply, of course, and to stay that course. The costs borne by people got hidden or downplayed until some ugly adjustments that played out after 1971 and then again a few more times.

      Some cleverish Dems decided to turn their backs on voters and to take the Wall Street ticket in the 1990s. The costs of that ticket redemption are being felt increasingly by people all over the country, on streets, in overpass encampments, in morgues and elsewhere. Short-term thinking and reactivity, a lethal combination. :/

      1. spud

        correct, the one of the most important statements in the article is this,

        “The left has embraced neoliberalism ever since Tony Blair and Bill Clinton.”

        till the so-called left figures this out, we see how union leaders and civil society organizations are completely silent, and keep endorsing these creatures to the detriment of our nations.

    2. Bsn

      I like your mention of “the social component (being) cast aside”. I wonder how this new order will use or reject fast developments such as AI, Chat GPT, softwareization, omnipotent surveillance, etc. It’s awfully tempting for anyone, socialists included, to control the populace via these methods. China has had the Confucian philosophy since about 500BC, with it’s hierarchy of superior – inferior relationships. How will this pan out in a “modern world”.

      1. Polar Socialist

        The “modern world”, as far as I can tell, deals with international relations, not the state vs. citizen problem.

        On the other hand, the smart folks at Valdai Club in their The World Without Superpowers (pdf) do seem to think that the future world will be more heterogeneous. Mainly because without hegemons and superpowers the humanity can express it’s plurality more freely.

      2. Kouros

        Confucianism is a two way street. The Heavens will allow a bad ruler to be removed from power…

    3. Yves Smith Post author

      The other theory is in Barrington Moore’s The Social Foundations of Dictatorship and Democracy. Neither Russia nor China had a bourgeois revolution. Peasant revolts are particularly bloody.

  6. Camelotkidd

    Amazing discussion of off-limits topics
    Only on Naked Capitalism
    Thanks so much Yves and Lambert–you guys rock!

  7. The Rev Kev

    Seems that even Larry Summers gets what is happening with the choices that countries are facing. In a Bloomberg interview he said-

    ‘Somebody from a developing country said to me, ‘What we get from China is an airport. What we get from the United States is a lecture. We like your values better than we like theirs, but we like airports more than we like lectures.’

    But then he said-

    ‘We are on the right side of history – with our commitment to democracy, with our resistance to aggression in Russia,. But it’s looking a bit lonely on the right side of history, as those who seem much less on the right side of history are increasingly banding together in a whole range of structures.’

    1. Samuel Conner

      > “We are on the right side of history”

      Methinks this statement betrays an unjustified confidence that his ideological heirs will be the ones writing those histories.

      1. Polar Socialist

        The paraphrase an old say: if you think everyone else is one the wrong side of the history, then the odds are you’re the one on the wrong side of history

      2. truly

        “We are on the right side of history”
        Maybe what he really meant was:
        We are ideologically on the right during the course of history.

    2. juno mas

      I guess Mr. Summers slept through the US aggression in Iraq. And American “democracy” looks great when you’re in the PMC. And the only History he understands is his own lifetime. He should read this post and learn from his mistakes.

    3. Susan the other

      Something Radhika said caught my attention – that the US has suffered as much as the rest of the neoliberalized world. It is true because we have had to expand the dollar to meet growth expectations which were based on profit expectations (my interpretation of her gist here). And in the process allowed our own social expectations to be sidelined. We were frantically financializing everything. The extortion racket that extorted itself. Because maybe we failed to understand the value of sovereignty – and look at us now. Homelessness, poverty, illness, drug addiction, crumbling infrastructure, a stock market held up by a central bank, political corruption everywhere, and on and on. We are a big mess.

    4. some guy

      History has no sides and no laws and history has no arc. History is not a morality tale. History is just a bunch of stuff that happened ( to quote Homer Simpson).

  8. David in Friday Harbor

    Radhika Desai is a breath of fresh air! Imagine — traveling to Russia and actually listening to what the leading economic thinkers are saying.

    Fascinating discussion and illuminating intro. Why I read NC!

    1. Susan the other

      That was Interesting. The only clarification I’m looking for is a definition of the different categories of gold. there is natural gold forever valued for its shine, and there is also environmental gold essential for the survival of life on earth, and there is also human gold which is the health and well being of societies. The infamous “gold” standard needs a more refined definition. Because gold, the metal, is actually nothing.

      1. skippy

        I’m always amazed with ***the gold question*** which is a focal point – too so many – be it physical or metaphorical. A soft metal that at one time was just laying around got used to make personal adornments. Which then got the divine treatment though various religions and connections with heraldic bloodlines which were de facto deities or earthly representatives of based on its innate qualities wrt non corroding and luster. The elites at the time used these qualities to buff their own image = transfer these qualities too themselves. All of which ultimately turned a base metal into a religious object that has innate divine qualities without human agency.

        Then this flows through out time and space without most having a clue about the origins behind it all. The devotion behind it then flows through so much dynamic history over the ages, through its mystical qualities, entire nations rise and fall for control/possession of it. Amazing to consider the loss of potential in our species due to the mysticism gifted to this base metal and even when the object is not present the lexicon in our social mindset is still there.

        As such I find the whole ***gold standard*** a theology which was imbued within the physical metal by those that sought to control societies via it and to the benefit of only a few. That this perspective has persisted for so long in human history does not raise my expectations about the direction of our species survival.

        1. Cine Tee

          Gold also has a continuous industrial use in electronics.

          And its scarcity is pretty constant. Like NFT’s in crypto, which have no properties at all, the fact that there is only one 60ft cube of gold in the world, any piece of gold is a unique location in that cube.

          1. Wukchumni

            Perhaps whats missed by those who can only denigrate, is the idea that Saudi Arabia, Iran, India, China & Russia are all very much goldbug countries whether they like it or not in their personal dismissal… India in particular, but the others are no slouch.

            In a world of money that can be conjured up on a QWERTY, how does the new and improved hegemon separate itself from the fiat chaff?

            1. skippy

              As you well know rarity is not always synonymous with value or price.

              PS gold as a asset, in a basket of other assets, is just diversification. No big story there.

            2. skippy

              I would have thought you being vocal about evangs and the whole belief underpinning and then ignore the very same aspects about gold considering its history.

              1. Wukchumni

                Invisible means of support never did it for me, but seems to underpin our entire worldwide economic system. so maybe the evangs are onto something?

  9. JonnyJames

    Thanks to Radhika Desai, Michael Hudson, as well as Ben Norton and the folks at Geopolitical Economy for organizing, recording, posting and transcribing these videos. Thanks to Yves Smith and Naked Capitalism for posting this as well. Also, the comments are great here. Cheers!

  10. Cetra Ess

    “Well, you can just imagine if Jesus had come in and tried to found Christianity by saying, —We’re going to kill everybody who disagrees with this.”

    Just a very minor quibble, as I recall from my readings, Jesus’ followers initially became different schools of Christian thought scattered between Rome, Ephesus, Philippi, Thessaloniki, Corinth, etc. The Roman variation was not what Paul founded but which he subsequently tried to get under control. What followed were turf wars and the Roman version won by killing off the others, and we know how the story went from there, with Roman Catholicism gaining world dominance and also subverting most of the teachings.

    So if history is our guide, the Americans *could* gain world dominance in the same way, by force, and appear to be using the same approach. But non-consensual ideological “conversion” by force or threat of force, even when unethical, repugnant and wrong, does not necessarily fail by virtue of being force, unethical or wrong. Sadly.

    But I do agree with the main thrust that the American approach is not winning hearts and minds and also that any approach based on coercion and threat of force *should* fail and should always be made to fail.

    1. digi_owl

      But in order to pull that off one need fanatics. And i don’t see USA fielding an army of fanatics any time soon (baring say another Pearl Harbor or 9/11).

  11. truly

    First off, THANK YOU for this great transcript. And the intro adds such valuable context.

    Near the end Radhika states:
    “why it is that the left has essentially failed to understand imperialism,”
    I am really having problems with how the word “left” gets used in American discourse. I think it needs to be replaced with the word “Dems”.
    I just returned from an anti war rally hosted and attended by a bunch of lefty’s. I think we all understand imperialism. There just aren’t many lefties in this country anymore.
    We have two right wing political parties that have slightly different views on gender issues and guns.

    If you aren’t opposed to imperialism you aren’t part of the left.
    If you aren’t opposed to war you aren’t part of the left.
    If you don’t hold in high regard the need for class struggle you aren’t part of the left.
    If you aren’t opposed to banks and finance continuing to extract wealth from those who have none already, you aren’t part of the left.
    If you aren’t siding with labor, you aren’t part of the left.
    If the above statements are fairly true then the current Dems are not part of the left.

    I don’t think you can say the left is failing to understand imperialism. They aren’t the left then.

      1. JonnyJames

        On Political Compass ( Both D and R parties are placed firmly in the right-wing authoritarian quadrant. There is no left or “liberal” parties in the USA., despite the blah blah. Policy and fact speak louder than BS

    1. jobs

      This annoys me to no end, too. It underscores how well the incorrect framing by the mainstream media that the Dems are “the left” has taken hold.

  12. digi_owl

    Putin’s view on things from the Brookings paper kinda echo ideas that took hold after WW2. But then got tossed aside in the 70s-80s as stagflation etc happened.

    The ghost of those ideas may well be what has kept Norway and Iceland out of EU thus far.

    1. skippy

      Actually one can go back to say early Judea and then latter MED/Eastern Europe dynamics in the 1st century and watch this replay itself over and over again. The only difference is rather than blood lines endlessly positioning themselves for expansion, wealth, power, survival, in a constant state of flux is now we have multinationals and transnational wealth set.

      As such the support for such during the cold war and post plaza has now come home to roost, hence the Hail Mary that is the proxy conflict in the Ukraine. The transnational liberal wealth set has put all its chips down on this event not because of resources available – if they win – gravy – but more so the control over the narrative all must submit too ultimately.

      The greatest fear of such is not so much about owned assets or price denoted in FX as it is about shaping a world that benefits them and the control of all things that assist in that endeavor.

      BRICKS et al is just threat to the code/theocracy [orthodox economics] in having a dominate control over the shaping of the world, everything else is just a tool to advance that project.

      1. digi_owl

        Now you got me thinking about how the British system distinguish between the reigning monarch and “the crown” as an almost corporate entity.

        1. skippy

          At the end of the day its all laws …. the rub then is enforcing them … and what happens when you can’t …

        2. UncleDoug

          As George VI reportedly asserted (and Colin Firth definitely did), “We’re not a family, we’re a firm.”

  13. VietnamVet

    Yes, the proxy WWIII in Ukraine is about the birth of the tripartite globe (1-Eurasian Axis, 2-Developing World, and 3-Remains of the EU, Five Eyes and NATO.

    Saudi Arabia’s switching sides signals the end of the western hegemon with the US dollar as the reserve currency. From this point on, over half of the world’s trade will be conducted in other currencies. Any future issuing by the FED of digital dollars to fight an economic depression will be pointless because the US dollar is supported only by the finite wealth, labor and resources of 43% of North America. This is livable, but it requires planning, sharing, common sense and the rule of law – a constitutional democratic republic. These all vanished with the Reagan/Thatcher counter revolt and the Clinton/Blair acquiescence that founded the current neo-liberal, 21st century robber baron, exploitive world.

    The proxy world war in Ukraine will continue until one side (or both) collapses just like the first world war. The only way out is a peace treaty and building a DMZ between Ukraine and Russia this summer. However, the USA has split apart, peoples separated and government agencies at war as shown by OG’s leaks. This plus the ideological & age incompetence in the White House keeps the war going.

  14. JoeBiden

    “As to the quality of the dissertation: it is quite poor. It is poorly organized, poorly written, and
    poorly researched. On this last point, the most striking thing is that there is not a single
    explanatory footnote in this 218 page document. The source citations, to the extent they are
    there, are in the form of a single bracketed number to refer, without page numbers or other
    explanation, to a work in the bibliography list.”

    Ya’ll gunna base a discussion on that premise?
    good grief

    1. Yves Smith Post author

      This is a textbook case of the cognitive bias called halo effect, of needing to see things as all good or all bad.

      First, have you read the dissertation in Russian? Have you read any other PhD equivalent theses to be able to judge the assessment as accurate? Putin was in his mid-40 and a pretty prominent politician with a full time job. This was clearly a ticket-punching exercise.

      Second, even if this particular criticism is overdone, please explain how it invalidates the sections excerpted.

      1. JoeBiden

        This is absurd, what was posted was a quote from the analysis…..that YOU linked to, that you are using as a basis for, in the first place, as an example of a “doctorate” level dissertation by Putin. The Brookings authors are laughing at it, finding it in no manner a document that rises to that height. They show it is full of errors and plagiarized. I have no idea why you would point to it, to use it as an example of great work. It might meet that level in the Russian mining administrations hallways…..but, so what? Further, if you want to argue that I need to read it in the original language, you are simply making that argument AGAINST the the Brooking authors. I have no idea why you would post a critical analysis of the paper and then believe the analysis supports the idea it is a “PhD” level submission.

        Further, knock off the personal insults. I’m sorry if my pointing out that the paper in no way supports your 1st argument that this IS “PhD” level causes you to say I’m suffering from “bias”. The Brookings authors must be too.

        Again, good grief.

      2. JoeBiden

        “please explain how it invalidates the sections excerpted.”

        Your entire post, by and large, is a conflation of INTERNAL domestic policy and international policy. The “thesis”, not written by Putin, not in any manner rising to a “PhD” level, concerns what he might have envisioned for domestic policy, how he might have organized the industries in Russia. This is a fantasy. He came into power and made it clear that he, not the Yeltsin oligarchs, was in charge. He either intimidated them to his will or outright replaced/murdered them with his silovarks. If you want to label this structure “neoliberalism”, go for it. It is nonsense.

        The vid primarily addresses an international policy. Of course Putin is abandoning Western trade connections, he has no choice since he decided to invade a sovereign state to regain his precious submarine pens and re-create a solid land/rail connection to them. It is entirely the consequence of his actions that has caused Russia being cut from the West. When a speaker you are promoting says :

        “Whatever view one may have, everybody can see that Russian victory is absolutely essential, that a NATO victory would be disastrous for Russia and the rest of the world.”

        …..there really isn’t any need to “invalidate” it, it is self evident that she is promoting Putin propaganda. A victory IS essential for Putin, without it he will be murdered by his silovarks.

        But then again, maybe I just don’t get how “neoliberalism” is defined any longer.

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